COMMUNICATIONS Authority of Kenya (CA) has reviewed downwards termination rates for mobile and fixed operators, in a move that could lower voice calls cost.
This is also targeted at increasing market competition, with operators expected to reduce off-net calling costs.
This often drives down the price gap between on-net and off-net calls, benefiting smaller operators and fostering a better market.
In the latest move, CA has recommended a moderated and phased reduction of the Mobile Termination Rates (MTR) and Fixed Termination Rates (FTR) for the next four years, during which the rates will tend towards the long-run cost efficient level identified in the Telecommunications Network Cost Study of 2022.
MTRs are the costs that operators charge each other to allow customers to communicate across networks while FTRs are wholesale charges one telecommunications operator pays to another for terminating calls on a fixed-line (landline) network.
The first phase which commences on March 1, will see the interconnection rate reduce to Sh0.37 per minute from Sh0.41 which has been in place for the last two years.
This will run untill March next year when the rates will reduced to Sh0.35 per minute for the 2027-2028 cycle, Sh0.33 for 2028-2029 and finally Sh0.30 in 2029-2030 cycle.
“Undertaking the review, the authority has considered the need to strike a balance between promotion of investment, protection of consumers and the prevailing economic and market environment as well as best practices in the region and globally,” director general David Mugonyi said on Friday.
In 2022, the authority conducted a comprehensive Telecommunications Network Cost Study to determine the efficient cost of delivering mobile and fixed call termination services.
The study found that the prevailing mobile termination rates and fixed termination rates were significantly higher than the underlying network costs.
It recommended a phased glide path to progressively align the rates with cost-based levels, consistent with international best practice.
Subsequently, the authority issued a moderated rate of Sh0.41 from previous Sh0.58 per minute for a period of two years, effective March 1, 2024 to February 28, 2026.
That the new rates shall apply only to local voice traffic.
The prescribed MTR/FTR is a price cap; therefore, all operators have the latitude to negotiate interconnection rates that are lower, meaning reduction on voice call costs will be determined by decisions telcos make.
All operators are expected to vary their interconnection agreements in line with CA’s determination and file with the authority their “deeds of variation” by February 15.
“Once the market attains the rate of Sh0.30 per minute, a further review will be undertaken to ensure continued alignment with new and emerging issues, cost trends and competitive conditions,” Mugonyi said.
World Bank has been urging the regulator to significantly reduce mobile termination rates, arguing that the Sh0.41 per minute rate was “significantly above cost”.
Lower cost-based rates (near Sh0.06) are urged to increase affordability for consumers and reduce the market-dominating “club effects” that disadvantage smaller operators.
