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Reductions in Interconnect Rates in SA

Posted on Aug 16 in News-Publicby Press OfficerPrint

It is a question of when and how, not whether

Mobile interconnection rates in South Africa and consequently the prices of mobile telephone calls are unquestionably very high by international norms and practices, and well above the costs that cellular operators incur in terminating calls to their customers.

Economists may argue about the absolute level of these costs, but it is unlikely that anyone could argue that their level in South Africa is not well above any reasonable allocation of total network costs to call terminations.

Mobile termination rates as of 2007

Country In National currency In US$ (PPP) Comments
Brazil 0.71889 $0.186 Average of peak/off-peak. Sender Keeps All was implemented from July, 2004, under which payment for use of local network among mobile operators is not made unless the traffic imbalance among them exceeds the ratio of 55/45%.
Chile 77.4 $0.148 Average access charge established by regulator.
India 0.35 $0.008 Average of Inter- and Intra- circle calls established by regulator.
Korea 37.13 $0.040 Weighted average of rates of all MNOs.
Malaysia 0.0818 $0.024 Local mobile termination established by regulator. Separate interconnection prices exist for long distance and calls transmitted via submarine cable.
South Africa 1.155 $0.163 Average of peak and off-peak fixed to mobile rate. Includes value added tax (VAT).
There is no need for another study to prove the point that MTRs in South Africa are too high and should be reduced. After all, the South African MTRs have not been lowered since the level shown above for 2007, whereas for example Chile’s were reduced by almost 45% at the beginning of 2009 and significant reductions in some European MTRs have been implemented as well.

It is also noteworthy that in Africa Namibia has just reduced its high MTRs from over US$0.19 (at PPP exchange rates, close to the South African level) to US$0.11, with a further reduction foreseen to US$0.055 in January, 2011.

Calls for further studies should be interpreted as obstructive delaying tactics by interests who would like to see the present high price regime perpetuated for as long as possible. The questions are:

By how much and how rapidly should MTRs be reduced
What other steps should be taken to ensure that the outcomes of and benefits from a substantial reduction in MTRs are very positive and are not subverted from the perspective of consumers by short sighted actions taken in anticipation of and response to these reductions?
MTRs in South Africa as elsewhere should and will be reduced at some time to well below the equivalent of US$0.10/minute and more likely closer to US$0.05. Cellular operators should take steps now both to:

Avoid being characterized as incorrigibly insensitive and hostile to the interests of consumers by engaging in prolonged last ditch opposition to significant change, and
Plan and implement initiatives to ensure that they benefit from the high growth in the use of mobile communications that will ensue once high MTRs become a relic of past regulatory priorities and practices.

Source: Sex and the City: The Movie

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