Report to determine fate of rate cuts

The decision whether to resume the suspended policy of reducing interconnection charges will be made mid-June after an industry research is concluded, the communications regulator has said.

The Communications Commission of Kenya (CCK) said it has commissioned the Kenya Institute for Public Policy Research and Analysis (Kippra) to conduct a study on the impact of the current regime of mobile termination rates on the macro and micro economic factors.

It will take about eight weeks for the findings of the study, commissioned two weeks ago, to be made public.

Kippra is an autonomous think tank established in 1997 to provide objective public policy advice to the government and other stakeholders towards achieving national development goals.

Speaking to Smart Company last week, CCK acting director-general Francis Wangusi said the findings of the study would inform the direction the industry will take on the suspended glide path in the mobile interconnection rates.

Elicited sharp division

“The board shall study the findings of the report and come up with a decision before July, when the suspension expires,” said Mr Wangusi.

Interconnection rates refer to the amount of money that one telecommunication operator charges another for terminating a call on its network.

For instance, if a Safaricom subscriber calls an Airtel customer, then Safaricom has to pay Airtel for terminating the call on its network.

The rates debate has elicited sharp divisions among the providers, with some supporting a further decline while others claim the glide path is harmful to the industry.

Airtel and yu have been pushing to have the MTR cut to the lowest possible level while Safaricom and Telkom have insisted that the rates do not reflect the current cost of doing business.

Safaricom had earlier in the year written to the regulator, calling for a new study to establish whether the rates are reflective of the economic status.

Safaricom said the current rates were not indicative of the real situation of the local economy and the cost of doing business, considering the changes in inflation rates and foreign exchange rates.

Telkom Kenya on Friday last week said it has asked the regulator to talk with operators on the scope of the new study.

“We are the operators. We still don’t know what is being researched by Kippra and whether we are part of the scope, but we appreciate that there is at least a study being done,” said Telkom’s head of corporate communications, Ms Angela Ng’ang’a-Mumo.

“There is need for a scientific study to be done before we can continue with any more MTR glide path because we feel that telecom companies are currently not making any money,” she said.

CCK initiated the inter-network rates reduction regime in August 2010 following research carried out on its behalf by Analysis Mason to review interconnection rates framework developed in 2007.

In August 2010, the commission announced the reduction of the rates by 50 per cent from Sh4.42 to Sh2.21 with immediate effect.