A number of lessons were learnt and are summarised from the interviews conducted and documents analysed. Recommendations that emanated from interviews and the document review are captured as well.
Amendments to the ECA need to be promulgated
Respondents suggested that the ECA‟s competition prescriptions in Chapter 10 of the ECA are onerous and should be amended to ensure that rate regulations are not subject to a market review exercise being carried out before rates are prescribed. An ex-post process will speed up the processes in the future. The ECA calls for another review of market determinations before pro-competitive measures are changed. This means then that consumers will be subjected to a further long drawn out process before rates are adjusted to get to close to underlying costs. Experts believe that rates should be closer to 25 cents (ZAR). Respondents cautioned that an
amendment to the ECA will be appropriate and should ensure that any new rate to be regulated will not be subject to another market review before rates are adjusted but rather that rates are adjusted subject to a benchmark exercise as was achieved in India.
Interconnection must be treated as one of the strategic pillars for cost reduction
Some Respondents agreed that ICASA should treat interconnection as a strategic pillar to reduce retail rates. To achieve this it has to issue draft regulations to be implemented in 2013 to reduce rates to get closer to underlying costs. Respondents
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alerted the Researcher to ICASA‟s institutional inertia and warned that the exercise will not be conducted in a timely fashion and will once again be a stumbling block, preventing consumers from improving their wellbeing. The regulator therefore needs to recognise that interconnection regulation is a strategic imperative to drive retail prices down. In the absence of a cost-oriented exercise being carried out opinion from Respondents is that the current glide path has still not achieved the aspiration of cost based charges. As stated some Respondents believe that the costs should be closer to 25 cents. Therefore there is opportunity to further reduce wholesale call termination rates after 2013.
An opposing view however held by at least one Respondent is that ICASA needs to make its intention very clear that it wants to reduce retail rates. It is the Respondents view that ICASA has not done this. This then will give Operators an opportunity to work with ICASA to look for alternatives to meet this objective. Some Respondents believe that reducing interconnection rates, due to the waterbed effect, as has been explained will not achieve a reduction in retail rates.
An asymmetric rate is not sufficient to assist new entrants
View from respondents is that asymmetric rates should be complemented by regulations ensuring successful number portability implementation, local loop unbundling, access to efficient spectrum and carrier pre-selection so that new licensees get the benefit of easy entry into the sector. Although this has been addressed in the current regulations, some Respondents believe that the damage caused by this inaction has set Cell C back in terms of market share.
Pro-competitive measures needed to be bolder
A conclusion drawn from the literature suggests that some pro-competitive remedies could have been bolder; for example divestiture of some lines of business within the incumbents e.g. Telkom, MTN and Vodacom could have been alternative measures to introducing competition more rapidly. Telkom in particular is the monopoly
backbone services provider to the sector. However it is also a service provider in downstream markets e.g. internet service provision. Even though a court ruling, favouring Altech Autopage has allowed other operators to self-provide they will have to obtain network services from Telkom because of high capital costs to roll-out
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infrastructure of their own. It is opportune that with the market review exercise that was conducted that ICASA together with the Competition Commission put plans into place to functionally separate Telkom‟s wires business from other services. This could mean that the licensing regime would have to be re-examined.
Institutional problems at ICASA have impacted on developmental goals
Some Respondents were adamant that delays in finalising wholesale call termination and interconnection rates is a factor of poor skills at ICASA, dis-continuity of key staff and poor use of existing skills. Respondents expressed an anxiety that any further review of interconnection and wholesale call termination will result in further delays if skills problems at ICASA are not addressed. The literature shows that delays in issuing regulations have impacted negatively on developmental goals such as aspirations for South Africa to enter the call centre market, like India has done. At least one Respondent suggested that past acrimony between the CEO of ICASA and the Chairperson of the Council due to role clarity contributed to delays in the issuing of key regulations. Skills according to a head of regulation at a large operator are not deployed optimally. In some instances institutional skills are lacking to interpret COA/CAM data. The other problem that ICASA faces is that they are not able to retain skills for a sustained period to conclude on finalising key regulations. The Researcher in fact found that most of the Respondents were erstwhile ICASA employees/councillors having occupied key positions at ICASA previously. ICASA will have to improve working conditions to enable retention of key staff. Furthermore as one Respondent pointed out ICASA has a budget of R280 million to regulate an industry with a turnover of R100 Billion. “They are hopelessly underfunded and cannot retain or hire the staff required for the complex task at hand” (Vella, 2011, p.58).
Respondents agree that since the ECA requires regular review of market dynamics, it is opportune that ICASA resolves skills issues immediately.
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The interconnection rates prescribed in the new regulations has not yielded the correct result
Some Respondents were annoyed that there seemed not to have been as thorough a costing exercise to get to the rates as specified in the glide path rates that have been prescribed. The rates seem to be arbitrary in nature. The market review process and the rates that were finally issued do not correlate. This according to some Respondents can be attributed to the fact that the Authority's process was paralleled by a political one as the process was characterised by interventions of the PPC and the Minister at the time. From a Promotion of Administrative Justice Act (PAJA) perspective this was possibly non-compliant but it did produce an outcome that goes towards improving the consumer‟s welfare. The ICASA process, arduous, rigorous and complex as it was, never actually yielded the proper call termination rate result based on cost based charges.
Intervention by the policy maker in regulatory processes was counterproductive
From the interviews conducted with Respondents there is little doubt that the focus on interconnection rates by the media, the PPC and Ms De Lille in particular galvanised ICASA into finally concluding on interconnection and wholesale voice call termination regulations. However some held the view that the intervention by General (Ret) Siphiwe Nyanda had the potential of setting the process back a few years. Had the Minister continued with the heavy handed approach it was inevitable that the regulations would have been challenged using the Promotion of Administrative Justice Act citing lack of compliance to due process.
However one can understand the actions of the Ministry as they were “frustrated by the lack of progress between the operators and ICASA” (Comninos, et al, 2010, p.
11). However this intervention by government also did not do justice to the new rates that were prescribed. The rates that were prescribed did not seem to be based on any rigorous costing exercise being conducted. The full value therefore has not been extracted and rates are a fair distance away from the rate of 25 cents that has been estimated as the true cost of interconnection in South Africa.
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Table 13 : Summary of Research Questions and Conclusions drawn
No Research Question Conclusions drawn
1. To what extent does the approach to regulating interconnection rates adopted by the South African Regulator present a favourable outcome with reference to the approach adopted by the Indian Regulator?
The approach taken by the SA authorities yielded arbitrary interconnection rates. The Indian process however achieved cost based rates that were used to drive retail costs down. The SA process was also overtaken by a politically driven process that overshadowed the ICASA driven process.
The market review process could have been a combination of ex-ante and ex-post rather than ex-ante only.
1.1 To what extent has the approach to market definition promoted an effective regulatory process? parallel with a cost based exercise
1.3 How does the determination of pro-competitive remedies strengthen the regulatory process?
Pro-competitive measures could have been bolder and could have included divestiture of certain lines of subsidiary businesses of incumbents
1.4 How does the process for determining interconnection rates strengthen the process?
Processes have gaps in them. The ECA unnecessarily bogs down the process because of a requirement for an ex-ante market review process
1.5 What lessons can be learnt from the approach to interconnection regulation
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