Interconnect is a red herring

Ivo Vegter

[By Ivo Vegter] Communications minister Siphiwe Nyanda announced a token cut in peak-time interconnection rates between mobile operators, to take effect in February and March next year. The cut was half as big as the reduction the regulator had earlier contemplated, and off-peak rates weren’t cut at all.

Nyanda smugly called it a “big early Christmas and Easter present we can give to the nation”.

Not to be exploited by a colluding cartel created by misguided government policy is a present in much the same way as giving a moist floor cloth to a parched hostage is “a present”. Only someone with Stockholm Syndrome would rejoice.

Moreover, the cut won’t be here in time for Christmas. Even if it was, it is not early, but 10 years late. It was 10 years ago that Vodacom and MTN colluded to ratchet up the interconnect rate five-fold to try to keep Cell C out of the market.

Worst of all, I suspect we’ll find that under the shiny paper and the pretty ribbon, the box is empty.

Without doubt, the operators will make up this loss in their revenue somewhere else. They’ll choose something less visible, where there is less competition, less price transparency, and less regulatory attention. So in the end, we’ll get nothing at all.

Starter packs with free minutes can be bought at supermarkets for next to nothing. Consumers use those all the time. Are mobile voice rates really that much of a drain on the SA economy?

Meanwhile, South Africans pay through their noses for slow, low-quality and highly limited data services. Just normal daily Internet use costs hundreds of rands a month or more. And while all the innovative stuff now happens in the network cloud, this assumes high-speed, high-cap, always-on connections. South Africans are being left out in the cold, surviving on meagre rations falsely marketed as “broadband”.

Like with number portability, the interconnection agreement was a populist sop to government. The operators made a huge public fuss about it, but in reality, it will cost them little and do little to promote competition. However, it bought them a shield with which to deflect future regulatory pressure. When attention turns to our sorry position in the information economy, they’ll point to voice interconnection and say: “Look, we met you halfway when you said it affected the poor. But the poor don’t use data.”

No, that is true. The poor don’t use data. Imagine the possibilities, however, if they could afford to do so.

Imagine the possibilities, if SA could compete with India for high-tech business.

Imagine the possibilities, if the poor could travel less but trade more widely?

Imagine the possibilities, if the Bric countries — the emerging markets of Brazil, Russia, India and China — on whom so much expectation for future global growth and prosperity rides, included SA.

Oh sorry, we were talking about interconnection rates. What about them?

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  • http://alan.blogspot.com Alan Levin

    “off-peak rates weren’t cut at all” …. outrageous, are they mad?

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