Vodacom, MTN and Cell C should be thankful they don’t have the UK’s Ofcom regulating them.
Ofcom, which is the UK’s equivalent of the Independent Communications Authority of SA (Icasa), has proposed reducing mobile termination rates to just 0,5p/minute — that’s 5,5c in SA currency.
The British regulator wants the rate to fall from 4,3p (47,3c) to 0,5p on a “glide path”, where the rate is reduced each year over four years.
Mobile termination rates are the fees the mobile operators charge each other and other operators to carry calls on their networks. There has been considerable political and consumer pressure on SA mobile operators to cut the rates. As a result of this pressure, they agreed to cut the rates voluntarily from R1,25/minute to 89c on 1 March.
In a detailed market review, published on Thursday, Ofcom says it plans to impose regulations — based on operators’ long-term incremental costs — that will result in termination rates falling from 4,3p/minute in 2010/11 to 2,5p in 2011/12.
The rates would fall further in each successive year — 1,5p, then 0,9p and finally 0,5p in 2014/15.
“Our proposals continue a long-term trend during which time termination rates have fallen from more than 23p in 1995 to less than 5p today,” Ofcom says in its report.
“We anticipate that the market will be capable of adapting to these changes, which will be implemented over four years and which are broadly in line with previous trends,” it says.
“As the market adapts, we believe that further reductions in termination rates will promote competition, the development of innovative tariff packages and the growth of genuinely converged fixed and mobile services.”
Ofcom says it will conclude its market review in the second half of 2010.
Some industry executives believe Ofcom’s move could prompt Icasa to be more aggressive in setting the level for termination rates. Icasa is engaged in a regulatory process that will allow it to begin imposing wholesale price controls on the operators.
ECN Telecommunications CEO John Holdsworth (pictured at top), who has long campaigned for the rates to come down, says Ofcom’s document will put “enormous pressure” on Icasa to reduce the rates more aggressively.
“Already, mobile termination rates in the UK are half what they are in SA,” Holdsworth says.
“Ofcom regulations often become international best practice and Icasa often bases its regulations on the European model, which is heavily influenced by Ofcom,” he says. “It is inevitable that SA will follow the same route.” — Duncan McLeod, TechCentral
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