Conduct a new cost study to settle call rates dispute

What you need to know:

The Communications Authority of Kenya (CA) made a decision, now contested by Safaricom Plc, to lower the tariff per minute from Sh0.99 to Sh0.12.
The CA admitted that it made its decision after benchmarking with other countries, adding that a new cost study will be done in the future.

The row over the proposed cut in the mobile termination rate (MTR) should be resolved through a new and independent study of the cost of interconnecting subscribers across networks.

The Communications Authority of Kenya (CA) made a decision, now contested by Safaricom Plc #ticker:SCOM , to lower the tariff per minute from Sh0.99 to Sh0.12. The cut was to be implemented at the start of this year but has been put on hold after Safaricom opposed it at the Communications and Multimedia Appeals Tribunal.

The company’s main argument is that the regulator’s decision ignores the cost of doing business in the telecommunications industry.

The CA admitted that it made its decision after benchmarking with other countries, adding that a new cost study will be done in the future.

This controversy has revealed the importance of acting promptly on rigorous studies that are relevant to a particular sector.

It appears that the CA used the benchmarking method after efforts to implement two other cost studies were thwarted by lobbying and vested interests.

A cost study was undertaken in 2007 and another one in 2010. But both were shelved, making them unusable currently due to the passage of time. This has given Safaricom an opportunity to demand yet another cost study.

The regulator should promptly conduct a new study to understand the true cost of interconnecting mobile subscribers. Once done, the report should also be implemented expeditiously to put an end to the squabbles in the critical telecommunications sector.

At the end of the day, consumers are only interested in quality services at lower prices that also allow the companies to recoup their costs as the regulator has articulated.

We agree with the CA that MTRs should not be used to make profits but just to cover the cost of interconnecting calls. Setting MTRs on the basis of a local cost study is therefore the most credible process out of all options available to the regulator.

Economies may have similarities but none are exactly alike. We also urge all players in the industry to support the findings of any future cost study.