Smaller players back call for MTR cut - TechCentral

Smaller players back call for MTR cut

Doug Reed

Cell C CEO Alan Knott-Craig suggested this week that mobile termination rates (MTRs) — the fees mobile operators charge other players to carry calls onto their networks — should be reduced further after they are cut to 40c/minute in March next year.

Knott-Craig told TechCentral in an interview this week that the Independent Communications Authority of SA (Icasa) should cut MTRs to 25c/minute, and possibly even lower than that. He said this would allow for further retail price cuts and create a more competitive telecommunications industry in SA.

MTRs have come down dramatically in the past three years, falling from R1,25/minute to next March’s 40c. Icasa has already said it will review the rate once it reaches the 40c level.

Vox Telecom co-CEO Doug Reed agrees with Knott-Craig’s call for further reductions but believes there should be a single termination rate for both mobile and fixed voice services. “Why must we get 15c/minute from Vodacom but then have to pay them 56c with the same licence and while doing same job?”

Reed says mobile networks aren’t more expensive to operate than their fixed-line equivalents. “Copper’s just been around longer.”

He believes termination rates in mobile will continue falling. “Voice prices will come down by 20%/year or so for next five years. Fixed line is bottoming out already, but mobile is still going to take some time.”

Nashua ECN MD Andy Openshaw says he is “pleased consumers are eventually seeing the benefits of the hard-fought-for interconnect rate reductions”.

He says his company would like Icasa to reduce MTRs even further than Knott-Craig’s proposed 25c/minute. “A rate of 10-15c is what we’re seeing in Europe and internationally. There’s definitely room to move them down further, and this is one of the best ways to drive competition.”

Alan Knott-Craig

Openshaw says asymmetrical MTRs, of the sort 8ta and Cell C enjoy – whereby they pay Vodacom and MTN lower rates than Vodacom and MTN pay in return — are another good driver of competition.

“I like [Knott-Craig’s] asymmetry comments,” says Openshaw. “We saw a 15% benefit last year, which will go down to 10% next year. Asymmetry creates competition and needs to be maintained to encourage new entrants to the market.”

Like Reed, Openshaw would like to see a single termination rate for both fixed and mobile operators. “Convergence is happening in the [telecoms]space. I think we need to see one interconnect rate because there’s really no difference between networks anymore — everyone is doing everything.”

John Holdsworth, founder of start-up mobile virtual network operator AppChat, says Knott-Craig is “quite right” to call for lower MTRs and that doing so “is a very positive and bold move”. Holdsworth, the founding CEO of ECN (with which his new company is embroiled in a legal dispute), has been one of the leading agitators for lower rates and has lobbied politicians on the issue in recent years.

He says Knott-Craig ought be “praised” for shaking up the mobile industry. “I certainly hope that consumers reward Cell C’s bravery and vision.”

Holdsworth says the issue for Cell C, or any new entrant, is the complexity of the different offerings from the big players and the “smoke and mirrors” around these. For example, he says, Vodacom’s new 99c/minute tariff is more expensive than Cell C’s because, unlike Cell C, Vodacom does not charge on a per-second basis.

Although the discrepancy between per-minute and per-second pricing is well known by those in the industry, Holdsworth says it trips up consumers who “don’t really understand the difference and aren’t able to quantify it”.

Holdsworth says Vodacom’s rate works out at closer to R1,40/minute if taken on a per second basis. “Someone needs to be able to debunk these things and challenge them. MTN says its core prices are less, but that’s complete nonsense. You can only benchmark against standard tariffs in normal hours.”

Over the next two to three years, Holdsworth says he expects further dramatic price reductions in mobile, both for voice and data. “There’s no doubt that consumers are going to see a major, well-deserved reduction in pricing.”  — (c) 2012 NewsCentral Media

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