Paper cuts?

THERE WAS GENERAL media elation at Communications Minister Siphiwe Nyanda`s recent announcement  that peak-time mobile interconnect rates or mobile termination rates will be cut from R1.25 to 89c, and off peak rates remain at 70c. The new pricing will come into effect in the first quarter of next year.

The interconnect issue has been a hot topic for a while, and Arthur Goldstuck, MD of World Wide Worx says: "It`s been a long time coming, but it`s never too late."

But, will this result in lower call costs for the consumer?

Goldstuck says unless the networks are transparent about call cost structure, consumers won`t see any benefits.

"Under the current structures of call packages, it is almost impossible for the consumer to understand the cost components of various categories of calls, and this is clearly an area of potential confusion and disinformation. Across both mobile and fixed-line networks, consumers need to be able to see, for each category of call, such as off-peak and peak-time, to mobile and landline numbers, what amount is made up by the interconnect fee."

Fezekile Mashinini, telecoms analyst at BMI-Techknowledge, agrees: "At the moment, there are no indications that the networks will lower tariffs for making calls." He explains there will be effects, but it is not yet certain how they will manifest.

"[The operators] have already taken a knock with their discount offerings." He says since the interconnect issue emerged, some operators have changed the structure of certain packages (he gives the example for MTN`s `Zone discounts`). "So yes, there will be tariff rebalancing taking place, but the direction and extents of these movements are yet unknown."

Mashinini says new operators can gain from this. "Clearer benefits are there for potential new entrants in the market in that the cost of delivering cross-network calls will be lowered, which is a key competition enabler," he explains. "Cell C and Virgin may also gain on the competitive front, and the same applies to ECS players with voice interconnection. Additionally, more competition can drive down prices, which is what consumers are looking for."

Andre Wills, analyst for Africa Analysis, says there`s no direct link between interconnect rates and call costs, so the operators must actively lower tariffs, or the consumer won`t benefit. "Unless the operators decide to cut the tariffs along with the cut in the interconnect rate, there won`t be any change in the price."

However, he adds: "One would assume that the operators will make a tariff cut when the interconnect is changed and the price would move downward. It`s not a direct relationship, but there is an expectation in the market that there should be some kind of cut by the operators in their net tariff."

OPERATORS

The operators have generally made positive noises about the cut, but there has been little news about how the consumers` phone bills will be affected.

Vodacom SA MD Shameel Joosub" rel=tag>Shameel Joosub says: "We are pleased that the industry has found an early solution to the issue of reducing mobile termination rates, and thank the Minister for the leadership role he has played in this process. In addition to the reduction in call charges from fixed to mobile, we believe this will encourage greater competition in the mobile market and therefore lower prices for all consumers."

MTN Business said in a statement that the company "is not comfortable discussing the topic externally".

Telkom said it welcomed the move as being a step in the right direction.

"Telkom has consistently stated that the company is committed to the process of affordable access to telephony for all South Africans. We believe that the reduction in mobile termination rates ... is a positive step forward towards the attainment of this goal," said Nombulelo Moholi, Telkom SA MD.

 "The reduction in mobile termination rates will enable Telkom to pass on substantial savings to Telkom customers. We are currently assessing the full impact of this," Moholi said. She expected customers to benefit from price reductions after March next year.