[By Duncan McLeod] Cellular operators were set to receive a grilling in parliament this week. Politicians want mobile interconnection fees to come down. But it’s far from clear if the basic cost of calls will also fall. Can politicians avoid the temptation of interfering further?
Parliament’s portfolio committee on communications has called SA’s mobile operators, Vodacom, Cell C and MTN, to account for high interconnection fees — the fees they charge each other and other operators to carry calls on their networks.
There’s hope that lower interconnection fees will translate into lower call prices for consumers. But this is far from guaranteed.
Look at Namibia. It recently cut mobile interconnection fees by nearly half and plans to reduce them by half again in the next 18 months. Yet MTC, Namibia’s largest mobile network operator, has left its retail rate — or the basic cost of a call — unchanged.
Yes, SA’s mobile interconnection fees are too high. MTN and Vodacom forced them up just before Cell C entered the market in an apparent attempt to cripple the new entrant before it could get off the ground. They now use them as a crude anticompetitive club to keep new competitors out of the market.
But reducing them too quickly could lead to unintended consequences, not least of these being a shift in focus by the operators away from low-end, prepaid consumers, who could become unprofitable to serve.
Most people will agree that something had to be done. The Independent Communications Authority of SA (Icasa) has taken far too long to deal with the issue. And though the department of communications, under new director-general Mamodupi Mohlala, is making the right noises, there is also reason to be concerned that government could become too aggressive in trying to deal with high prices.
The danger is this: if interconnection rates are reduced and there is no commensurate reduction in retail rates, politicians may feel the need to try to force down retail rates. But regulating tariffs is a complex matter and is a job that really ought to be left in the hands of the independent regulator, not managed by politicians eager to please voters.
SA has high prices — especially in broadband services — precisely because of strategic missteps in telecommunications policy over the past 15 years. Both the Mandela and Mbeki administrations were too slow to liberalise the market, leading to the creation of dominant operators that have been able to maintain high profit margins because of a lack of real competition.
However, the remedies the state introduces could do even more long-term damage. Operators will be reluctant to invest if they’re worried government could intervene in their businesses at any time.
Already, Mohlala has mooted the introduction of a “tariff advisory council” to ensure government and consumers are involved any time operators want to increase their prices.
But this is a function that is already handled by Icasa. If the authority is not doing its job, why not fix it instead of introducing another layer of bureaucracy?
As a basic rule, regulating prices, especially retail tariffs, is a bad idea. What government and Icasa ought to be doing is finding ways of stimulating as much competition in SA telecoms as possible. Other forms of regulation — examples include enforced unbundling of Telkom’s local loop and smart allocation of radio frequency spectrum to new market entrants — can play an important role.
Yes, mobile interconnection fees must be regulated (at least until the market is more competitive). And, yes, they must come down so they more accurately reflect the cost to operators of carrying calls between their networks. But politicians must resist the temptation to regulate retail tariffs. Leave that to the markets.
- This column is also published in the Financial Mail