South Africa: 25c interconnect rate fair, says expert


The South African interconnect rates battle continues to rumble on. It was given new life this week when telecoms regulatory expert Alison Gillwald said that rates sould fall by 80% to get in line with international standards.

The high interconnect rates in South Africa have been under fire for some time with consumers, telecoms companies and politicians calling for a reduction in interconnect prices. The new Minister of Communications even attempted to intervene if market speculation is to be believed, but so far the main players – MTN, Vodacom and Telkom – have given no indication that a price reduction is on the cards. The difficulty for the operators is that they make too much revenue from this level of interconnect rates to give it up without a fight.

ICASA councilor Fungai Sibanda last week gave South Africans some hope by saying that interconnect rates will come down sooner than operators expect, and that telecoms players may be well advised to drop their rates in anticipation of regulatory interventions.

Whilst it is heartening to hear the Regulator issue such a strong warning to industry players many may view it as an empty threat as ICASA has developed a reputation for backing down when companies threaten legal action against them. Sibanda further indicated that a comprehensive process is needed to put regulations in place to deal with interconnect prices, a process likely to take a long time if ICASA’s past record is anything to go by.

Sibanda said that ICASA expects to issue a revised discussion document on the subject of interconnect rates, which will include the Regulators’ ‘research and market studies’, before the end of 2009.

While ICASA is still uncertain about what an appropriate interconnect rate should be, Research ICT Africa Director Alison Gillwald suggested an interconnect rate of R0.25 instead of the current peak-time cellular interconnect rate of R1.25 per minute. Gillwald added that R0.25 per minute can be seen as a conservative figure which leaves a fair margin for profit to operators.