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Cape Town - The new policy to determine the actual cost of termination rates should benefit mobile consumers in South Africa, an analyst has said.
Icasa or the Independent Communications Authority of South Africa has adopted the long-run incremental cost plus (LRIC) model as a cost standard to determine the cost of mobile and fixed wholesale voice call termination.
The new policy aims to address the legal question over how MTRs are calculated. Icasa had insisted that MTN and Vodacom pay double the rate that Cell C and Telkom Mobile pay for calls that terminated on rival networks.
Court action forced the regulator into a re-think and the new policy should have a benefit for consumers.
"Ultimately, a reduction in MTRs will result in lower overall costs to consumers through enhanced competition. If the process is concluded rigorously, transparently and accurately, greater certainty will allow operators to plan, invest and operate more competitively," industry analyst Steve Ambrose, CEO of Strategy Worx, told Fin24.
Best practice
He said that the new policy was based on international best practice, and that going forward, the regulator would have to liaise with the operators to ensure that the cost calculation was accurate.
"The MTR review will conclude with new regulations based on this internationally recognised cost calculation standard by end of September. The challenges will be getting the correct data from the operators in a format that can be properly used in the model."
After the first round of regulator proposals faced controversy, Cell C embarked on a campaign accusing the senior operators of greed because they pushed back on the regulations.
However, in an ironic twist, Cell C's traditionally lowest call rates were smashed by Vodacom and MTN, leading to a price war which saw Cell C reduce its rates to 66c.
While operators have extended a cautious welcome to the change in policy, Ambrose said that the initial process was rushed.
"The big picture is that Icasa should have been extremely thorough initially and this would have obviated all this uncertainty, these cost models are used internationally and with proper application are difficult for the operators to argue with, as they all use similar models in their own planning and costing internally."
The process will now result in a better review of the local mobile market and Icasa is taking a sensible approach, instead of just going through the motions because of a court judgment, said Ambrose.
"They are doing what should have been done in the first place with a thorough review of the market and calculations based on standards that can allow certainty and accuracy. MTN and Vodacom raised the valid point that there was not a rigorous process in determining costs when they challenged the new regulations in April, and this new announcement should take care of this."
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