N5/Minute Phone Calls Around the Corner

Nigerian phone subscribers could start enjoying lower call rates as industry interconnect rates which directly affect call rates are set to fall.

This is due to the fact that the current interconnect rates regime set by the regulator, the Nigerian Communications Commission (NCC) is to expire on December 31, 2012, which would then usher in a new rate regime.

Interconnect rates are the fees telecom operators pay each other for terminating calls on each other’s networks.

The existing rates, which are tilted to favour new entrants into the market, will give for a unified regime, according to a website report on Monday. Interconnection is a critical component of a functioning and competitive communications market, and it is recognised in the Nigerian Communications Act (2003), which requires networks facilities providers and other network service providers to provide licensees with interconnection on request at any technically feasible location.

A source at the NCC, who spoke on the condition of anonymity, confirmed that the current regime will expire at the end of this year and a new rate would be determined after thorough, in-depth studies of the cost of voice and SMS interconnection rates have been conducted by independent consultants.

The source also said it is expected that a new interconnect regime would lead to a further reduction in telephony tariffs. “When a new interconnect regime is determined and it is favourable to telecoms operators, the call tariffs will come down one way or the other. When the rates they pay to each other comes down, telecoms operators will try to compete, which would ultimately lower telephony tariffs”.

The present regime commenced on December 31, 2009, and provided that interconnection rates be set at N10.12 for mobile voice connection for new entrants (which the NCC defines companies operating for less than four years) irrespective of originating network.

The rates were programmed to fall to N9.48 by December 31, 2010; N8.84 by December 31, 2011 and N8.20 on December 31 this year. The commission adopted this measure in the hope that the revised interconnection rates would stimulate the entry of new companies into the sector which shall offer more affordable services to subscribers.

Telecoms operators not defined as new entrants were required to set a mobile voice termination of N8.20 from December 31, 2009. On the other hand, fixed voice termination rates were set at N10.12 from December 31, 2009; N9.48 from December 31, 2010; N8.84 from December 31, 2011 and N8.20 from December 31, 2012. The SMS termination rate of new entrants was pegged at N1.94 on December 31, 2009 which gradually came down to N1.02 by December 31, 2012. Other mobile operators were required under the existing regime to charge from N1.02 from the start of 2010. Lower interconnect rates gives operators the latitude to offer cheaper and more affordable rates to consumers, since the rates serve as a barrier to any plans by any operator to adopt cheaper rates for their networks.

Prior to the current regime which is being reviewed this December (which is the 2006 interconnect regime), the rates favoured the GSM operators who were paid N11.52 by the fixed networks for any call originating from them and terminating on a GSM network. However, a call the other way around cost the GSM operators only N5.52. When the present rates were announced, the GSM operators contested them at the courts. It remains to be seen as to in what direction the new interconnect regime will go, but opinions and analysts are predicting a further crash in rates.

Both Globacom and Airtel have indicated that the interconnect rate at an average of about N9 was too high for the industry, and would want the telecoms regulator to review them downwards. Only recently, Globacom said that if conscious steps were not taken to save the medium and small players in the GSM category, their fates may soon follow the trends in the CDMA category who have been sapped dry, due to heavy and unbearable interconnect charges paid to the dominant player.

A senior executive at Airtel stressed that at NGN 9, the nation’s interconnect rate was too high. In India, which is the operational base for Airtel, effective call rates are said to be as low as N5 per minute. An Industry analyst said that the recent promotion blitz by virtually all the GSM operators, offering huge bonuses for on-net calls indicated their abilities to lower their call rates.

The Herald NG

The Herald NG is a leading newspaper in Nigeria at the forefront of the digital revolution.

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