1 How does ICASA facilitate communications in South Africa? The - PowerPoint PPT Presentation

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• How does ICASA facilitate communications in South Africa? • The Policy framework • Trends in retail prices • Call Termination • Universal Service • The Fixed Line Challenge • How can ICASA address the concern of high prices? • What would ICASA like to do? • What can ICASA do? 2

• Services cannot be offered without: – Telephone Numbers – Spectrum – Type Approval – Review of Interconnection Agreements to ensure fairness • ICASA is the only body that does this in South Africa 3

• Government policy is to address high prices through introduction of competition – Competition Act of 1998 – Electronic Communications Act of 2005 • ECA: – ICASA can regulate prices where a licensee has dominance and the market is not competitive – Governed by Chapter 10 of the Act 4

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Cell C Vodacom 4 500 4500 4 000 4000 3 500 3500 3 000 3000 2 500 2500 2 000 2000 1 500 1500 1 000 1000 500 500 0 0 2009 2010 2011 2012 2009 2010 2011 2012 30 outgoing calls/mnth 300 outgoing calls/mnth 30 outgoing calls/mnth 300 outgoing calls/mnth 900 outgoing calls/mnth 900 outgoing calls/mnth MTN 8ta 4500 4500 4000 4000 3500 3500 3000 3000 2500 2500 2000 2000 1500 1500 1000 1000 500 500 0 0 2009 2010 2011 2012 2009 2010 2011 2012 30 outgoing calls/mnth 300 outgoing calls/mnth 30 outgoing calls/mnth 300 outgoing calls/mnth 900 outgoing calls/mnth 900 outgoing calls/mnth 6

Vodacom MTN 7000 7000 6000 6000 5000 5000 4000 4000 3000 3000 2000 2000 1000 1000 0 0 2009 2010 2011 2012 2009 2010 2011 2012 30 outgoing calls/mnth 300 outgoing calls/mnth 30 outgoing calls/mnth 300 outgoing calls/mnth 900 outgoing calls/mnth 900 outgoing calls/mnth 8ta Cell C 7000 7000 6000 6000 5000 5000 4000 4000 3000 3000 2000 2000 1000 1000 0 0 2009 2010 2011 2012 2009 2010 2011 2012 30 outgoing calls/mnth 300 outgoing calls/mnth 30 outgoing calls/mnth 300 outgoing calls/mnth 900 outgoing calls/mnth 900 outgoing calls/mnth 7

No of tariff Name of Operator Name of tariff plan plans 4U prepaid (Per second) Vodacom 4 Less (Per second) AllDay per minute Vodacom 6 AllDay per second Day Saver (per second) Big Bonus Voucher (per second) Muziq (per second) MTN Zone (per second) MTN 4 One Rate Call Per Second Easychat Standard (per second) EasyChat All day (per second) Cell C 5 EasyChat per second EasyChat 99c 99c For Real Per Second 8ta 3 Per Minute 8 Per Second

18000 1.4 17000 1.35 16000 1.3 15000 1.25 Effective 14000 1.2 Tariff 13000 1.15 12000 1.1 11000 1.05 10000 1 Jun-10 Jun-11 Jun-12 Dec-10 Dec-11 Total Prepaid Revenue (LHS) Total Prepaid Minutes (LHS) Effective tariff (RHS) Both consumers and mobile operators have benefited from the reduction in MTRs due to: Operators: Increase in both termination minutes and revenue • Consumers: Reduction in effective tariff per minute • 9

• Level of on- and off-net tariff differential by Vodacom & MTN • On-net promotions by Vodacom & MTN could further increase in on- and off-net differential • International voice tariff less than national tariff (Cell C R0.85 int. tariff, Vodacom R0.89 int. tariff) vs R1.04 industry effective tariff) Industry Operator International tariff Effective tariff Vodacom R0.89 to 52 countries R 1.04 MTN Discounts up to 100% to selected countries R 1.04 Cell C R0.85 to 50 destinations R 1.04 8ta Varies from R2.50 to R176 R 1.04 10

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Origination Termination End- End- Network A Network B user A user B • High termination rates: – Represent a price floor for the retail price of a new entrant – Retard efficiency within a firm • Solution: – Establish cost base for call termination – Introduce regulated glide-path towards the cost base • BUT Billing systems are the most expensive part of a call 12

2010 2011 2012 2013 2014 Promulgation call termination regulations, GG 33698, 29 Oct. 2010 Mar 2011 - First cut: Mar 2012 – second cut: Mar 2013 - last cut: R0.89 – R0.73 R0.73 – R0.56 R0.56 – R0.40 • • • Rate % reduction Pre 2011 R 1.25 Voluntary reduction R 0.89 -29% March 2011 R 0.73 -18% March 2012 R 0.56 -23% 13 March 2013 R 0.40 -29%

March March March This benefit ONLY Pre-2010 2011 2012 2013 ACCRUES to the smaller Nominal Retail player Rate per minute R 2.50 R 2.50 R 2.50 R 2.50 Termination Rate R 1.25 R 0.73 R 0.56 R 0.40 Only the smaller player Margin R 1.25 R 1.77 R 1.94 R 2.10 has “regulated” pricing power Less Origination (estimation) R 0.60 R 0.60 R 0.60 R 0.60 The increased profit Profit R 0.65 R 1.17 R 1.34 R 1.50 margin makes room for % change in profit 80% 15% 12% price competition 14

8000 5694 5683 6000 5425 5120 4108 3524 4000 R'million 2000 1271 1027 866 816 826 637 0 2007 2008 2009 2010 2011 2012 -2000 -2887 -3282 -4000 -3849 -4609 -4656 -4828 -6000 Interconnection revenue Interconnection payments Net interconnection revenue (payment) Telkom’s net position has improved by 37 per cent based on the termination rate reduction 15

The potential future? 1. Will further reductions R 1.4 harm all stakeholders? R 1.2 Peak 2. Slide 9 showed that a small R 1.0 reduction in retail prices Off-peak led to an INCREASE in R 0.8 revenue R 0.6 3. Any future change in rates will be evidence-based R 0.4 The future? R 0.2 R 0.0 16

35% • No. of households with 30% fixed line access to communications No access to continues to decrease 25% communications • Access to the Internet is growing because of Fixed lines 20% mobile telephony • Fixed lines are not as Household member relevant as they should 15% with Access to the be Internet • The private sector 10% mobile operators have made significant 5% progress in achieving 2009 2010 2011 universal service objectives 17

• Fixed lines are not relevant because they cost too R331.37 much for lower speeds • This is out of line with the rest of the world 21.6Mbps R149 1Mbps Data Bundle Price Download Speed Fixed Line Mobile 18

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• Fixed lines to the home must be the objective • High capital cost but very low fixed operating cost for ̴unlimited capacity • BUT: – Up to 80% of new fixed line network cost is civil construction – Delays in getting wayleave approval and water use licences artificially increase this cost • We have to ensure efficient: – New network deployment – Existing infrastructure, e.g. LLU 20

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High costs to Industry: • Infrastructure monopoly? • Barriers to network deployment? • High costs to end-users Lack of spectrum? • No spectrum sharing? • Import duties? • High costs to industry • Volatile exchange rate? • Possible monopoly in retail markets? High cost to communications? 22

3 PTA East Rand JHB/PTA Sandton JHB Bloemfontein Durban 2 4 1 JHB Cape Town )))))) Local switch International connectivity National backhaul Metro-ethernet Local access 23

Initiate Discussion Findings Document Final Enquiry Document & Draft regulations Regulations Data Collection Public Public Implementation & Analysis Consultation Consultation Resource Needs Resource Needs Resource Needs Resource Needs • • • • Cost Accounting Economists Economists Economists • • • • Compliance: Legal Cost Accounting Cost Accounting Cost Accounting • • • • Impact Analysts Statisticians Statisticians Statisticians • • • Engineers Engineers Engineers • • • Lawyers Lawyers Lawyers > 4 months 6-9 months > 4 months On-going 24 Timeline: > 14 months

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• Cost model for voice value chain • Cost model for data value chain • Identify need for intervention • Regulate prices where necessary • Other obligations to be considered 26

• Make High Demand Spectrum available ASAP – To new entrants – To an open access network, and – To the incumbents • All this assignment of spectrum to have universal service obligations • Expected impact: – Increase access for all – Increase competition leading to lower prices and better choice – GDP growth as per World Bank forecasts 27

• Broadcasting Value Chain Analysis – Improve competition • Support development of Local Content • It will be technically possible to have 140 SD TV channels in the UHF band. • We want to make this happen! 28

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• The Challenge – ICASA only has approximately R 20 million to do all its discretionary work – One market review costs approximately R 5 million • What is ICASA doing about this? – We are re-prioritising our activities BUT – We do not have sufficient funds to support parliament in all of its objectives 30

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