'Mobile rates are cheap' By Candice Jones, ITWeb online telecoms editor Johannesburg, 16 Oct 2009 Read in this story
Strong case
Taking care
Cost to consumer
MTN SA MD Karel Pienaar called the DOC's benchmarking study into question during parliamentary hearings on interconnect. Local call rates are not high, says MTN, criticising a benchmarking study commissioned by the Department of Communications (DOC), which proves SA's rates are expensive. Despite not having seen the study, the company's head of regulatory affairs, Graham de Vries, says the rates presented by the ministry in Parliament, in September, need to be “interrogated”. MTN also raised its criticism of the study during the two-day parliamentary hearings on high interconnect rates, held on Tuesday and Wednesday, this week. During MTN's public address, the company's SA MD, Karel Pienaar, said the validity of the study needs to be questioned. According to De Vries, over the last 10 years, retail rates on mobile for MTN have come down by 20%. He adds that the company's current MTN Zone campaign has dropped rates further, offering a 90% discount to calls at certain times. He says the company has compared its rates with the countries that were benchmarked by the DOC and found the rates are actually cheaper. “In the case of Chile, for example, we come in at 40% cheaper than the costs that were presented in Parliament.” During the hearings, Pienaar said the study was flawed, because the costs used in the research were lifted from MTN's Web site, some of which are out of date. The company says it is still making the changes to the site after it revamped its tariff structure.
Strong case The DOC has responded to MTN's criticisms of the study. “The DOC takes exception to MTN challenging the validity of some of the tariffs in its report on the cost of telecommunications in SA,” it said in a statement. The statement goes on to validate the credibility of the authors, which include Michael Minges, former head of statistics for the International Telecommunications Union, and Dr Martyn Roetter, former head of telecoms consulting for AD Little. “Mr Minges is an acclaimed world-authority on tariff benchmarking and has conducted similar benchmarking studies for governments across the globe. Dr Roetter has equally completed extensive tariff policy work for operators internationally,” the statement explains. The department says the study's methodology was meticulous and can not be called into question.
Taking care The benchmark study compares telecoms prices in SA with Chile, South Korea, India, Brazil and Malaysia, and looks at both fixed and mobile telecoms, as well as the associated Internet usage and costs. The introduction to the study explains that the operators have previously questioned the veracity of similar work and the study set out to once and for all concretely compare prices in markets similar to SA. “For example, South African operators have objected to the results of earlier comparisons with other countries, showing that telecommunications prices in SA are much higher than international levels in key market segments (eg, international services, leased lines and mobile services) on the grounds that such comparisons are spurious, because they fail to take sufficient account of actual operating conditions in the Republic,” the introduction explains. It goes on to say that all care was taken in the study to ensure that none of these objections could be raised in response to the
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DOC's commission. BMI-TechKnowledge, which compiled the report, explains that it not only compared and analysed prices, but also looked at the varying regulatory environments, economic conditions and development, and areas of similarity and difference. The study's background information says it set out to “develop convincing and comprehensive evidence, based on global experiences and comparisons with five benchmarking countries in Asia and Latin America, regarding performance and gaps in the telecommunications sector in SA”. The second criterion of the study was then to “formulate recommendations for short- and long-term measures to improve this sector's performance and overcome the gaps that are identified”.
Cost to consumer The study concluded several key rates are still considered high. Fixed local call rates per minute on Telkom's prepaid service proved to be the highest, at more than 10 US cents per minute, followed by Telkom's postpaid service at eight US cents per minute. Brazil came in at six US cents per minute, followed by Chile, Malaysia, India and South Korea. In terms of fixed business baskets, excluding taxes, Telkom Business proved to be the most expensive, at $160.39, followed by Brazil at $123.55, then Malaysia, Chile and South Korea, with India coming in cheapest, at $36.98. The study shows mobile broadband options, higher than 2Gbps, are expensive, because the country doesn't have uncapped plans, which the other benchmarked countries have. As far as SMS is concerned, SA has the second-highest prices after Brazil, despite SA having a higher usage of the service. The study also finds that in terms of mobile voice, SA's Cell C BusinessChat Standard had the highest tariff, followed by Neotel Lite2Gb, then followed by Brazilian packages. Vodacom Talk 120 and MTN ProCall 120 were ranked fourth and fifth highest out of the nine packages surveyed. The study says: “In summary, however, the study concluded that SA is, with few exceptions, a high (and in some instances very high) communication cost country.”
Related stories: Parliament slates MTN's interconnect reliance MTN calls for policy trade-off DOC orders gazetted
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