1. Purpose
1.1. The Independent Communications Authority of South Africa (“ICASA”) thanks all those who participated in the workshop held on the 23 May 2014 at the ICASA’s premises to discuss the content of the questionnaires that the Authority issued on Wednesday the 21st of May, 2014.
1.2. The purpose of this briefing note is to provide clarity in respect of the questionnaires as well as respond to some of the questions raised during the workshop held on the 23 May 2014.
2. The specific areas to be clarified:
2.1. What is the context under which ICASA is seeking this information? ICASA seeks the information included in the questionnaire from all licensees pursuant to Section 67(8) of the Electronic Communications Act 36 of 2005 (“ECA”) to review the Wholesale Voice Call Termination Regulations of 2010 (Government Gazette 33698).
The questionnaires are designed to ensure that ICASA has the necessary up to date information to:
- review the market determinations made on the basis of earlier analysis [meaning the definition of the market, the determination of significant market power as well whether the market is ineffectively competitive]; and
- decide on whether to modify the pro-competitive conditions set by reference to a market determination.
The ICASA’s preliminary position is as follows:
- the definitions of Markets 1 and 2, being the markets for termination to a mobile and fixed location, are unlikely to change;
- all licensees continue to have Significant Market Power in terms of access to their networks; and
- the two markets remain ineffectively competitive.
2.2. Relevance of cost of other services.
The cost of wholesale voice call termination cannot be calculated in isolation. All information regarding an operator’s costs is therefore important. Information pertaining to the costs of other services (e.g. SMS, MMS, data, etc.) is relevant in order to ensure accurate allocation of costs to the wholesale voice call termination service. This is due to nature that for network operators different services share common assets and those not relevant for wholesale voice call termination service need to be identified and appropriately excluded from the termination rate calculation.
2.3. The Voice over Internet Protocol (VoIP) questionnaire.
The VoIP questionnaire is for the Authority’s planning purposes regarding the changing technological environment in the provision of voice services. The completion and submission of the VoIP questionnaire is deferred until the 3rd July 2014.
2.4. The cost standard to be applied in determining a suitable termination rate for wholesale voice call termination rates in South Africa.
The Long-Run Incremental Cost (“LRIC”) standard is the internationally accepted practice used by regulators to determine the efficient cost of providing wholesale voice
call termination services.
Within South Africa, the 2010 regulations applied different cost standards to different markets. The mobile termination rate was set at Fully Allocated Cost whilst the fixed line termination rate was set on a LRIC basis. This created a distortion in prices and ICASA intends to address the matter through this review.
ICASA has decided to apply a LRIC cost standard for all licensees. ICASA has determined that it is necessary to gather detailed information from licensees so that it is possible to determine which form of LRIC is best suitable for South Africa.
2.5. The methodology to be used to determine a termination rate.
ICASA shall undertake the following in determining a suitable termination rate for South Africa:
- The development of a bottom-up LRIC model.
- The development of a top-down LRIC model.
- A comparison of termination rates in other jurisdictions.
ICASA will consider the outcome of all three approaches to determine appropriate termination rates for South Africa.
2.6. Future engagement with the Regulator.
ICASA and its consultants intend to engage with each licensee who duly completed their questionnaires as follows:
- To validate the information submitted to the Authority;
- To outline how ICASA will use the information submitted.
ICASA will share the results of the cost modelling exercises with these licensees at a date to be communicated in due course.
2.7. Timelines.
ICASA has noted concerns raised by licensees regarding the time required to submit information by 13 June 2014. ICASA grants an extension of the submission date for the questionnaires to 20 June 2014.
ICASA requested licensees to submit any further queries / clarifications regarding the questionnaires to marketreview2014@icasa.org.za before 28 May 2014 as communicated to licensees on the 23rd of May 2014. ICASA will review these submissions and publish a consolidated statement on its website by 30 May 2014.
Any enquiries relating to the 2014 wholesale voice call termination regulatory review should be directed to Christian Mhlanga on 011 566 3637 or CMhlanga@icasa.org.za and Leweng Mphahlele on 011 566 3677 or LMphahlele@icasa.org.za.
For all media enquiries please contact:
Paseka Maleka
Tel: 011 566 3455
Cell: 079 509 0702
E-mail: pmaleka@icasa.org.za
