Independent Communications Authority of South Africa Presentation to the Parliamentary Portfolio Committee on Wholesale Call Termination 08 March 2011

Background Government Policy is to ensure fair retail prices through promotion of competition Competition Act of 1998 Electronic Communications Act of 2005 Implementation of policy: Evaluate bottlenecks to competition Such bottlenecks are prevalent in supply chains, e.g telecommunications etc

On-net calls and termination End-user A End-user B Network A Origination Termination Step 1: End-user A starts a call to End-user B Step 2: Network A routes the call through its network to End-User B Outcome: Network A completely controls retail price

Off–net calls and termination End-user A End-user B Network A Network B Origination Termination Step 1: End-user A starts a call to End-user B Step 2: Network A routes the call to Network B Step 3: Network B routes the call to End-user B Outcome: Network B has an impact on the retail price

Promotion of fair prices under the ECA Authority may regulate prices : Where there is a lack of effective competition in a particular market What must the Authority do? Evaluate the value chain over which retail services are provided Regulate “away” bottlenecks to fair competition

Call Termination and Retail Prices Retail prepaid prices have not increased since 2007 Retail prepaid prices have actually declined Per second packages MTN Zone/ Loaded/ Vodacom Yebo 4 Less/ Cell C Winc/ Telkom Mobile or 8ta What is the impact of a reduction in Call Termination?

Retail Price Trends CPI comparison of Inflation, Food prices and Telecoms prices, 2008 to Jan 2011 Source: StatsSA

Have prices actually come down? Year on year price movements, 2008 to Jan 2011 Retail prices ARE declining

What has the Authority found Call termination rates were set at excessive levels Ability to compete was hampered by existing commercial terms in interconnection agreements High bank guarantees High minimum monthly traffic requirements

Regulation Reduce termination rates Reduce cost of access Outcome: Networks now have more control and ability to charge lower retail prices Do not face high barriers to entry/operations Networks may now effectively compete on price

Expected Impact Enhanced competition in provision of retail services Are we seeing this yet? Yes, licensees are expressing interest in entering retail mobile market Fixed to mobile retail rates have been reduced Consumers have more transparent mobile to mobile retail tariffs