Neotel takes stab at Telkom

By Damaria Senne for Telkom
Johannesburg, 09 May 2007

Fixed-line incumbent Telkom's new rates for calls originating from its network and terminated on other networks penalise the company's own customers, says competitor Neotel.

This week, Telkom announced rates for calls terminating on the networks of Neotel, under-serviced area licensees (USALs) and value added network service (Vans) operators. The rates are to go into effect on 23 May, pending approval by the Independent Communications Authority of SA (ICASA).

Telkom's proposals include: calls from Telkom to Neotel customers will be charged at 65c (including VAT) per minute, irrespective of distance or time. For USALs, calls to fixed destinations will carry a minimum charge of 72c (including VAT) for all calls, irrespective of when the call is made, with calls to mobile destinations charged in increments of one minute for the first minute and in increments of 30 seconds thereafter.

Telkom managing executive for retail Steven Hayward says the rates will contribute to generating competition in the local telecoms sector.

However, the tariffs were slammed by the Communications Users Association of SA (CUASA), Neotel, Storm Telecoms and Thinta Thinta, a KZN-based USAL.

A Neotel spokesman says: "It is surprising to note that any telecoms operator chooses to penalise only its own customers by charging them a higher tariff for making local calls to other networks, particularly when such customers may not always be able to appreciate whether the call is being made to a Telkom phone or to the phone of another operator."

Thinta Thinta COO, Sbonelo Mvuyana, says the interconnection rates also discriminate against the poor that the USALs serve. "It's hard to believe that Telkom would offer Vans better rates than USALs, when the latter are the ones who are bringing services to the poor," he says.

Mvuyana says Telkom's rates are also forcing his company to look for other options. "For USALs, it's better to interconnect through Neotel than Telkom," he says.

Confusion reigns

Storm business unit manager, Kevin Jacobson, and CUASA spokesman, Ray Webber, say the tariffs are complicated and confusing for customers.

Vans with 087 number allocations are now able to receive calls made from Telkom lines via the new interconnect regime, says Jacobson. However, there are 14 different number ranges listed with 10 different rates, causing unnecessary confusion, he states. "It's more like divide and conquer, as confusion and Telkom reign supreme," he says.

He adds that the new rates also leave Vans unable to compete with Telkom to attract voice customers. He notes that Telkom charges the Vans 28c per minute to terminate the call. On the other hand, the fixed-line operator also charges its own customers 63c per minute for a national call and 33c per minute for a local call to Telkom numbers, he says.

"This means the margins Vans have to play with in order to compete are less than 35c per minute for a national call and 5c per minute for a local call, while remaining in business."

Simpler ways

The Neotel spokesman says most countries choose to charge a flat fee for interconnection and the decision has nothing to do with whether or not an operator chooses to offer peak and off-peak retail rates to its customer.

"It's not clear why Telkom would choose to structure its own retail tariffs in this way, particularly when there will soon be compelling, simpler alternatives available to its customers."

Neotel, CUASA and Thinta Thinta are calling for ICASA not to approve the tariffs. "We are confident that ICASA will take the 70% increase in local call charges proposed in the new tariffs into consideration before making its decision."