The stage is set for a battle of epic proportions at public hearings in Johannesburg next week. That’s when operators will make their arguments for and against proposed cuts in wholesale call termination rates.

MTN, for one, has warned of dire consequences for its business and for the entire mobile ecosystem if industry regulator, the Independent Communications Authority of SA (Icasa), proceeds with its plans to cut mobile call termination rates to 65c/minute this year. Other operators have also lodged strong objections.

Icasa wants the rates — the fees the mobile operators charge each other and other telecommunications companies to carry calls onto their networks — reduced to 65c in July. This would follow a 36c voluntary cut by the mobile providers on 1 March.

High mobile interconnection rates have been blamed for keeping retail prices high and for keeping new competitors from emerging.

Now, MTN has gone on the offensive. In its submission to Icasa ahead of public hearings scheduled for 28 to 30 June, the company says the draft proposals “suffer from serious legal and regulatory flaws”.

Moreover, when the March rate cut is factored in, the “drastic nature of the proposal is truly revealed”, MTN says. “In fact, it represents the most aggressive mobile termination rate price control MTN has ever seen: the peak rate would fall from R1,25 to 65c in just four months, and 70% of the total 85c cut proposed by the authority would take place between March and July this year.”

The operator says the impact of too steep and unbudgeted-for cuts in one year would force it to take “dramatic cost-cutting actions in the second half of 2010, affecting not just MTN’s business, jobs and investment plans, but also its customers and the whole mobile ecosystem” of least-cost routing companies, independent service providers and distributors.

“The ‘business shock’ is further heightened by the removal, overnight, of the peak and off-peak price structure that has characterised the market for the past 15 years, with great wholesale, retail and network disruption,” MTN says in its submission.

Vodacom, though disagreeing with large sections of the proposed cut in termination rates, has taken a more conciliatory approach to the regulator. In its submission, it says it agrees with Icasa that the wholesale cost-based rate is about 40c/minute — the level the authority has proposed the rates be cut to in July 2012.

However, Vodacom has objected to what it thinks is a too-steep “glide path” — the two-year period over which the rates will come down. It says the proposed timeframe is “far too aggressive and will significantly impact on the wholesale and price structures of the SA communications industry”.

Vodacom wants to delay the first step in the proposed guide path until March 2011. “This will assist businesses to factor the new rates into their business models and decisions for the next financial year,” it says.

Like MTN, Vodacom has also questioned the process Icasa has followed in creating the draft regulations, and has warned that, if issued in their current form, would be “unlawful and open to judicial review”.

Cell C, meanwhile, has — not surprisingly — argued for asymmetric termination rates that favour it over its bigger mobile rivals. In other words, it wants Vodacom and MTN to pay it more than it pays them to carry calls between their networks.

The country’s newest and smallest mobile operator argues that higher termination rates have undermined its full potential. It has objected to being defined as an established operator with significant market power for the purposes of regulation, alongside the likes of Vodacom, MTN and Telkom.

“The use of asymmetric mobile termination rates for an interim period will promote competition in the long run in the SA mobile market as this will enable Cell C to grow its market share and become a more effective competitor,” Cell C says. — Duncan McLeod, TechCentral