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Independent Communications Authority of South Africa

The presentation discusses the regulation of call termination rates to promote fair retail prices in the telecommunications sector using the Electronic Communications Act and Competition Act. It covers the impact on competition, retail prices, and barriers to entry, emphasizing the authority's role in regulating prices for effective competition.

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Independent Communications Authority of South Africa

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

  2. 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

  3. On-net calls and termination Origination Termination Network A Network A End-user B End-user A 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

  4. Off–net calls and termination Origination Termination Network A End-user A Network B End-user B 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

  5. 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

  6. 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?

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

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

  9. 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

  10. 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

  11. 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

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