ISPs question Icasa’s new fixed termination rate

A group of internet service providers (ISPs) in SA is questioning the recently announced aggressive reductions in fixed call termination rates, saying these have become too low, making it more expensive to terminate fixed calls.

Operators have previously made a lot of money charging for calls between networks. But new rules from the Independent Communications Authority of SA (Icasa) could see call termination rates halved over the next year.

Icasa, which intends to enforce the new rules from July, says this is one of a set of measures to reduce the cost of communicating. In essence, the rules reduce the costs of making calls to subscribers on other operators networks. From a competition perspective, the lower the termination rates, the better for smaller operators.

Industry body the Internet Service Providers Association (Ispa) on Tuesday said it was calling for the implementation of the planned convergence of mobile and fixed call termination rates towards eventual parity .

The regulator first reviewed termination rates in about 2010. At the time, Icasa created a set of paths for the reduction of termination rates. Under the regulations, call termination rates have been substantially reduced since 2014.

Now, however, concerns are related to issues of parity and the sensible view is that there is simply no good reason for differences in fixed and mobile termination rates .

In essence, industry players had been hoping for a situation where rates were the same for both mobile and fixed-line calls. Now, all operators pay 6c per minute for calls to a fixed device. This is set to decrease to 4c in July, then to 1c in July 2025.

Switch Telecom, a member of Ispa, says 1c is an extraordinarily low fixed termination rate (FTR) by global standards . In addition to the FTR being just a fraction of what it is in highly developed markets , SA is a geographically large country with relatively low population density, says the operator.

It says the real-world cost of deploying fixed lines is far higher than in places like Europe, where the FTR is 40% higher than Icasa is proposing. Further, SA has unique challenges relating to unreliable power, which adds to the cost of providing reliable services.

When the regulator gave its latest update on the new proposal in March, Telkom was not happy with the possible impact on its fixed-line business.

It said this was especially concerning at a time when the distinction between fixed and mobile calls, from both operator and consumer perspectives, is blurring and fixed-mobile substitution in the voice market is increasing .

According to Ispa chair Sasha Booth-Beharilal: The argument for parity has little to do with interconnection revenue, but rests on the fact that the distinction between fixed and mobile calls is blurring. The result is that the average cost of terminating a fixed call is now the same, if not more expensive, than terminating a mobile call.

The regulator has added a clause that international termination rates charged by an operator must not be less than the SA termination rates as set out in its new guidelines or higher than the rate charged by the international operator.

Ispa welcomes the proposal to curb excessive international termination rates which bear no relation to regulated rates or actual costs. Ispa will engage with Icasa to ensure it understands how this will be practically implemented, the association said.