Lowering Cell Phone Interconnection Rates in South Africa: public hearings Day 1

Meeting report

The Chairperson stated that Parliament was concerned about the impact interconnection rates had on ordinary South Africans in using their cellphones and telephones. In broad terms, there had been an agreement that there should be an overall reduction in costs. The debate would now revolve around how much this reduction would be and over what period this would be done. The Committee had received over 80 submissions and the consensus was that people supported the initiative. The Committee had selected 22 for oral submissions.

He discussed concerns about this being a form of political interference and agreed that this was a legitimate concern under normal circumstances. The Committee saw this as an extraordinary step in extraordinary circumstances. The Committee had concluded that the regulatory authority, the Independent Communications Authority of South Africa (ICASA), had failed in dealing with the matter. At this point the reasons for this failure were immaterial. The Committee could not ignore this issue. ICASA was the regulator and it had to regulate. The hearings would allow the space for ICASA to do that. If legislative amendments were required, the Committee would decide on this as a collective. If the Committee had to review legislation to make it clearer, they were open to that suggestion.

Ms J Kilian (COPE) noted that some of the submissions had been received after the closing date stipulated in the advertisement. Subsequent to closure, the Congress of South African Trade Unions (COSATU) had made an appeal for an oral submission. From COPE's perspective it was not fair to invite only one of the institutions that missed the deadline. If they wanted to open the process again, they should have done so and made provision for all stakeholders in the public hearings process. She asked if the Chairperson had made final decision on the matter and asked the ruling party to reconsider as it would set the wrong precedent. In advertised public processes, everyone should respect the cut-off date.

The Chairperson replied that the COSATU submission was received late. They had apologised for the late submission and, upon consideration, he decided to include them in the hearings. The dominant interests represented in most of the submissions were business interests. As such it was important to allow other voices in the discussion. COSATU had a sizeable working class constituency. He had made the decision to include them at his discretion, as Chairperson of the Committee. He did not see this as a licence for others to be included, as the decision was based on the nature of COSATU's constituency and the voices it might represent.

Submission by Thabiso Mokgoro
Mr Mokgoro presented a submission on his personal experience with mobile service providers. This spoke specifically to the fact that he felt crippled by high interconnection rates and how limited he felt by his inability to change service operators without incurring a high penalty. He supported the Committee’s proposals.
He recounted that he had received an international roaming bill for R 33 000 for a two-month stay in Botswana. He had negotiated a 4 month payment period with the operator. In addition to the arrears, he was also required to continue paying for the existing contractual obligations. Even though he had negotiated a payment plan with the operator and was in the process of repaying the debt, his service was suspended due to being in arrears. At that point he began to evaluate his options. He considered moving to another mobile operator. He was told he would have to pay R20 000 in order to get out of his contract. He was of the opinion that if he paid for a service, he could expect to get his money's worth in service. He was not getting this service and had no option but to demand better service.

Discussion
Ms P De Lille (ID) noted that the submission also showed the difference in costs between roaming charges for his stay in Botswana and comparable services in the USA. He pointed to the regional agreement South Africa was part of as a member of the Southern African Development Community (SADC) and asked why the cost was higher in the SADC region than in the USA. She agreed that this was a matter of choice and felt that all the operators were the same when it came to prepaid customers/services.

Mr Mokgoro replied that he spent time training in the USA. He had spent 32 days in the USA last year and the total bill for his stay had been R6 000. He had expected the same amount for his month long stay in Botswana and Lesotho and had been shocked by the bill for R33 000.

Ms De Lille referred to the problems Mr Mokgoro had with the call centre and asked whether he had lodged a complaint with the CEO of the company (MTN).

Mr Mokgoro replied that he did not think he could reach that level of the company for a complaint. He had sent four or five complaints and had not received a proper response to date. Admittedly, following one of his complaints, his service was reactivated without his knowledge, but the operator had never formally responded to the complaints. He added that he did not know how to approach a complaint at the CEO level.

Telkom submission
Dr Andrew Barendse, Group Executive (Regulatory Affairs): Telkom, reported that Telkom would be affected by any reduction in Mobile Termination Rates (MTR) as most mobile calls originated on the Telkom network. He clarified that Telkom did not retain the MTR. He explained the impact of the lower termination rates on Telkom’s business. The full implications were not clear. Due to the substitution of fixed line calls for mobile services, this might impact on Telkom’s payments (increase the substitution of mobile calls for fixed line calls and reduce Telkom's revenue). Regarding the impact of the termination rates of Telkom’s payphones and how this compared to the termination rates of the mobile operators Community Service Telephones (CSTs), he commented on the onerous licence obligations that Telkom had to adhere to. Telkom proposed that they also be allowed to terminate at 6c per minute on Telkom payphones. 
Mr Thamsanqa Kekana, Senior Legal Advisor: Regulatory Affairs, Telkom, presented Telkom’s understanding of the legislative framework for the regulation of termination. He commented on the importance of the Chapter 9 Institution (ICASA) and adherence to Chapter 10 of the Electronic Communications Act, specifically Section 41. Telkom was of the opinion that the complexity of the MTR issue required an institutional framework. Telkom affirmed its commitment to participate in any endeavours aimed at reducing communications costs - provided that the integrity of the process was lawfully permissible. Furthermore, Telkom believed that the regulation of termination rates was exclusively within the regulatory competence of the ICASA.

Discussion
Ms De Lille noted that the Committee was aware of the difference between the receipts from operators and the payments to operators. She asked if Telkom had a commercial agreement with the operator and if so, why did they allow this mismatch between the rates that were charged on their payments to mobile operators and the rates that applied to their receipts.

Ms Pinky Moholi, Managing Director: Telkom, replied that the first interconnection agreement was concluded in 1993/4 and was crafted as a three way agreement between Telkom, MTN and Vodacom. The Telkom managers had negotiated this agreement based on the assumption that the mobile operators would never exceed 500 000 customers. Currently Telkom could not change the agreement with mobile operators (MTN and Vodacom) as they needed consensus in order to make a change. The operators had not agreed to date. To overcome this restriction, Telkom decided to bounce calls internationally. This meant that they relayed calls internationally in order to avoid incurring the interconnect costs. They used this form of arbitrage to force the other two parties to return to negotiations. Their hands were tied by the agreement. Furthermore, ICASA had limited scope to intervene as there was no regulation for them to dictate the cost.

Ms De Lille noted that Telkom stated that they were not allowed to reduce the termination rate on CSTs and asked if this was in terms of their licence conditions and what prevented intervention.

Ms De Lille asked what was meant by “a second licence” and why Telkom was subject to different licence conditions than mobile operators. She asked if Telkom had raised these issues with ICASA.

Dr Barendse replied that under the original licence they had been required to provide 120 000 payphones plus other conditions. The operators were not subject to these onerous obligations. The new licences (second licences) enforced the prior obligations. The idea was that the authorities would review these obligations. As this review was still pending, Telkom now suggested that the process be accelerated for the benefit of the end-users.

The Chairperson asked if the three way contract was a fixed duration contract or whether it was of the “till death do us part” variety.

Ms Moholi replied that it was of the “till death do us part” variety (a contract without a fixed duration).

Mr E Kholwane (ANC) asked if they had benchmarked against other countries and whether the mobile and fixed line telephony rates followed the trend.

Ms Moholi replied that benchmarks were meant to provide guidance as to what the MTR should be. It was still necessary for ICASA to do the market review.

Mr Kholwane referred to the issue raised about Telkom payphones and CSTs. He understood their argument that they had more obligations than the mobile operators. He felt the Committee should look at the similarly high rates Telkom were obliged to charge for calls on payphones.

Mr Kholwane referred to the solutions Telkom had proposed and asked them to elaborate on how Parliament could proceed within the legal framework.

Mr Thamsanqa Kekana replied that Telkom advocated a separate process to address the issues around payphones and CSTs. They were also enthusiastic about tabling a concrete proposal on how to approach this legislatively.

Mr K Zondi (IFP) noted that most calls terminated on the Telkom network, making them a key player in this debate. He asked what was meant when Telkom stated that they did not yet know the full implications of the proposed reduction in interconnection rates. Were they referring to the implications for the end-user, Telkom or Mobile Operators? He also wondered what was needed to determine the impact.

Ms Moholi replied that the most obvious impact was that Telkom’s payments to the Operators would be lower. As Tekom operated on a pass-through model, any reduction would be passed on to the end-user. For this reason there would be minimal impact on Telkom’s profitability. Substitution might have an impact as the reduction in rates might make cellular call rates cheaper than fixed line call rates. This could cause higher substitution of mobile calls for fixed line calls and therefore impact on Telkom.

Ms Kilian noted Telkom’s apparent sensitivity about the Committee taking the extraordinary step of intervening in the role of a Chapter 9 Institution. She asked Telkom to elaborate on this.

Dr Barendse replied that, as he understood it, policy makers made policy, regulators implemented policy, courts reviewed policy and operators operated in the environment that the other role players created. This approach created clarity, consistency and certainty. In this instance, thing did not work according to this model and that was the source of the sensitivity. Telkom had expected things to operate in the manner outlined and there was sensitivity around not knowing how this process would unfold.

Mr Kekana added that the point they had made about protecting the independence of Chapter 9 Institutions and ensuring that they function in an impartial manner was made in the context of how Telkom understood the institutional arrangement. They acknowledged the role Parliament played in galvanising public sentiment. In terms of implementation, Parliament had given ICASA its powers through legislation. Telkom had perceived Parliament’s role as being one of accountability, oversight and support to institutions. They did not feel that there was “encroachment”. There was, however a need for caution in approaching the situation. After careful consideration, Telkom's conclusion was that ICASA was the body best suited to implementation.

Adv J De Lange (ANC) thought that Telkom had the incorrect understanding of the inter-relations according to the Constitution. Parliament did not make policy. This was the prerogative of the Executive. Parliament was in the middle, performing the legislative and oversight functions. These two functions came with a host of powers according to the Constitution. The purpose of the hearings was to determine why costs were so high. If legislative or oversight intervention were necessary based on the information provided, the Committee would do so. He stated that Telkom should concentrate on getting things right from their side. They should not sign such bad agreements and should apply pressure to get a better deal. Telkom should not worry about the legislative framework as they did not understand it correctly. He felt it that Parliament had concentrated on the public sector in the past and should have started to intervene in the private sphere where things were not always what they should be.

Mr N Van Den Berg (DA) stated that this had been the most unimpressive submission he had yet heard. If Telkom could not convince the Committee, how could they convince the public? They had given the Committee all conceivable excuses not to reduce prices. He remarked that he was on the verge of cancelling the Telkom line in his home, as other people have done because the fixed line was too expensive. Telkom had mentioned the effects of substitution of mobile for fixed line service. Fees were ridiculous for calling mobile numbers from fixed lines. People need to make many more calls to mobile numbers than to fixed line numbers. It was therefore stupid to use a Telkom line. When one considered the cost of line rental and the service consumers got, he concluded that Telkom was putting itself out of business and he would be unsympathetic if this did occur.

Ms Moholi agreed that the current charges were expensive adding that the effect of lower MTR would be to reduce that cost. Telkom was subject to these rates and had to pass on the cost to the end-user. Telkom supported the reduction of MTRs. The issue they raised was that the benchmarks would give them guidance as to the direction on this matter. Equally important was the study by ICASA to determine what that cost should be. The line rental was a maintenance charge and was not unique to South Africa and was a result of the cost of maintaining a copper based network. There was a worldwide movement towards using wireless networks as they were cheaper to maintain and service. Under the new Electronic Communications Network Service (ECNS) licences they have moved away from prescribing a choice between a fixed or mobile service. The ECNS licence allowed them to provide a network service, irrespective of the technology chosen. These licences would make it cheaper to provide telecommunications services because they would allow access to wireless technology as well.

Submission: Prof Petrus Potgieter
Prof Petrus Potgieter, of the Department of Decision Sciences at the University of South Africa and member of the International Telecommunications Society, spoke in his personal capacity, saying that the high interconnection rates were a symptom of a persistent lack of competition in the sector and unfortunately this had been condoned by authorities over time. Therefore, this was not a matter of the lack of action by ICASA over the past few years - the problem was much older than that. The Fixed Termination Rates (cost of terminating a call on the Telkom network) also deserved the Committee’s attention, as they were also excessively high. Comparatively speaking, South Africa was as far out of line here as on MTRs.

Under the Calling Party Pays system, the calling party had to bear the entire cost of a phone call.  The operator operating the number of the receiver had a monopoly over terminating that call. What was meant by monopoly was that the person paying for the call (calling party) could not choose which operator to use in delivering the call. This was less competitive than the postal system: if one wanted to send a mail item, one could choose whose service to use to make the delivery. The problem would not exist, if the receiver paid for the termination of the call. If the call terminated on the network the end-user had chosen, such a monopoly would not prevail. Because this was not preferred, many countries had chosen to regulate interconnection rates.

He disagreed with the contention that the regulator had placed greed and profit above people, as operators acted legally in accordance with the regulations that had been put into place. It was their duty toward their shareholders to make a profit. Incidentally, many of the operators had some form of government shareholding and he did not recall any significant intervention from government's side, in their role of shareholder. This was not a new issue, as other people (notably Allison Gillwald) had alerted the previous communications portfolio committees to the issue before. Nevertheless, he complimented the Committee on bringing the issue into the public sphere.

He thought the proposal for an immediate cut to 60c per minute was reasonable. This had happened in Namibia and he advised the Committee to take note of this example. The Committee should also consider the services mobile operators were able to deliver based on the higher revenue generated by the high MTR. He supported the immediate reduction and suggested that the Committee should not go any further than mandating the immediate reduction - to create certainty.

He put the current rate of R1,25 into context. Taking consumer price inflation (CPI) into account since 1994, R1,25 was not much higher than the 25c which was the interconnection rate in 1994 in purchasing power. Therefore the rate was not currently exorbitant compared to 1994. However in light of technological advancements since 1994 and the accompanying drop in prices in other countries, this was still not in line with the trends internationally.

He did not support the staggered reduction in rates (as proposed). He felt that this was an all encompassing issue and the Committee should inform itself about other alternatives and how the regulation of this sector might be done in future. He noted that fixing interconnection rates would preclude the possibility of eliminating interconnection rates entirely. This had been achieved in limited cases, like Hong Kong. He added that this was not so far fetched as the Skype voice connection already allowed for both parties (at both ends) to pay for the termination of the calls to themselves through their respective service providers.
Parliament would have more effect from restricting its action to the recommendation for the immediate cut to 60c and revisiting the issues in 2010.

Furthermore, there was sufficient evidence to suggest that there was no need for retail price regulation, as the Competition Commission would ensure that the reduction in the interconnection rates would feed through to retail tariffs. Should the interconnection rates be cut, it was unlikely that any specific recommendation on retail rates was required,

He urged the Committee to consider the "Indian Model". This was worth attention because India had achieved widespread geographical coverage in just one decade. They had achieved high access for the poor and the retail prices were ± $0,02 per minute domestically and the international rate was ±$0,10 per minute. The Committee might also want to look further than interconnection, specifically the fixed line rates and the role of the Regulation of Interception of Communications and Provision of Communication-Related Information Act (RICA) in limiting mobile portability.

Discussion
Ms Kilian noted that over the last five years it was very clear that the market did not open up and that competition had stalled in the market. Prof Potgieter was of the opinion that the Committee should restrict this to one immediate cut. The Committee was opinion that they should look at the regulation of retail rates through ICASA. The Committee was concerned about the waterbed effect of the cut ie if MTRs were reduce, tariffs would be increased elsewhere. She asked if the Committee should not concern itself with looking toward the cost of an efficient operator. She asked how the Committee could then break the apparent stagnation and rigidity in the market, in order to liberalise the market and allow for free competition. Their concern around a single cut was that the market would level out at that rate and that there would be no further reductions.

Prof Potgieter responded that the initial cut could simply be an opening salvo. If the Committee scheduled its future reduction proposal, they were simply announcing their future moves. Certainty was a good idea, but price regulation was usually far from ideal. Competition was the key issue. He pointed out that South Africa had relatively few supermarkets but South Africans generally received reasonable, competitive prices because the barrier to entry in the supermarket business was relatively low. Other countries had concluded that cost based price regulation was desirable, but it was perhaps best left to another body and should not be done immediately.

Adv De Lange asked what the actual call termination cost was to the mobile operators.

Prof Potgieter replied that the consensus amongst experts was that this could not be more than 20c or 30c per minute. This did not mean that the costs were outrageous, especially when one considered the extras provided to end-users. This was hard to determine as it depended on supply and demand, specifically linked to the traffic or congestion on the network.

Adv De Lange pointed out that the operators then charge R1, 25 as a peak rate. He asked why Prof Potgieter then accused the Committee of sending out a statement that this was driven by greed rather than by expediency or need.

Prof Potgieter agreed that this was a five-fold increase in price. He did accuse the Committee of that because pricing in business was not simply cost plus mark-up. It was a complicated issue. He supported the immediate drop to 60c as a market signal which was clearly higher than the cost.

Adv De Lange asked Prof Potgieter to highlight the possible areas of contestation between the cost of the service and the profit operators made, other than interconnection rates.

Prof Potgieter replied that interconnection rates were the most important issue in South Africa. There had not been much impact on lowering the costs of handsets because of the high handset subsidies. ICASA had a framework for dealing with this but had seemingly decided not to do anything about the handset subsidies. He could not see any issue that was more critical to the consumer than interconnection rates.

Adv De Lange asked for a detailed breakdown of the costs and what operators charged end-users to determine how much profit they made on each item generally.

Ms De Lille asked which operators government owned a stake in.

Prof Potgieter replied that (speaking under correction) through the Public Investment Corporation (PIC), government was a shareholder in MTN. There was also some government shareholding in Vodacom through the PIC or Telkom. The only operators that had no obvious government connection was CellC and perhaps Neotel.

Ms De Lille asked for examples of countries where the interconnection rates had been eliminated and also wondered how this had been done.

Prof Potgieter replied that the main effect of high interconnection rates was that it eliminated competition by fixing an artificially high price for calls. It did not allow free competition with regard to price. Other countries where this had been done were Hong Kong. The application of interconnection rates had effectively withered away over time in the USA. The USA had the Receiving Party Pays system where consumers paid for calls received and made, through call bundles per month.

Ms De Lille asked what percentage of operator’s profit was derived from interconnection rates and whether this was the biggest part of their income.

Prof Potgieter replied that he did not know the answer to this question.

Mr Kholwane referred to Prof Potgieter's comment on the effect of price inflation on the current interconnection rate, and asked if he support the Committee's proposal.

Prof Potgieter replied that he agreed that R1,25 was much too expensive. In real terms (adjusting for inflation) it was not much more expensive in 1994 in real terms. The question was why it had not dropped in real terms, as in the rest of the world.

Ms W Newhoudt-Druchen (ANC) asked why South Africa had the highest SMS rates. She expected using text to be much cheaper. Instead it cost more to use text than voice.

Prof Potgieter replied that the pricing of SMS had been strange worldwide. No one had anticipated the high levels of take-up of the text, as it was originally seen as an additional service to the voice service. He agreed that the pricing was high because of the bandwidth used to transmit and the limitation of the transmission channels. There were ways to send cheaper SMS via the Internet and he could advise on these methods. The situation in South Africa was not the worst possible as many carriers in USA also charged for receiving a text message.

Vodacom submission
Mr Pieter Uys, Chief Executive Officer: Vodacom, commented on their achievements in expanding mobile penetration in South Africa. They had achieved high levels of access to people and high quality networks. He explained how subsidisation and the resulting lower cost of SIM cards and handsets had driven access in South Africa. Vodacom facilitated services to marginal customers and was committed to high investment in broadband growth. Regarding the reduction in the MTR, Vodacom explained the current MTR regime, how the MTR regime benefitted South Africa in supporting lower usage customers. Vodacom were in discussion with ICASA to develop a model for the immediate review of termination rates. They were supportive of this, as long as it was linked to a cost structure with a reasonable return and that there was allowance for a period where operators could adapt their business models - to allow them to continue developing and growing the sector.

Discussion
Mr Van Den Berg stated that "there ain't no such thing as a free lunch" - and noted that a "Please Call Me" was not free, as the party receiving the "Please Call Me" had to pay for the return call.

Mr Uys replied that the "Please Call Me" service was supposed to be free. When it was introduced, abuse of the service occurred (by schoolchildren) and they had to put a cap on it to stop the abuse.

Ms L Mazibuko (DA) stated that the overall gist of the presentation indicated that Vodacom seemed to view the universal access and penetration of telecommunications as some kind of philanthropic service for the poor and the marginalised, when, in fact Vodacom stood to gain if the tariffs were lower and people could make more calls. The argument presented was that they had too high MTRs because they had to subsidise poor users who were a burden because they were not making calls. The reality was that they could not afford to make calls because their tariffs were so high. They were trying to make a case for higher rates based on the needs of the very people they were abusing. She therefore rejected the overall air of the presentation. She noted the submission that ICASA should be allowed to regulated according to Chapter 10 of the ECA and the Committee should not impose imperatives on ICASA. She pointed out that ICASA was constantly labouring under the burden and fear of arbitrary litigation by operators. The submission that the reduction could lead to cutting of poor customers sounded like a threat and a kind of contempt for poor users who were tempted into using their services by subsidised handsets. These people were then trapped with a service they could not use because of the pricing policy. The presentation seemed to motivate for high MTRs.

Mr Uys replied that this was not about doing people favours. If one did not have coverage, access to a SIM card or access to a telephone, one could not make a call. Fifteen years ago, using the Calling Party Pays principle seemed to be a good way to develop the sector - driving penetration and access. They had reached desirable penetration and access levels. As they moved forward, the time had come to review the current market structures. This involved making services more affordable for consumers and also making the cost of doing business more affordable. He had not meant to imply disconnecting at all costs. They had to find a balance between the initial intervention and give operators time to change their business model to introduce new innovations to drive access and usage in the market. Please Call Mes were introduced as a way to assist people to begin using the handsets and services

Mr Nkateko Nyoka, Group Executive (Regulatory Affairs): Vodacom, added that the operative words here were "a benign interconnection regime". The current MTR regime had played a key role in promoting the objective of access. Vodacom had acknowledged that the time had arrived to review the interconnection regime. They were not suggesting that marginal subscribers should be treated contemptuously but without this benign interconnection regime many people would not have been connected. He used Tanzania as an example of a country that had low MTRs and low penetration and access in the market. As Parliament contemplated intervention, competing interests had to be considered in the proceedings because they had to find a way to include marginal subscribers into the network. He added that the phenomenon where some customers made calls exclusively and some received calls exclusively was not peculiar to South Africa.
Regarding the Chapter 10 intervention, he felt that the fears about litigation were ill considered and ill informed. The regulators ought to follow the process rigorously. There was nothing extraordinary about Chapter 10. He agreed that regulators had to intervene when markets failed, adding that it was wrong for the Committee to do this arbitrarily without following the proper procedure. Section 67(a) of the ECA outlined these procedures.

Ms Kilian pointed out that the ICASA process was commenced in 2007. ICASA's feedback indicated delays, largely due to industry action. Industry was able to derail the process, often not on a substantive basis, but rather on a procedural basis. That had concerned the Committee. ICASA informed the Committee that the process would only be concluded by June 2010 and it was on this basis that the Committee had decided to put pressure on the process.

Ms Kilian agreed that South Africa had relatively high penetration. She felt that Vodacom was playing the role of Robin Hood by taking from the public through the MTRs to fulfill their social responsibility role. The "freebies" they had referred to, such as “Please Call Me”, reverse charges and call sponsor all meant that someone had to pay for the services.

Ms Kilian asked which countries that had lowered their MTRs, had seen lower usage by subscribers, leading to operators not being able to make up the difference.

Ms Kilian asked what the estimated cost of termination was for Vodacom. She added that the Committee was willing to engage to achieve a win-win agreement. The Committee asked operators to agree to intervention and ICASA could continue with its prescribed process.

Mr Nyoka replied that the costing information had been submitted to the regulator and ICASA would make a determination based on this. The information affected each operator individually. Operators submitted the information confidentially and were not aware of the cost details of the other operators.

Ms Kilian asked if the Committee could assume that operators charged five times what the cost is.

Mr Uys replied that the way the market was structured led to the cost structure. Vodacom was not aware of from where some of the estimates mentioned in the meeting cam. They were not saying this cost structure could not change, but the market would need time to adapt to this.

Ms De Lille stated that ICASA had said 40c at their last engagement with the Committee.

Mr Nyoka replied that the figure was incorrect.

Ms De Lille noted Vodacom's view that this was an arbitrary rate reduction and that the Committee's proposal was unsubstantiated. She responded that Parliament should consider whether the rates operators charged reflected the true cost of MTRs and asked what the figure was.

Ms De Lille asked if they had delivered on their licence conditions.

Mr Uys responded that they had fulfilled all their licence conditions.

Ms De Lille asked why prepaid customers were charged more than contract customers.

Mr Uys responded that the average cost of making a call for a prepaid customer was not more expensive than for a contract customer.

Ms De Lille replied that the cost per minute for a prepaid customer was R2,99 while contract customers were charged R1,50 per minute.

Mr Uys responded that there was a variety of different tariff plans and it was therefore difficult to look at the published tariffs. Vodacom had introduced a range of tariff plans to accommodate people's calling requirements.

Ms De Lille asked why this was the case. Prepaid users paid up front and presented no risk while there was risk attached to contract customers.

Mr Uys replied that contract customers committed to a much longer period than prepaid customers. Although the economics of the models differed, there was no fundamental difference in the cost of the calls. The differences were due to the different tariffs plans.

Ms De Lille replied that the study conducted by the Department of Communications showed that the three operators were on the same pricing level. She asked why there were differences in charges when there was no risk attached to prepaid customers.

Mr Uys reiterated that the differences were a result of how the tariff plans evolved over time. The model for contract customers was based on the fact that contract customers committee for up to 24 months while prepaid customers only committed for one month. The main consideration in the business model was that they needed certainty around investment.
 
Ms De Lille noted that the pricing in the market was similar and asked where the discussions on this pricing had taken place.

Ms De Lille wondered how Vodacom's international operations ran profitably at lower MTRs.

Mr Uys replied that the financial results were always available. There were always differences in the profitability due to the differences in the markets. Viewed against their achievements, their profitability was not excessive.

Adv De Lange stated that the inputs and answers were appalling. He thought the presenters would take this matter seriously and do what the Committee had asked them to do, which was to explain their cost structures. He felt that they had presented their results and achievements to show how brilliant Vodacom was. They then asked the Committee to make a good decision. They had furthermore refused to give the Committee the information on which to base that decision. Constitutionally, the Committee had the right to compel this information. Parliament could subpoena them for the information. He would seriously suggest that the Committee discuss the possibility of a subpoena. He insisted on a breakdown of the costs involved and if necessary (if information was commercially sensitive), the Committee could consider this in closed session. The Committee would consider this possibility.

The Committee needed a complete breakdown of the agreement Vodacom reached with Telkom and MTN in 1994 as well as any updates to the agreement. The Committee wanted to know what costs were in peak times and off-peak times, specifically the costs and the profit margins. He felt that the MTR of 6c on the Community Service Telephones (CSTs) was a dead giveaway on what the profit margins might be. Regarding the CSTs, he asked what the exact extent of the subsidy was. The Committee needed to know about all the agreements with the other operators - where costs and tariffs were agreed upon, where they had agreed to fix prices, specifically on prepaid and the international roaming costs. Particularly they needed to know about all the areas where the industry had made "gentlemen's agreements" on what they would charge people. Broadly, he felt that the Committee needed further hearings on all the cost implications. He was also concerned about the millions Vodacom spent on sponsorships. He suggested that this was an unacceptable input and that the Committee should be given the information to decide whether the Committee's proposals to cut rates were reasonable or not.

Mr Uys replied that Vodacom had engaged with industry to develop a proposal on reducing rates and they believed that they could come to an agreement on the MTR. The 6c MTR on CSTs was one of the licence obligations. The condition was that the MTR and tariff would be fixed. Regarding international roaming, the rate was not exclusively determined by South Africa operators. They were partially internationally determined. Vodacom had submitted the information on their costs to ICASA. The Committee did not have to issue a subpoena, as they could call on ICASA for the information.

Adv De Lange responded that Vodacom had missed the point. The Committee did not want to ask ICASA. They wanted the information directly from the operators to question them on it. If they did not give the Committee the information, the Committee would not have the opportunity to make the right decision. He still thought a subpoena was appropriate, adding that this would not be the final hearing. The Committee had to go into the area of operator costs and they wanted that information.

Mr Kholwane asked Vodacom what the base cost was. The Committee wanted the actual figure.

Mr Kholwane noted that Vodacom was not opposed to reductions and asked what was meant by this. The Committee wanted to know if a reduction to 60c was possible and if not, why not.

Mr Uys replied that the answer was in some of the slides. Vodacom was willing to move the MTR regime. He stated that they could not support something that did not support the model or change immediately to a model that was below their costs. The mobile operators engaged in bilateral discussions, came up with an agreement that could be taken to ICASA and would move on the agreed number very soon.

Mr Kholwane wanted know what Vodacom's cost was, if 60c was below their cost.

Mr Uys replied that the MTR had to be cost related. The current market structure had costs attached at present.

Mr Kholwane asked if he was correct in assuming that Vodacom did not know its costs.

Mr Nyoka replied that this was the inappropriate forum for extracting those numbers. They had submitted the figures to ICASA. The figure could be considered in closed session

The Chairperson asked if the Committee was opposed to a closed session to take the presentation of this information, to discuss and interrogate this with ICASA.

Mr Kholwane stated that ICASA was on record as saying that the cost was between 40c and 50c and asked what they would be discussing.

Mr Uys replied that he had no problem with engaging in such a discussion.

Ms Mazibuko stated that the public hearings were supposed to be open and felt that closing the session to hear this information would undermine the purpose of the hearings. She could not support this on principle and asked how this would serve the people.

Adv De Lange replied that Parliament could use certain methods to force things to happen. The Committee could consider a closed meeting - it was still uncertain as to whether they would agree on a closed session. The Committee would wait until the operators made a motivation for a closed session. If the operators took too long to do this, the Committee would have to issue a subpoena.

Ms Newhoudt-Druchen stated that there was no use sending a “Please Call Me” if the receiving person could not respond. She asked why Vodacom’s SMS rates were so expensive. As to Prof Potgieter's suggestion of using the Internet, a person who did not have Internet access could not use this.

Mr Uys responded that they had different SMS tariffs - these could be as low as 18c per message. People had the option of buying SMS bundles to bring the cost down. SMS or text messaging was originally developed as a way to control the voice transmission system. South Africa did not have an abundance of channels for this. Data transmission was a far more effective application for sending text messaging often at rates just below 1c. Another option was instant messaging. He offered to get someone to contact Ms Newhoudt-Druchen to inform her about Vodacom's non-voice services.

SMILE Communications submission
Ms Irene Charnley, Chief Executive Officer: SMILE South Africa, said that they were fully supportive of the process that had been embarked upon and offered their support to ensure that the reduction of rates was achieved by January 2010.  She stressed the need for analysis of the costs that were being raised in defence of the current interconnection rate in the light of significant commissions paid out by operators. She furthermore decried the fact that consumers were being made to pay for operational efficiencies which were responsible for driving up costs. If a company had a business plan for which infrastructure was rolled out and they did not get a return on that business plan, this did not mean that customers would be liable for those costs.

Discussion
Mr Kholwane (ANC) asked whether the argument raised by operators about costs and the roll out of investment in infrastructure justified their charging higher tariffs. He commented that there were other operators who had not gone through the pain of investing in infrastructure such as Value Added Networks (VANs) and they benefited from the existing infrastructure. He wanted to know what this meant in relation to the argument raised about the rolling out of infrastructure. It did not seem that there was any consideration of the time that had passed since the rolling out of infrastructure which allowed these operators to recoup their investment.

Ms I Charnley responded that it was ironic that the same operators who had now gained significant market power had, when they started out, used such arguments against Telkom which was a state-owned entity at the time, to bring down the rates of interconnection.  This had been an issue for many years politically and that is why even up today if one had to phone a mobile operator from a Telkom line, one would have to pay more for connecting to the mobile operator than did mobile customers connecting to Telkom. This had been introduced to cater for what was known as an asymetrical interconnection determination rate to cater for new operators because Telkom had been a significant power. However, at present, the same mobile operators did not want those arguments to apply to them. One therefore had to look at these things in context. The payback on the initial investment by the dominant operators had been received already. What was happening was that every time an operator rolled out infrastructure, they were using cash flow and that is why they were able to have a profit at the end of the day, which they distributed in terms of dividends and so on. Their current cash flows supported the roll out of the infrastructure. There were opportunities for the operators to be more efficient that were not being implemented.

Ms P De Lille (ID) asked whether the concept of 'moral suasion' was not being used as guise for collusion by the mobile operators. She submitted that the reduction in the interconnection rate should not just be .60c if they wanted to open up the market. Was it not possible for the rate to be differentiated according to the type of operator so that one operator would be subject to say a rate of 0.50c whilst another was subject to say 0.40c because to her mind there seemed to be 'collusion out of moral suasion'. Did they really need to have the same fixed rate again?

Ms Charnley responded that it would have been ideal if one did not have to regulate it but in terms of business interests one preferred the higher rate. However the current intervention was being done because this situation had prevailed for too long, more than 15 years. At the moment with the proposal of the 0.60c, it allowed Telkom and Neotel to increase their rates, which were lower than the current rates. The reality was that South Africa was part of a capitalist society and businesses would continue to do whatever they could to maximise their profits. The people who came before the Committee had performance bonuses which incentivised them to deliver and they would strive for profit whether or not they were efficient. However, consumers did not have to pay for inefficiency.

Neotel submission
Dr Angus Hay, Executive Head of Strategy, Neotel, submitted that Neotel was South Africa's first truly converged network operator. They supported the lowering of termination rates to further competition. The presentation also gave an overview of their tariff structure. Dr Tracy Cohen, Managing Executive: Regulatory Affairs, Neotel gave an outline of the process and regulatory issues pertaining to the measures to reduce interconnection rates. The multiple process led to increased awareness and speedy interim measures. They suggested that the current process had to carry the impetus and the broader strategy of ensuring that Chapter 10 of the ECA was implemented. This was the chapter that brought the pro-competition measures that were going to bring a much more level playing field and competition framework. This would ultimately result in lower prices, service diversity as well as a more improved consumer focus which was the ultimate goal. The industry needed some clarity as to the effect of multiple processes as it was unclear which process would finish first currently. They were very supportive of an immediate cut in the termination rate, subject to a clear process, and this was very good for competition and for consumers and created conditions for promoting new entrants and making them sustainable. Clear time frames were absolutely essential and the process could not be let to drag on. There were financial tools available to whichever process that would result in market intervention to assist an informed path and a glide path, if that was found to be necessary.

Discussion
Ms S Tsebe (ANC) asked Neotel to respond to the proposal put forward by the Committee. She asked if the proposed 0.60c was too high, too low or moderate and what would be in the best interests of the consumers. She also asked Neotel to comment on whether ICASA had to be given more time to deal with this or if there had been more than enough time for them since 2007.

Dr Cohen responded that as someone who had received her phone bill this week and gone through it, she too was frustrated and wanted to see cuts that were immediate as did many other consumers who needed relief in a range of areas. This was long overdue. There was a process at ICASA that could effectively be implemented, which is the Chapter 10 process. However, legislative processes took time. What they were appealing for here was setting up a framework that was not just about termination rates but one which would settle the issues that affected consumers so they would not have to be brought to Parliament every now and then effectively turning Parliament into a regulator. There were other problems as well that would need to be addressed further down the line. She could not disagree with the point raised about consumer relief. They were looking at a market where there was more price diversity and service differentiation than they had ever been seen before.

Dr Hey responded that they wanted to steer clear from presenting any numbers even though they supported the Committee's proposals. They felt that the process had to determine the actual numbers. They however supported in principle what the Committee had proposed subject to the caveat that what actually came out of those proposals followed a process which was sufficiently in line with the broader Chapter 10 process. With regard to actual numbers, they believed that as a challenger to the telecommunications market in a global sense, they were aware that the telecommunications market had experienced a declining price model over the years. This was a model where globally the price per unit of service had declined gradually. Their business plan as Neotel and in the way they had approached the market had been with the expectation of declining prices per unit. This did not mean that the market was shrinking as obviously there would be more people getting access to service. They therefore had an expectation of a reducing price market and as such they had set their own termination rates on that basis. What they currently charged on termination of calls onto the Neotel network was 0.29c for a national call in comparison to the figure of R1.25 figure. They did not charge on a peak/off-peak model as they had blended it so they could charge the same, day or night in line with what was done in some jurisdictions globally. 

Mr S Kholwane (ANC) requested clarification on Neotel's pricing to determine the exact charges.

Dr Hey responded that what they charged was R1.76 less 14% VAT minus R1.25 to get their profit margin of R0.26c. Some of their own network costs were incorporated in that margin. It was not a pure margin and there was an underlying cost to their own network.

Mr Kholwane commented that this meant therefore that it was a very minimal cost.

Dr Hey responded that they paid out the majority of what they received.

Mr Kholwane commented that this gave another picture in terms of what constituted the cost base for providing services in the light of figures of R1.25 and so on.
 
Ms De Lille asked Neotel to explain why they were seeking clarity on the effect of the multiple processes currently underway? She thought one of the reasons why they had multiple processes now was because nothing had happened in the past. She thought that the one process actually complemented the other. ICASA still had to do its job as did Parliament and the Department of Communications.

Dr Cohen responded that they absolutely supported all processes concerned but were not sure as a market player what would happen if one concluded first, whether the others would be abandoned or if they would all come to finalisation together. There had to be some kind of direction going forward.

Ms J Kilian (COPE) commented that she sensed a little bit of a reluctance on Neotel's part and she understood it was because there were different bodies looking at this issue. It almost seemed indicative of how rigid this market had become for newcomers such as Neotel who had to battle for turf to establish themselves.  The bilateral arrangements and moral suasions seemed to play into the hands of collusion by the major players in the industry from the Committee's point of view.  She asked whether she read correctly that Neotel would rather not debate on what was an effective operator because essentially that is what they wanted to go back to. Looking at the Chapter 10 process, their understanding from ICASA and other bodies that they had interacted with, was that it was a very cumbersome process. However this was in specific clauses that would need revision. The Committee’s concern was that if it was taking so long, then clearly something had to be wrong in the process, because as indicated before the process had been started in 2007. She asked if Neotel could indicate to the Committee, therefore, what it was in Chapter 10 that was prohibitive for ICASA to fulfil its regulatory role? Secondly, she asked if they agreed that as oversight body, the Committee had to identify such weaknesses that seemed to play against pro-competitive measures, which ICASA needed to take? The Competition Commission was looking at anti-competition at the end of the processes whilst ICASA had to look at what sort of pro-preventative measures. At this stage it seemed as if this was not happening. She wanted to know what Neotel suggested should happen if they took a resolution as a Committee that refrained from suggesting a price but recommended certain changes that would allow ICASA to fulfil its regulatory role adequately.

Dr Cohen responded that Neotel supported Parliament's oversight role and they did a good job of correcting all legislation that was not drafted properly. However, the concurrence issues that had been between the Competition Commission and what was in the Competition Act and ICASA's Chapter 10, the “subject 2 clause” had now been largely corrected through an amendment of the Competition Act and that was the point of review. An obvious area which could be corrected fairly quickly would be the removal of s67(1) on the requirement to, on an ex ante basis, prescribe a list of behaviours that would amount to undue preference and anti-competitive conduct. It was tried at ICASA and the Competition Commission and it was found to be impossible to do. She did not think that if that provision was removed immediately that it would have any impact on the rest of the Chapter.  She felt that ICASA was halfway across the pond and support had to be given to ICASA to finish that process be it in the form of consultations or specialists coming in to assist them.

Mr Van Den Berg (DA) asked if Neotel could indicate how they were thinking about time lines in light of the Committee's proposal that interconnection rates had to be dropped before Christmas. Another issue he wanted to raise was that there seemed to be a cat and mouse game with some ducking and diving and reluctance by the operators to put all their cards on the table. What was Neotel's view of the willingness of all the concerned parties to bring forward the interests of the consumer in these discussions.

Dr Cohen responded that it was a 'somewhat subjective assessment'. She had attended a meeting where there had been different views on the willingness to make a cut. The operators needed to renegotiate the interconnection rate on a bilateral basis amongst themselves. Dr Heys had made the point that no operator could effect immediate cuts by 50% without some effect. One had to consider things like glide paths and more accommodating measures as well and not giving up on the immediate consumer needs. There had been so much activity over the past six weeks in this sector, probably more than in the past six years, on this issue and it would be hard to deny that there was some progress going forward.

Dr Heys also responded that in commercial terms, as opposed to a process and regulatory process, they would support an immediate glide path that was reasonably rapid as they did not believe that it would be fair to have instantenous changes. They would support the implementation of that glide path in the time frames that had been proposed by the Committee. The effect, from their perspective, considering that they had a cost base which consisted of termination of mobile calls, would be felt immediately which they could then translate immediately into consumer benefit. The sooner it started, the better it would be for them commercially.

Internet Service Providers Association (ISPA)
Mr Greg Massel, Co-Chairperson, and Mr Dominic Cull, Regulatory Adviser, represented ISPA. Mr Cull stated that their presentation avoided repeating the facts that had been well ventilated in Neotel's submission and they did not wish to offer any legal opinion supplementary to that which had been offered to the Committee. ISPA was an industry representative body recognised by the Department of Communications and Chapter 13 of the Electronic Communications Act. They represented approximately 150 entrants, all of whom had appropriate licensing rights. The ISPA registered their support for the lowering of mobile termination rates (MTR) and agreed that the current MTRs were excessive. They could not be justified on the basis of cost and they were a significant contributor to the high cost of telecommunications in South Africa.

Discussion
Adv De Lange (ANC) commented that there was a strong emphasis in their input on anti-competitive behaviour. He asked whether ISPA had put forward those views to the Competition Commission and if they had, then what had been their response?

Mr Greg Massel responded that they had not lodged a formal complaint with the Competition Commission on this issue, however they had detailed extensively, especially related to interconnection, a lot of the anti-competitive behaviour in their submissions to ICASA.  They wanted to see the current processes run their course before approaching the Competition Commission specifically on that issue. They had lodged a number of complaints to the Competition Commission in the past.

Mr Cull added that none of the complaints that had been lodged with the Competition Commission since 2002 had been finalised largely due to cracks in the system as a result of the issue of concurrent jurisdiction between ICASA and the Competition Commission. With regard to complaints against Telkom for anti-competitive conduct, Telkom had taken the decision of the Competition Commission on review to the Gauteng High Court where they been successful. The matter was now on appeal and there would be no finalisation of the complaint until that appeal was finalised.

Mr Kholwane commented that he could see from the statement by IPSA that they were participating in the process of moral suasion. But IPSA seemed to have their own doubts about something that they were a part of and were fully involved. He asked if IPSA could elaborate on that because he could not understand how if they were part of the process, they could have doubts about the process.

Mr Massel responded that Mr Kholwane's comment was an accurate encapsulation of their experience as a regulator. They had no interest in maintaining high MTRs or pandering to the needs of the mobile network operators in that regard. However it became clear fairly early in that process that there was a difficulty with competition and the operators had been advised that they should speak to specific rates in the absence of a written opinion from the Competition Commission - that this would not amount to criminal collusion under the Competition Act. They had taken the position that they wanted to support ICASA in its initiative to bring down the mobile termination rates and accordingly continued to participate making it clear that unless there was concrete and tangible evidence of progress in reaching a proposal to reduce mobile termination rates then they would no longer participate in that process.

Ms R Morutoa (ANC) referred to their submission warning against a waterbed effect and the fact that something would have to go up if interconection fees were reduced. She asked if this meant that there would be a need to regulate retail prices to ensure that the reduction in termination rates was passed on to consumers?

Mr Massel responded that where there was a lot of competition on the market, one could logically draw the conclusion that a reduction in wholesale tariffs would result in a reduction in retail tariffs. Unfortunately there were various pro-competitive processes that had not run their course and in the absence of those processes running to conclusion, there was a very real risk that a reduction of MTR on its own might not have a direct impact on the retail tariffs.

Mr Cull added that there was also a danger that because they had so many parallel processes in place there would be uncertainty as to the outcomes in terms of how they affected the MTRs.

Professor Duncan and Highway Africa submission
Professor Jane  Duncan and Highway Africa presented their study on the social impact of communication costs in terms of the implications of people not being able to participate fully in the information society. Mr Sebenzile Sankobe presented on the impact of the high cost of mobile services on the unemployed. He mentioned the trying circumstances that job-seekers went through in their attempt to access job opportunities. These were advertised in the newspapers and required them to make phone calls, which most of the time they were unable to make because of the high cost of airtime [see document].

Discussion
The Chairperson commented that this research provided a grassroots insight which was a wake-up call for ICASA. It showed that ordinary people were mindful of these issues and even if they could not articulate it in scientific terms with research and figures, they had a good sense, a gut feeling, which told them that there was a problem. There was a cry out there that needed to be addressed and the Committee hoped that this matter would receive the attention it deserved. Although they were not there to discuss ICASA he felt that they were really letting the nation down on this matter.

Ms Newhoudt-Druchen (ANC) commented that service providers had to absorb the cost of additional mark-ups added onto airtime by spaza shops. This was because there was a large number of consumers who relied on them for airtime because they could not access large shopping malls. The smaller spaza shops were charging airtime customers a higher mark-up, which in her opinion had to be paid by the operators because these shops were selling the airtime on behalf of the operator.

Professor Duncan respond that this was indeed a valid point and indicated that similar complaints had been made by a community in the Free State and the matter had been taken to ICASA. Someone from the Consumer Advice Centre at ICASA had actually cautioned the people who were complaining about taking on this matter in a confrontational manner. They had made the observation that if you denied the spaza shop a mark-up then you could end up driving them out of business, which would force people to travel greater distances in order to buy airtime. The proposal made by the Committee would actually speak to that particular problem.

Ms R Morotoa (ANC) commented that this presentation ought to have preceded all the others as it had given them an inclination of what was happening on the ground and it could have helped the Committee in some of the arguments that had arisen in earlier discussions.

Advinne submission
Mr Amish Chana and Mr Lionel Swarz, Managers at Advinne, suggested that the mobile termination rate should be at a capped rate, rather than a fixed rate and that mobile operators would then have the option to reduce the interconnect rate on their own. The rate capped at R1.25 could then be gradually reduced over time based on competition in the market. They also requested consideration to be made on the impact of converting more than 400 Value Added Network (VAN) licences to Electronic Communications Network Service (ECNS) and Electronic Communications Service (ECS) licences before reducing the cap on the mobile interconnection rate.

Discussion
Mr Kholwane commented that earlier Vodacom had been asked if there was an example of a country where interconnection rates had been reduced. Vodacom had not given any such example except that they said that penetration was low in other countries without giving specific examples. He assumed that from what they were saying that South Africa would be unique from all other countries? Secondly, since they were talking of fixing the interconnection rate, and he did not know of anyone who had fixed the current one of R1.25 but this figure was the one that was there currently. They should not fix anything as a country and even the regulator had not fixed anything. He therefore did not understand the fixing part that they were talking about? He commented that to talk about home zoning in the submission distorted the focus on the issue of high cost of interconnection rates. He also asked for an understanding of how the VANs beat the traditional operators, despite the fact that VANs relied on their network. Yet the VANs were more innovative to come up with certain products and then take over the traditional network's customers. Was this not an indication of the lack of innovation by the big operators because they were lulled into complacency by their domination of the market?

Mr Chana responded that the waterbed effect was not very prominent in countries where there was a high presence of competition such as in the United States and the UK. Reduction in the interconnection rate did not necessarily result in increases in consumer prices because of the large number of competitors that would be waiting to take on customers if the incumbent operators were to let them go. In a country like Namibia where there was one established operator, they would still have a large base of customers and they would still generate their revenue and it was the smaller operators that needed to make a bigger effort to pull customers over. At the moment, Namibia had not seen the impact of the reduction in the interconnection rate because it was not a country that could be compared to South Africa, where there were three mobile operators. A reduction in the interconection rate would bring competition. However, it would depend on whether that competition was sufficient because in many areas, such as radio coverage, if the dominant operators did not decide to reduce consumer rates, it would not affect them significantly.

In terms of the issue of a fixed rate, Mr Swarz responded that their presentation did not refer to fixing but to capping of the rate. There had not been competition in the market so far and there were still some stumbling blocks. The reason why they were in this situation now was that because of competition they had gone to the operators to find out how to interconnect to them and how they could lease facilities since they did not have their own. There had been two operators that had been forthcoming although other operators had made demands about traffic volumes and guarantees that they had not been able to subscribe to.

Mr Swarz added that there were reports that dropping the interconnection rate in Kenya had resulted in increases in commercial rates, be it through the withdrawal of commercial rates or by direct increases in the commercial rates for subscribers. 

Adv De Lange commented that Advinne sounded like one of the research arms of the industry, and the more they talked, the more they were in favour of them. This whole independence Advinne had tried to paint at the beginning fell flat on its face judging by their input. If Advinne’s argument was the fact that they benefited from high interconnection rates and that they would lose out as entrepreneurs, he was flabbergasted to hear that Advinne were suggesting that interconnection charges should not be cut because they benefited from having a high interconnection rate!

Adv De Lange commented that Advinne's input was filled with speculation. If they wanted to be taken seriously then they had to put scientific facts on the table instead of saying this could happen or that could happen. The one thing that they could not convince him of was the issue that had been raised by Mr Kholwane where they wanted to say to the Committee that if the interconnection rate was going to be cut by half then there would not be any benefit. How on earth could they believe. And there was no example of any country where that had happened. Obviously the rate cut would filter down to the consumers as all the presenters had assured the Committee that this would benefit consumers. He did not know why Advinne tried to convince them of something like this which defied logic and was so ridiculous.

The meeting was adjourned.