Public hearings on cost of communications 29 30 november 2012
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Public Hearings on cost of communications 29 - 30 November 2012. Telkom’s contribution to lowering cost of comm’s. Launched first FMC bundle in the form of Telkom-Mix Retained 68% of customers that took on the free 3-month broadband trial

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Telkom s contribution to lowering cost of comm s
Telkom’s contribution to lowering cost of comm’s

Launched first FMC bundle in the form of Telkom-Mix

Retained 68% of customers that took on the free 3-month broadband trial

Launched uncapped broadband customer value propositions

Improve entry level broadband product proposition

Increase basic broadband offering speed from 384kbps to 1Mbps

Launched Telkom Business Mobile & TBIZ uncapped offering

Telkom has reduced prices of Fixed-to-Mobile calls


Telkom has kept price increases below inflation
Telkom has kept price increases below inflation

Trends

  • Since 2005, communications prices have risen more slowly compared to other inflationary indices (Education, Food, Medical & Health care, Housing, Transport) and the gap continues to widen

  • Whilst Telkom’s costs have increased in line with inflation, Telkom’s price increases have been kept below inflation which also resulted in profit squeeze

  • Telkom has consistently demonstrated prudence in its pricing practices to the detriment of its own profitability

  • Telkom’s tariffs for line rental is below costs and loss making

Telkom has kept price increases below CPI and below Price Control allowances


Telkom s contribution to lowering cost of comm s dsl
Telkom’s contribution to lowering cost of comm’sDSL

In 2011 Telkom upgraded DSL Faster (512 KB/s) to 1 MB/s at no cost to customers

Between August and November 2012 Telkom again upgraded 440 000 DSL Fast (384 KB/s) services to 1 MB/s speeds as well as 190 000 DSL Faster (1 MB/s) services to 2 MB/s

These upgrades are equal to a price reduction of 45.8% since the current (before upgrade) DSL Faster at 1 MB/s cost R 299.00 VAT incl. while the new DSL Fast at 1 MB/s will only cost R 165.00 VAT incl


Telkom s contribution to lowering cost of comm s wholesale business
Telkom’s contribution to lowering cost of comm’sWholesale business

Telkom reduced the prices of wholesale products during 2012/2013:

IPConnect -30%

SAIX Dedicated Access -10%

SAIX ADSL Usage -20%

Metro Clear -57%

Ethernet Express -57%

IPLCs (legacy Half circuits) -20%


Telkom s pass through of mtr reductions
Telkom’s pass-through of MTR reductions

Telkom’s Fixed-to-Mobile retail prices have come down!


How mcos have profited from telkom through high mtrs
How MCOs have profited from Telkom through high MTRs

  • Telkom would pay approx 10x more to MCOs than it received from MCOs

  • Asymmetry and ICX revenue was used by MCOs to build networks and offer low on-net calls to increase fixed-mobile substitution

  • Over 2002/2010 period this ‘overpayment’ amounts to approx R34bn


Shortcoming of current call termination regulations
Shortcoming of current Call Termination regulations

  • Current call termination regulations set the interconnection charges that operators can charge one another

  • In respect of mobile operators, the MTRs include the cost of both access and transport segments of the network to the POI

  • Telkom’s FTRs however do not include the cost associated with the access network

    • This is a result of differential treatment arising from the regulatory accounts

  • Telkom believes the levels of current FTRs are unfair and discriminatory

  • Is backward looking and ignores the convergence of service offerings and the convergence of the underlying costs of networks


Challenges that telkom fixed line is facing
Challenges that Telkom Fixed-line is facing …

Declining voice revenue

Access Line Deficit (Telkom is subsidising line rentals)

Inappropriate termination rate regime

Asymmetry in termination rates

Legacy regulatory obligations

Extensive capital investment required to renew & expand network

Cable theft


Conclusions
Conclusions

Telkom supports principle of cost-oriented termination rates

Call termination rates must allow for full cost recovery

Current MTRs means that 8ta’ is already under-recovering costs

New entrants (like 8ta) should be given higher asymmetrical MTRs to allow them to compete with incumbents

Current FTRs are set at wrong level and are discriminatory

Propose simplified and converged MTR / FTR

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