Call termination rates slash relief for mobile users

Between 2007 and 2013, through the then Kenya Communications Commission’s intervention, call termination rates dropped by 84 percent, and by 65 percent between 2007-2010. The rates were last lowered in 2015 from Sh1.44 per minute to Sh0.99 per minute.

In its quest to make call rates all the more affordable to Kenyans, the Communications Authority of Kenya (CA) on December 22, 2021, issued a statement fixing the Mobile Termination Rates (MTRs) and Fixed Termination Rates (FTRs) at Sh0.12 per minute from Sh0.99 per minute, a reduction of 87.7 percent, with effect from January 1, 2022.

The rates are costs that mobile operators charge each other to allow customers to communicate across networks. For the sake of every reader, when calls or texts are exchanged between two numbers of the same service provider, it is called an on-net call. On the other hand, call or text exchange between two numbers of different service providers is called off-net call.

Available industry data indicates that the call rate has been falling gradually from a high of Sh4.42 in 2011 to Sh0.99 in 2021. The current revision was carried out after an elaborate stakeholder engagement in July 2021 as per the Constitution.

According to the CA, the cut will have a positive impact on both consumers and operators. It will also reduce the need for consumers to own multiple SIM cards as charges across networks come down. Currently, several Kenyans own SIM cards from various operators, which they use to call a particular network to avoid high charges.

The regulator also noted that at the retail level, consumers will enjoy access to a variety of affordable services across networks while at the wholesale level, operators will have more price flexibility.

This is buttressed by the fact that CA Industry Statistics shows mobile subscribers in the three months to December 2021 stood at 61.41 million, indicating significant growth opportunities for mobile service providers.

The review could not have come at a better time.

Kenyans are grappling with reduced spending power due to the Covid-19 pandemic.

The reduction in termination rates, and by extension calling rates, is welcome as MTR constitutes a greater percentage of off-net call bills. Customers will also benefit from better services as telcos will now have more money to invest in their infrastructure and networks, as opposed to paying high interconnect charges.

Various studies lend credence to the CA’s point of view.

The Mobile Termination Rate Debate in Africa, a paper by Research ICT Africa, found that in Kenya, for instance, the reduction in the rates in August 2010 led to an immediate cut in retail prices, allowing smaller operators to compete with dominant operators.

The African Journal of Information and Communication 2016 added that in many instances the subscriber base and incumbent profitability increased.

The onus is now on the operators to cooperate with the regulator to ensure that Kenyans enjoy the best call rates as they contribute to the country’s growth and development.

In Namibia, lower retail prices led to an expansion of the market, which, in turn, led to higher investment and profits for the dominant operator.

On the strength of the most recent empirical evidence from Africa, the paper by Research ICT Africa shows that cost‐based mobile termination rates increase competition between operators and lead to lower prices, resulting in more subscribers and more investment in networks and services.

The paper adds that fair competition is the best for consumers, investors and economic development. Cost-based termination rates are one further stepping stone towards fair competition.

In a paper titled Mobile Voice Service: Termination Rates and their Implications for End- User Charges, the International Telecommunication Union (ITU) argues that “high termination rates allow operators to sit on their laurels, not compelled to develop new services menus, or innovate products or quality.”

Such rates also deter pace of national development to information society services and investment, consistent with government expected outcomes, in their National ICT Plans.

As stated in the CA’s December 22nd statement, the initiative is aligned with the Authority’s vision of a Digitally Connected Nation, as well as the National ICT Policy Guidelines 2020 broad goal of ensuring accessibility and affordability of ICTs by Kenyans.