Namibia: What to do when mobile termination is reduced but offnet charges don’t follow

Posted on March 3, 2011  /  0 Comments

Namibia poses an interesting question. The regulator acts to reduce one of the key costs of providing offnet calls, the mobile termination rate. But the operator holding 85 percent market share refuses to make a corresponding reduction in offnet call charges. Now the regulator has responded by ordering reduction of offnet call charges.

Namibia has led SA in cutting call termination rates — the fees the operators charge one another to carry calls between their networks. The rates have been cut to 30c/minute, but MTC rivals claim the company has not passed on the benefits to consumers in the form of lower retail rates.

It’s a situation mirrored in SA, where the country’s two largest mobile operators, MTN and Vodacom, have decided not to reduce their off-network call rates despite a cut in termination rates on 1 March.

In some respects, SA has followed the Namibian example in reducing termination rates. The NCC forced down the rates to 30c/minute over an 18-month period; in SA, the Independent Communications Authority of SA (Icasa) is bringing them down over a three-year period to 40c/minute.

This is a manifestation of a general problem, of suppliers in oligopolistic markets not passing on cost reductions to consumers. When international call termination charges came down in Asian countries, many developed-country operators did not make the corresponding reduction in the retail prices. In the Namibian case the regulator has authority over the operator trying to pocket the difference. In the international case, the only pressure that can be brought to bear is by competitive operators using cards or other means.

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