Do we send revenues overseas or do what is right?

Been bad... been quiet...

So, the latest developments in the whole interconnection rate saga is really that ICASA is being painted as the bad guy. Well there are a number of dimensions to this.

Let's think about this carefully. Before Cell C came into the market, our mobile interconnection rates were pityful - if I recall correctly they were sitting at around 20 cents. Introduce competition and what do the two big players do? Move it up to R1.25 - with ICASA's approval.

Secondly - the industry has been calling for competition - in fact all the industry has been asking for is someone with a backbone to stand up and give some direction. Now the DoC has done that, but now we have to play regulatory catch-up.

Okay, before I start rambling, let's take a step back. ICASA tried to play the whole "you know you have to do it because this is what the public wants" game with the mobile operators. The outcome? ICASA eventually had to walk away. The two dominant players agreed to a new interconnect tariff, the smaller one walked away, stating that it was not the best that could be given (talk about positioning). Just a little inside info - nothing has been submitted to ICASA for approval on the lower interconnect rate, which means the two operators save face with consumers in the short term, but unless it's approved by ICASA it won't happen. And that also doesn't mean you and I will see a saving.

Now ICASA is going the legal route using Section 10 of the EC Act to find a solution. I think that's awesome - if it's a legal process, it means it will have to be enforced. But it's going to take till June 2010?????? You started this process months ago....

Someone, somewhere needs to take a stand for the consumer - that's the BOTTOM LINE.

You can delay this process indefinitely because there is really nothing the consumer can do - but wait till there are international alternatives.... Yes, the talk on the street is that our market liberalisation (as limited as it was) is far from over....

Do we wait to send precious SA Rands into other countries, or do local telecoms operators preserve our local economy and actually make a change?

BIG question...

Interconnection saga continues

It has been an interesting process around interconnection rates. First there was a major drive from Parliament to cut costs dramatically, and in time for Christmas. Then ICASA walked away from its discussions with mobile operators in what could only be described as sheer frustration. Then suddenly the two dominant operators, Vodacom and MTN, make an announcement that they will cut these rates to 78 cents (18 cents higher than requested by government...), but that they have been unable to reach an agreement with the smaller operator, Cell C, who is still adament that rates should be asymmetric. The operators have also agreed to cut the rate to 61 cents by using a sliding scale over the next three years. What is interesting to me, is that even when they hit their lowest (after the three year process) it is still 1 cent higher than the original demand.

Now before we as consumers get too excited - these rates are wholesale rates and a lot happens to a price before you as the consumer have to fork out your hard-earned cash. So although there is immediately a 47 cent decrease in the interconnection fee, we as consumers can expect anything between 0 and 47 cents reduction in our tariffs. So the proof of the pudding is really going to be in watching whether the operators pass on some or all of this saving...

My gut feel - out principle they are not going to give consumers much of a saving - at least not initially. Why, you ask? Well think about it - they have publicly stated that consumers would not see a decrease in pricing, stating that these costs would have to be recovered in other areas. That says a lot.

So, where to from here? I believe ICASA is going to follow the regulatory process as outlined in the EC Act and as a result of pressure from Parliament, these costs are going to be legally forced down. One has to wonder however if they will build in a clause around a minimum reduction to the consumer?

Who knows - only time will tell.

We'll have to depend on a regulatory process for interconnect cuts

So the interconnection saga continues. It seems that the process of deliberations between ICASA and the operators is a thing of the past. Agreement was apparently reached on an interconnect rate, but there are raging arguments around asymmetric tariffs.

So now ICASA will continue with the regulatory process under the EC Act and hopefully we will see resolution through that process.

In the meantime there is also hope that Parliament will come up with something. The only challenge here is that I don't think anything will be resolved unless it's a legal process that is followed. And we all know how long those processes can take...

Who knows - do we keep dreaming of a "lower call-cost" Christmas?

Anyway, an industry that is probably relieved to an extent that the process has not been concluded must be the LCR industry. When you think about it, these are probably the guys that are going to be hit hardest if interconnection rates are cut.

Think about it - their business focus is to help companies save on their communications by routing calls via the cheapest route. They obviously charge for this service, whilst saving their customers money, but the need for LCR could drop significantly if interconnection rates are dropped by a big enough margin. So what impact will it have on them when the interconnection rates are dropped significantly? It seems the impact of this drive to bring down costs is a lot bigger than anticipated...

We need a telecoms hero!

There seems to be a lot of interest in the ICT sector from politicians these days.

First there was the Independent Democrats leader Patricia de Lille making very public and vocal statements around the cost of mobile communications. Then we saw the Department of Communications and Parliament becoming involved in what has become a very high-profile tug of war around mobile interconnect rates. Now, Parliament wants Telkom to report to them and there’s talk of potential retail pricing regulations.

For years the sector called out for help, asking for a strong leader within the Communications Department. Now, it seems like a bit of overkill. Or not?

My view is that it’s great that we’re finally having the tough discussions around communications costs – particularly mobile communications. It’s become an every-day tool for most people in the country so any form of saving would be very welcome. I also think it’s time other issues are addressed, such as geographic number portability, carrier pre-select, etc.

But when it comes to retail prices? Come on! In my opinion regulating prices at a retail level, will in fact hinder or discourage competition. If you set a maximum rate that can be charged, I’m pretty sure your operators are going to probably charge slightly lower, but stay pretty much within range of that cap. So where will the competition be?

So, with all this sudden political involvement in telecoms, we’re no further to resolving the interconnection fee issue, competition is still basically non-existent and frankly consumers are still bearing the brunt!

I’m beginning to think we need a real telecoms maverick to enter the market and challenge the status quo that is costing us, as consumers, an arm and a leg.

For Pete's sake - just decide on interconnection rates

So, I'm sitting contemplating the debate currently raging in the telecoms industry. Should we drop interconnect prices or shouldn't we?

My thinking is that there are really two major things to consider. Firstly it will obviously make sense for us as consumers, IF the telco operators pass on the saving. But this raises even more questions - if they agree to drop interconnect prices, when will this happen? Secondly will I personally see the benefit? What impact will it have on the mobile operators that have specific packages e.g. if I'm on a package where I get 500 minutes free at X amount - am I suddenly going to get more minutes for the same price? Or are they just going to drop prices on "out of bundle" calls? Or are they going to stick to the same number of free minutes and just adjust the prices of the packages?

On the other hand - a sudden forced drop in interconnect could have a massive impact on the listed operators - what would the long term impact be on the economy if shareholders suddenly start selling their shares because revenues drop dramatically? Don't get me wrong - I'm all for a drop in communications costs - I am a consumer after all. But have we considered the long term impact on our economy vs short term satisfaction of the consumer? Should the approach not be a far more staggered drop in pricing rather than a big bang approach? I'm still grappling with those questions...

All I can say is I'm sure glad I'm not the one making the decisions on this. But who is really?

On the one hand you have the Independent Democrats, then the Department of Communications and subsequently Parliament putting pressure on mobile operators to bring down interconnection rates in time for Christmas (Come on, give us a Christmas present). On the other hand you have a (long-winded) industry discussion going on - "we know it's the right thing to do but we'll draw out discussions in the hope it will go away".

My humble opinion? Just get to it. Decide. Either you're going to implement a drop in these prices or you're not. So just have the backbone to state which side of the fence you're on. Frankly speaking if the industry stood together and made an industry-led decision, it could count in EVERYONE's favour.

But for Pete's sake, just decide. And then, make a move...