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Switch welcomes interconnect discussions, pledges rate reductions

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Switch Telecom has welcomed news that the Independent Communications Authority of South Africa (ICASA) is pushing the Parliamentary Portfolio Committee on Communications and mobile operators to reduce wholesale interconnection fees, while also pledging to reduce its retail rates to reflect the lower fees as soon as these come into effect.

The independent telecoms operator simultaneously urged the mobile operators to make firm commitments to lower their interconnect rates significantly by 1 February 2010, as ICASA has asked them to.

“ICASA’s negotiations with the mobile operators about interconnection fees are way overdue since these fees are a massive contributor to high telecom costs in South Africa,” said Gregory Massel, managing director at Switch Telecom.

“About 80% of the amount that one of our average customers spends on telephone services can be attributed to the costs of calls to mobile numbers. That is an absurd and untenable situation,” he added.

VoIP service providers such as Switch price their retail call tariffs to mobile proportionately to the wholesale termination rates that the mobile operators charge.

The mobile operators charge a fixed peak tariff of R1.25 per minute (excluding VAT) to the network provider of the caller to connect the call with a subscriber on their own mobile network. This fee – high by international standards – is passed onto VoIP users by their service providers.

“These paralysing interconnection costs and the resulting high retail costs are an onerous burden on South African consumers and businesses and the economy as a whole,” Massel said.

For that reason, Switch welcomes the industry initiative to bring interconnection rates down.

“Switch would like to see the mobile networks drop termination tariffs by at least 50% with immediate effect to be in line with what the international operators are paying to terminate calls to SA mobiles,” he said. This drop in interconnection rates would also bring the operators in line with draft interconnection regulations which state that wholesale tariffs may not exceed retail tariffs.

A drop in interconnection tariffs of at least 50% will help ensure that all call traffic from overseas networks to South African mobile phones is routed across official interconnect routes with contracted quality of service guarantees and caller ID delivery, said Massel.

Currently, a significant portion of this traffic is routed via grey market operators that use SIM farms with the result that end-users suffer drawbacks like an unacceptably high number of dropped calls, network congestion, poor network reliability and a lack of caller ID.

In the longer term, the industry should be aiming to move to a uniform wholesale termination rate applicable to land-line, mobile and next-generation operators. Ideally, this rate should be in the region of 25c/min, but Switch is sceptical about the possibility of the mobile networks embracing such a significant reduction in whole termination rates in the greater interests of the South African people and economy.

“The cost-savings that VOIP service providers can offer their customers are limited by the current interconnect regime. So we welcome any action to reduce these costs so that we can compete more vigorously on price and pass cost savings on to our clients,” concluded Masse

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