[By Duncan McLeod]

The decision last week by the Independent Communications Authority of SA (Icasa) to reduce mobile termination rates was not unexpected. What the industry didn’t expect was for the regulator to move as quickly as it has to reduce fixed-line rates.

It’s been a long time coming, but Icasa has finally revealed how it would like to see mobile termination rates — the interconnection fees the mobile operators charge one another to carry calls onto their networks — reduced over the next three years.

Icasa, which is empowered to regulate termination rates under the Electronic Communications Act, wants the rates reduced from 89c/minute during peak calling time now to 40c/minute by July 2012. It wants do this on a “glide path”, reducing the rate to 65c in July 2010 and to 50c in July 2011, and doing away with a distinction between peak and off-peak calls.

MTN, Vodacom and Cell C — all net beneficiaries of the interconnection regime — haven’t yet responded in detail to Icasa’s proposal. But you can be sure that they’re considering all their legal options, given that the proposed rates regime will cost them hundreds of millions of rand in profit.

It seems unlikely that they’ll take Icasa to court, though — they’d be inviting a PR disaster on themselves. Communications minister Siphiwe Nyanda and his feisty director-general, Mamodupi Mohlala, both of whom have pushed hard for the rates to come down, won’t take kindly to the operators delaying the process by challenging the issue legally.

Political parties, including the ANC, the DA and the Independent Democrats, are also broadly united on the need for mobile interconnection rates to fall. Parliament’s portfolio committee on communications, led by ANC MP Ismail Vadi, has played a leading role in ensuring Icasa moves swiftly on this.

What no-one was expecting, though, was for the authority to tackle fixed-line termination rates at the same time as taking on the mobile telecoms providers.

Icasa wants fixed-line termination rates to fall sharply between now and 2012 and, as in mobile, to do away with the distinction between peak and off-peak calling times and even scrap different rates for regional and national calls.

Telkom charges an interconnection fee of 23c/minute for peak local calls and 33c for peak national calls; off-peak local calls are 12c and off-peak national calls are 19c. Icasa wants these rates reduced to a uniform 15c in July 2010, with further reductions to 12c and 10c in 2011 and 2012.

It’s a move that should benefit Telkom’s rivals, including Neotel and Internet service providers that provide voice over Internet Protocol (VoIP) communication. VoIP providers are over the moon at Icasa’s decision. Justin Spratt, GM for Wi-Fi and mobile VoIP at Dimension Data division Internet Solutions, says he is “surprised” but “delighted” at Icasa’s decision. “There is no better news for VoIP providers,” he says. “This is a massive boon for us.”

Icasa’s move is likely to put downward pressure on fixed-line call tariffs as competition begins to bite. The reduction in fixed termination means companies like Neotel will be able to undercut Telkom’s retail tariffs further, which should force the incumbent operator to respond with lower rates of its own.

Already, Icasa has warned Telkom that it expects the company to pass on all the benefits of a reduction in mobile termination rates to consumers. The company has already passed on the mobile operators’ voluntary cut in rates on 1 March.

Consumers, already enjoying tumbling prices for fixed-line broadband, can soon expect call rates to start falling, too.