11 February 2013

Nigeria: Controversy Dogs Anticipated New Interconnect Rates

Lagos — As the Nigerian Communications Commission (NCC) prepares to release a new regime of interconnect rates in the country's telecommunications sector by the end of this month, operators still defer on the actual model of the next interconnections rates for the industry.

Interconnection rates are the charges which one telecoms operator charges another for terminating calls on its network and it is considered as one of the major factors for open and fair competition in a telecoms market.

Interconnect rates also referred to as termination rates which is currently being used in the sector expired on December 31st 2012 and it is reviewed every three years.

The NCC contracted the PriceWaterhouseCooper (PwC) of London as the project consultant to determine the new termination rates for voice services.

A final draft copy of the proposed rates was last week presented to the regulator and operators by PWC.

The interconnection rates determination of 2003 was based on international benchmark, with adjustments for the Nigerian operating environment, due to dearth of industry statistical data.

Operators and other stakeholders along with the project consultants brainstormed to determine the new interconnect rate for the voice services in Nigeria which is expected to be released later this month. At the stakeholder meeting, GSM and CDMA service providers counter opposed each other on the model for the proposed rates.

The forum which was a platform for the industry regulator to present the final draft report on the new interconnection rates to the stakeholders also served as an avenue for the NCC to gather more inputs from the service providers.

Dominants mobile network operators argued in favour of symmetric interconnection regime while the smaller networks preferred an asymmetric interconnection regime.

As part of the telecoms regulators' statutory responsibility of promoting fairness and competition in the industry, the NCC could determine the interconnection regime through two viable models - Asymmetric and Symmetric interconnection regime.

Asymmetry in termination rates refers to the charging of differential rates by access providers for the same termination service.

Under the 2009 regime which has just ended, interconnection rates for mobile voice termination provided by new entrants (defined by the commission as telecoms companies which have been operating for less than four years) irrespective of originating network, were set at N10.12.

The rates were programmed to fall progressively to N9.48 on December 31st 2010; N8.84 on December 31, 2011 and N8.20 on December 31, 2012 (from which date all termination rates will be symmetric).

Speaking at the forum, Alister Mcpherson, partner strategic consulting, PWC, UK noted that asymmetric interconnection regime is not a sustainable model as it promotes inefficiencies in the industry.

A Director at Visafone, Uche Ojo disagrees with Mcpherson urged NCC to adopt an asymmetric regime to assist smaller network especially CDMAs.

He said smaller networks were masked out by the scale of GSM operators.

"During the consultation with operators, we did say that the hypothetical network will not represent Visafone considering the internal and external realities. The final cost doesn't represent the cost structure of Visafone. This is because the scale and proportion of the cost is far above what Visafone or any CDMA network has."

Steve Evans, Chief Executive Officer, Etisalat Nigeria told the forum that asymmetry is a critical element to maintain a fair and open competition in the telecoms industry.

"We clearly believe that asymmetry approach should be used in the next three years to deepen competition, he said."

Osondu Nwokoro, director, regulatory affairs opposed an asymmetric interconnection regime.

"How long can this subsidy continue?", he asked. "In 2009 when we determined the current rate, we all agreed that asymmetry will fade out by the end of 2012. At that time, Globacom was just about six years old. Those that are asking for asymmetry today are as old as we were when we were denied the opportunity. So I don't know why they are asking for asymmetry", Ademola Olajide of Globacom said.

NCC's Director, Policy Competition and Economic Analysis, Lolia Emakpore explained that the state of the Nigerian telecoms industry will determine model to be adopted by the regulator.

She said, "We will have to review our market to determine what the state of competition in the market is. NCC will try to find out if the asymmetric rate supports growth and competition. We will also review the current growth of both big and small operators before we take a decision. We do not want a situation based on the imbalance that smaller operators are kicked out of the market. At the same time, we do not want asymmetry to inefficiencies in the industry."

Earlier in his remark, Executive Vice Chairman of the NCC, Eugene Juwah said the forum was to collect industry's contribution that will assist the commission in its determination for the new interconnect rates.

He said, "The different views will shape our determination. The model will be made available to all stakeholders and responses will be expected within the next seven days after. NCC will collate and take decision afterwards. Additional factors affecting services will be recognized. In decision making, local content will not be neglected."

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