Johannesburg - South African consumers will continue to be exploited by cellular network providers despite any reductions in interconnect rates, telecommunications analysts say.
This follows a breakdown in interconnect negotiations between the Independent Communications Authority of South Africa (Icasa) and industry stakeholders last week. Interconnect rates are charged by telecoms networks for carrying traffic on behalf of each other.
Head of research and consulting firm World Wide Worx Arthur Goldstuck said the high price of cellular communications in South Africa stems from government action which created an environment unfairly favourable to MTN and Vodacom.
He suggests this will not be changed unless competition is encouraged and telecommunications providers are made to disclose their cost structures to consumers, adding that Icasa has been ineffectual in handling the issue.
"Government policy has allowed a situation to arise where the consumer is not protected. Now government must step in to fix its mess," said Goldstuck.
"There is an acknowledgement all round that the previous DOC [department of communications] was deeply culpable in all this."
Goldstuck said South Africans must look beyond interconnect.
"This is not only about interconnect fees, but also laying bare the structure of costs to customers. At least then consumers can make decisions about how to manage their own communications in order to minimise costs. At the moment this is not possible," he said.
"Networks must show how cost to consumer is made up. They don't need to show us their own cost structures, just those that affect the consumer. This will also reveal what the effect of interconnect is, along with other elements," said Goldstuck.
Cell C never stood a chance
Goldstuck said MTN and Vodacom have acted disingenuously with regards to interconnect, and have also strong-armed Cell C in the market.
"There is no room for new players because new players aren't allowed in," he said.
"There are enormous sunk costs that have been amortised and huge profits that have been generated by Vodacom and MTN. Initially, mobile networks were seen as something that would fill a gap and it was thought that they could justify fairly high costs because they were perceived to have a limited market," he said.
"It was estimated that the mobile operators would have a market only 40% the size of landline. Now we are in an environment where they have eight or nine times the size of landline networks' user-base, and the cost base is sometimes three times more," he said.
"This is simply not justifiable in any way."
Goldstuck added that MTN and Vodacom have become a de facto duopoly and that symmetrical interconnect rates are a massive barrier to entry for other networks.
For this reason, Cell C has called for asymmetrical interconnect rates allowing it and other smaller players to levy higher charges than Vodacom and MTN, which have benefited unfairly in the past. Neotel has come out in support of Cell C's suggestion, as has Goldstuck.
"They [Cell C] have never had a chance, even as a new player. They were strong-armed out of the market by interconnect being symmetrical," he said.
Please call me plenty of profits
According to Goldstuck, Vodacom and MTN are also disingenuous in insisting that they would be limited in providing services to poorer cellular users should interconnect rates be slashed.
"The poorest of the poor are already paying massive premiums and cellular networks have made no effort to bring down costs. They [Vodacom and MTN] said in hearings last year that they would have to stop subsidising calls and would have to stop the 'please call me' service if interconnect rates were dropped - but, in fact, the 'please call me service' results in the generation of massive volumes of calls. It was an empty threat because they would never drop it," he said.
Goldstuck said high interconnect rates have been around for years, but that the SA media has only now educated itself on the issue.
- Fin24.com