Namibia leads Africa in push towards cost-based termination rates

Tuesday, 14 July 2009,


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The Namibian Communications Commission (NCC) has introduced a standard charge structure which has decreased interconnection charges by up to 43%. The NCC ruled on the termination rates in terms of MTC and Cell One's licenses, which requires cost-based termination rates for interconnection. Interconnection charges for all mobile calls are now 60c (Namibian).

 

The NCC commissioned a benchmarking study by Research ICT Africa, which found that the cost of termination for an efficient operator was 25 Namibian cents.

 

Nambian interconnection rates 

 

 

Telecom Namibia, Cell One and MTC have agreed to the following model:

1. The termination rate ceiling for mobile-to-mobile, mobile-to-fixed and fixed-to-mobile calls will be N$0.60 per minute, charged per second.

 

2. Operators terminating international calls for an operator with an international voice license will receive N$0.60 per minute, charged in per second intervals for the termination of calls.

 

3. Operators with an international voice gateway will be restricted to a transit charge of N$0.60 per minute, charged in per second intervals, plus the international settlement fee payable to the foreign operator for call termination. International settlement fees will be calculated each month, based on the average for last month for each destination.

 

4. The termination ceiling will be reduced every 6 months until the estimated cost of an efficient operator of N$0.30 per minute, charged per second, has been reached. 

 
The most widely applied cost standard is the forward-looking long-run incremental cost (LRIC) of termination of an efficient operator. Termination rates at cost of termination will remove economic distortions witnessed in Europe and Africa today and prepare the markets for a smooth transition to IP-based Next Generation Networks.Regulators across Europe and Africa agree that termination rates should be based on the cost of providing the termination service. CellOne’s and MTC’s licences, Namibia’s ICT policy and the draft bill discussed currently by parliament require the same. 
 
Symmetry between mobile and fixed termination rates supports fixed-mobile convergence and removes distortions that would advantage mobile operators. It is also quite clear from international best practice that asymmetric termination rates are not the best tools to facilitate market entry. More effective mechanisms exist that do not lead to economic distortions and entrenched traffic imbalances.
 
Hopefully the efforts of the NCC will encourage other African regulators and operators to also push for cost-based termination rates. 
 
The Namibian Interconnection Benchmarking Study can be found here at the NCC website.

See the press coverage below 

 

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