Companies that provide least-cost routing (LCR) services don’t want mobile interconnect rates in SA to fall precipitously as they profit from the arbitrage opportunities that the high fees offer.
That’s the view of ECN Telecommunications CEO John Holdsworth (pictured), who says LCR operators have a “vested interest in maintaining the status quo, and, providing the mobile termination rate does not decline below 90c/minute, they will be able to do so.”
Holdsworth’s comments follow hard on the heels of TechCentral’s interview with Jacques du Toit, MD of VoxOrion, a big player in the LCR industry. Du Toit argued that interconnect rates should not be slashed, but rather brought down gradually — at about 5%/year — to about 80c/minute.
But others, including Holdsworth, believe the rate should be far lower, and brought down far quicker. Independent telecoms researcher Alison Gillwald says mobile interconnection fees should fall to 25c/minute, or even less.
Mobile interconnect rates are the fees the cellular operators charge each another and other telecoms operators to carry calls not originating on their networks. They are set at a high R1,25/minute in peak time. MTN and Vodacom have been accused of using the tariff as a crude anticompetitive club to keep competitors from emerging.
Holdsworth says the high rates have prevented alternative operators from launching “innovative and disruptive” services. “New entrants end up having to subsidise the profits of the incumbent operators just to enter the market,” he says. “High interconnection rates are outdated and were introduced as a pro-competitive measure when the mobile operators first entered the market.”
If the rates are slashed, LCR operators stand to lose, Holdsworth says. “Almost all businesses in SA are forced to deploy LCR solutions to get around the high cost of calling mobiles from a land line,” he says. “The LCR industry was born out of an arbitrage opportunity that emerged when the mobile operators reduced their on-net rates below the regulated off-net interconnect rate.
“They did this to prevent new mobile networks from gaining market share, by offering lower on-net retail rates than the official off-net mobile interconnect rate,” Holdsworth says. “Cellular service providers were quick to spot the opportunity and immediately took advantage of this arbitrage by introducing technology that converted fixed-to-mobile calls into mobile-to-mobile calls taking advantage of the lower mobile on-net rate.” — Duncan McLeod, TechCentral
