Monday, January 17, 2022

Safaricom goes to court opposing CA’s cheaper interconnection rates

Safaricom has filed a case with the Communications and Multi-media appeals tribunal seeking to have the Communication Authority of Kenya’s (CA) recent revision of Mobile Termination rates be invalidated. The matter has been filed as urgent as the new rates are supposed to go live on January 1st 2022.

CA recently revised the mobile termination rates (MTRs) and fixed termination rates (FTRs) from the previous KES 0.99 to KES 0.12.

Telkom Kenya already welcomed the idea of reducing termination rates saying, “the review is timely, and a progressive step towards making voice services more affordable and accessible to more Kenyans.”

Some time back, the Communication Authority had shared a proposal on the need to revise termination rates. Among the things listed as to be considered in the revision were the imbalance between off-net and on-net calls between Airtel, Telkom and Safaricom, the impact of new costs on different stakeholders, and whether revision benefits would outweigh costs and risks.

Safaricom in its filing says the CA ignored its own procedures and reached a conclusion before the end of the process it had initiated. The telco also says CA ignored public participation, and that it didn’t provide the necessary evidence of how it reached the decision to reduce the termination rates.

What exactly are these Mobile Termination Rates?

These are charges that are not visible to users but affect the calling rates when you make a call from one network to another network. They are the costs one telco charges another when they receive a call from them.

So say you are making a call from your Telkom line to your friend’s Safaricom line, on top of the charges you’ll be paying Telkom for the call, Telkom will also be paying a fixed amount to Safaricom so that they complete the call and connect you to the Safaricom number. This is the termination rate, as the call terminates on Safaricom’s end.

It exists because you will be using Safaricom’s network to complete the call, thus using their resources, hence the need to pay.

Is reducing Termination Rates a good thing?

Of course telcos pass down termination costs to the consumers. Meaning when they’re high you pay more to call, and when they’re low you pay less. That’s not exactly always the case however.

In a country like Kenya where there’s a dominant player and smaller players, there’s definitely a huge number of customers of the smaller players calling customers of the dominant player. Meaning the smaller players get to pay the dominant player a lot of money in termination fees when termination rates are high.

Airtel Kenya for example, has been paying Safaricom approximately KES 300 Million per month under the existing rates. That’s expected to reduce should the new rates take effect.

While this sounds like a huge problem for Safaricom who will now face reduced revenues, it presents a huge opportunity for the smaller players who can now be more innovative with their packages.

“In markets with lower or zero MTRs, it’s been shown that mobile network usage increases accordingly, with cellcos in such markets free to introduce service packages including features like unlimited calling.”

Pete Bell, Telegeography Blog.

During the last bout of termination rates reduction, we saw significant changes in calling rates. The price war that started between Airtel and Safaricom led to calling rates falling from as high as KES 12 to the averaging around KES 3.

Hopefully, CA’s review will be implemented despite Safaricom’s appeal bringing in more growth opportunities for other players in the market. CA said when announcing the new rates, “The revised interconnection rate is projected to have a positive outcome for both the consumers and operators. At the retail level, consumers will now enjoy access to a variety of affordable services across networks, and at a wholesale level, operators will have more price flexibility when developing innovative and affordable products.”

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Dickson Otienohttps://tech-ish.com
I love reading emails when bored. I am joking. But do send them to editor@tech-ish.com.

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