Interconnect rate cut a 'futile exercise'

Johannesburg - A cut on mobile interconnect rates had no real benefit to contract subscribers, new research out on Wednesday showed.

A survey conducted by voice-based telecommunications solutions company Du Pont Telecoms found that the average business person could expect to save only 2% on their cellphone bill after the nearly 29% reduction in cellular interconnect charges in March.

Cellphone operators implemented the first rate cut in March.  

The Independent Communications Authority of SA (Icasa) then surprised operators recently by cutting mobile interconnect rates further.

Icasa proposed a three-year glide-path for both mobile and fixed service licensees.

Mobile interconnect rates, currently set at R0.89 per minute, were proposed to be reduced to R0.65 from July 2010 and further lowered to R0.40 from July 2012.

Fixed termination rates were initially asked to be reduced to 15c from July 2010, with a further 10c  drop from July 2010.

Du Pont Telecoms said it calculated the impact mobile telecommunications group Vodacom's (VOD) recently-introduced revised call tariffs would have on business contract subscribers. 

'Hugely disappointed'

Graeme Victor, CEO of the group, said: "Du Pont is in the business of managing and analysing cellphone packages on behalf of our customers, the majority of whom are large corporates running fleets of cellphones on business contracts.

"We were keen to see how much our customers who subscribe to Vodacom's two most popular business packages - Talk 500 S and Talk 1000 S - were likely to save with the new tariffs. We were hugely disappointed at what we found: an average saving of a mere 2%," he said.

Victor said that the evaluation exercise highlighted a need to move away from focusing on interconnect rates to putting pressure on networks to reduce the actual retail cost of calls.

Du Pont said it had previously warned that a drop in interconnect rates would not necessarily lead to a reduction in retail call charges. "So far we have unfortunately been proved correct. The networks have tinkered with some - but not all - pre-paid packages but we believe that the majority of pre-paid users have not benefited to any great extent by the lower interconnection rates," Victor said.

The group noted that benefits for existing contact users had largely been limited to more off-peak free minutes being bundled into their packages.   

Victor said that as most businesses and high-volume contract users already wasted a high proportion of their off-peak bonus minutes, the availability of even more of these for use outside business hours was likely to exacerbate the wastage problem.

However, with the elimination of off-peak rates by Vodacom in its new pricing structure business contract consumers could actually end up with less free off-peak talk time before, Du Pont said.

It pointed out that neither MTN (MTN) nor Cell C had announced any reduction in the per-minute rate for contract subscribers since the lower interconnect rate came into effect. 

"This clearly indicates that if the government and regulatory authorities are serious about reducing the cost of mobile telephony, they need to turn their attention to the retail costs of calls across the board - including for contract/post-paid subscribers," Victor said.