In October 2008 Namibia's electronic communications operators (1) were hosted by the Information Communication Technologies' (ICT) Minister Joel Kaapanda to address ongoing call termination rate disputes (2) between the parties. The forum agreed to a initiate a study of termination costs, which was commissioned in January 2009 and by 1 June 2009 the Namibia Communication Commission (NCC) prescribed a new termination rate ceiling of N$0.60 (3) (down from N$1.06) with a glide path to N$0.30 by January 2011. How did this happen and can it happen in South Africa?
Regulators agree that termination rates should be based on the forward-looking long-run incremental cost ("LRIC") of termination of an efficient operator and Namibia has just done that by benchmarking interconnection charges. Whereas, the draft Interconnection Regulations (4) ("draft Regulations") published by the Independent Communications Authority of South Africa ("ICASA") does not dealt with interconnection charges in any direct way. Why is this so? In a country where it has been reported that call termination rates increased by 500% over 12 years until 2007, and that they had surged by 512% in the period from 1998 to 2001.
Namibia's legal framework at the time when (and before) the call termination rates were cut was described by a leading academic as a "golden moment of chaos". To elucidate, Namibia's Communications Bill which is to provide for an independent, converged regulator, competition and licensing - much like the South African Electronic Communications Act, 2005 ("EC Act") - has been in the passing for more than seven years and there had been no integrated government policy (5) furthermore the incumbents were running rogue with call termination rates bearing no relation to the underlying costs. In this vacuum, the newly-appointed ICT Minister acted by interpreting the licence conditions of the operators; which provided for interconnection to be cost-based, transparent and sufficiently unbundled. The result being call termination rates at one of the lowest levels in the region, a quarter of South Africa's ZAR1.25.
So, why does ICASA's current draft Regulations not deal with charges? The reason for this is that section 67 (6) which deals with competition provides that ICASA must conduct a market study, make findings of significant market power and then only may it prescribe pro-competitive terms and conditions which may include, but is not limited to -
such price controls, including the provision of retail and wholesale prices in relation to matters connected with the provision of -
access, interconnection and facilities leasing; or
electronic communications network services, electronic communications services or any other service offered by the licensee applicable to the relevant market or market segment at issue.
As ICASA has not acted in terms of section 67, it seems that the EC Act will be amended before addressing call termination charges directly. Of course regulation is not the only way in which prices can be reduced, the other is by the market innovating and competing on price and service offerings, especially in light of international connectivity being available from Seacom. As the latter seems to be pie in the sky and the former leaves us at the mercy of our legislators, the South African consumer is, once again, pulling the short straw.
Attorney at Bowman Gilfillan
Telephone: (+27-11) 669 9354
1. Telecom Namibia (fixed line incumbent) MTC Namibia (mobile incumbent) and CellOne (2006 mobile licensee)
2. Call termination rates refer to the rates that operators charge each other for terminating a call on another's network. The terms interconnection, termination and call termination are used interchangeably in this article.
3. N$1 is equal to ZAR1
4. General Notice 941, Government Gazette 32370 of 10 July 2009, previous drafts were published in July 2007 and in 2008.
5. The Namibian Communications Bill has been passed by the Namibian Parliament in July 2009 and the ICT Policy was adopted in March 2009
6. Chapter 10 of the Electronic Communications Act, 2005