NCC 2018: fear grips among telcom companies against new termination rate

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NCC

By Bakare Idris

Fear gripped Telecom Company in the country over the new plan by Nigeria Communication Commission over announcement of new interconnectivity rate for voice segment that will take effect from March 1.

The worries emanate from the “fear of the unknown” by the telecom companies on whether the new rate will be higher or lower by the telcom after the outcome of a study commissioned by NCC might have been thoroughly reviewed.

Termination rate or interconnection rate is the amount or fee which one telecommunications operator charges another for connecting and terminating call(s) on its network.

Speaking at the stakeholders forum held in Lagos, last week, Vice – chairman of NCC, Danbatta who was represented by Executive commissioner, stakeholder management, Mr. Sunday Dare disclosed that the new plan will take effect starting from March 1 after the final study by the PricewaterhouseCooper (PWC), UK.

“After the presentation and the work with the consultants and other stakeholders, we’re sure that come March when we introduce this cost it will augur well for the stakeholders.”

He said without interconnection, it could be difficult, if not impossible, for subscribers on one network to call subscribers of other networks.

According to him, a key component of the commercial aspects of interconnection is the determination of interconnection rate among network service providers.

Sunday said “Apart from the first interconnection rate, which was based on negotiation between the incumbent operator (NITEL) and other operators, all other determinations have been handled by the commission.

“NCC had to handle the termination rate due to the reason that the negotiated interconnection rate was fraught with many controversies.

“And more importantly, there was a need to ensure interconnection rates are cost-oriented in line with international best practice.

“Till date, there have been four interconnection cost determination regimes (2003, 2006, 2009 and 2013 respectively).”

The EVC said the commission had an obligation to create a level playing field for all operators and ensure the continuous growth of the industry.

He said the NCC would ensure the determination of mobile voice termination rates that truly reflect the cost of deploying the service and interconnection of networks in Nigeria.

Research shows that Interconnection is a major cost component of Network Service Providers. According to International Telecom-munications Union (ITU), interconnection is a set of legal rules, technical (operational), and commercial arrangements between network operators that enable customers connected to one network to communicate with customers of the other network. Simply put, Interconnection can be defined as linking of telecommunications networks, so that customers of one network can communicate with customers of another network. Based on ITU Survey, Interconnection is rated by many countries as the single most important problem in the development of a competitive marketplace, for telecommunications.

In the tripartite aspects of interconnection, of which are Legal, technical and commercial. The commercial facet, is the critical denominator of the three, because it has to do with sharing of revenues generated via tariffs, when subscribers makes use of telecommunications services that goes beyond their own individual networks, the Nigerian Communications Commission (NCC), in conjunction with PricewaterhouseCooper (PWC), implore cost based study in other to determine mobile voice termination rate, also known as Interconnection Rate, for a particular period, which is referred to as a Regime.

International Telecommunications Union (ITU), the United Nation’s specialised agency for information and communications (ICT) regulation, recommended that, in determining Interconnection Rate, it should be cost-oriented, it should reflect the cost of providing services that is required to unbundle the networks. Unbundling, in clear terms, means the charge or tariff made separately, rather than as part of a package. It is only the part of the network that is connected with interconnection operations of the system that is charged.

In 2003, the Nigerian Communications Commission (NCC) had its first intervention in the interconnection rate in the nation’s telecoms industry. Around that period, the full liberalization of the sector was still at its nascent phase, therefore the needed data for its determination, was not obtainable from the then evolving sector. The regulatory commission deplored International benchmarking to set the terminal rates for the country’s telecommunications industry then.

In 2006, the Commission carried its first detailed cost study by employing Long Run Incremental Cost Model (LRIC). LRIC is a cost model used in telecommunications regulation to determine the price paid by competitor network operator, for services provided by operator with significant market power. It assists in the determination of the cost of termination services for an efficient operator. The NCC employed LRIC because it is futurist in its policy formulations.

Interconnection Rate was reviewed in 2009 after a thorough cost study, which brought new Interconnection Rate for that regime. Progressively, in 2013, the NCC adopted asymmetrical cost profile. This particular policy initiation leveled the Interconnection Rate for both small/new entrant operators. It made it possible for the Interconnection Rate for all the Mobile Network Operators (MNOs) to be pegged at N3.90k/min-which is the current Interconnection Rate being used till date.

Under 2013 Determination Regime which birthed existing interconnection rates, Nigeria’s telecommunications industry experienced visible growth speed, which propelled the subscribers’ base to over one hundred million active lines. With biting economic recession, coupled with lower interconnect rates, it has become obvious that the Mobile Network Operators (MNOs) are now living on borrowed lifeline. The present terminal rates can no longer sustain funding of the operations of MNOs, which is already stifling life out of MNOs, at the same time, affecting quality of services and telecommunications expansion

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