Cell call costs cut likely

The Department of Communications and telecommunications industry regulator the Independent Communications Authority of SA want the Electronic Communications Act to be amended to give the government the power to set prices for cellphone calls.

In a move expected to be met with resistance by the cellphone industry, Themba Phiri, the department's deputy director-general, yesterday told parliament, which is holding hearings into the high cost of telecommunications in South Africa,that the government was considering introducinga flat rate for cellphone calls.

Phiri said cellphone call charges in South Africa were very high compared with those of other countries, even after former communications minister Siphiwe Nyanda reduced them in 2010.

"The amendment to the [act] in addressing matters that hinder competition and other related matters needs to observed . The imposition of a flat rate on mobile voice calls needs to be studied to determine its relevance in today's market. Regulation of transparency in the pricing and the publication of mobile retail prices is a very important policy issue," said Phiri.

Nyanda's intervention reduced the cellphone termination rate from R2.50 to 89c a minute in 2010. It is expected to drop further in March, to 40c a minute.

The termination rate is what networks charge to carry calls between networks.

Phiri said despite the reduction in the termination rate, the cost of making cellphone calls was "very high", with Vodacom and MTN - which have 85% of the market between them - accounting for the highest package prices of between R2.50 and R2.58 a minute.

At 99c a minute, Cell C offers the lowest packages price. Packages of operators such as Virgin Mobile and 8ta cost R1.75 a minute.

Cellphone companies are opposed to the proposed reduction in the termination rate, saying it would lead to job cuts because profits would plummet.

But Icasahas disputed this claim, saying cheaper cellphone call rates would attract more customers.

William Stucke, an Icasa executive, also supported the department's calls for more state regulation of the cellphone industry.

"We would like to build a cost model for the calls value chain. We would also like to build a cost model for the data value chain and identify the need for intervention. We would like to regulate prices where necessary," he said.

Professor Alison Gillwald, an expert in information and communications technology, said the high cost of cellphone calls was inhibiting economic growth and job creation, particularly in the call centre sector.

"The very high input cost of communications to this economy is killing certain sectors and has prevented the rise of obvious sectors such as call centres ... which really have not taken off as they should.

"It has implications for job creation and economic growth. Our wholesale [cellphone call] prices remain very high. They have to come down," said Gillwald.

Vodacom, Cell C and MTN are expected to make their submissions to the committee this morning.