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It’s time to review economic impact of mobile termination rates

By Chris Wangalwa | August 15th 2021

Kenya continues to lead various conversations in the telecommunication sector, such as the high use of mobile money.

The overall national information, communication and technology (ICT) policy over the past 12 years has been geared towards increasing mobile penetration and facilitating development of the telco industry.

From a regulatory standpoint, switching costs and mobile termination rates (MTRs) have been a focal point. MTRs are frowned upon because of promotion of ‘monopolistic tendencies’ to the detriment of consumers and the industry’s development.

Dominant mobile operators, who are the sole beneficiaries of MTRs, are vehemently opposed to lowering the termination rates as this reduce their bottom lines, less avenues to collect rents from rivals and provide consumers with a choice to explore competing products. This is however not true.

It is universally accepted that cost-based termination rates encourage competition and allow more affordable pricing. Moreover, as the market matures the justification for levying MTRs lessens and switching costs are eventually completely scrapped or brought down to a nominal charge.

A key driver of competition is the regulation of interconnection; a critical public policy tool for the proper functioning of a vibrant, consumer-centric communications market.

The debate has now widened, with the Communications Authority of Kenya seeking the public’s input on the review of mobile voice and fixed termination rates.

This is a welcome move not only for the consumer but the industry at large, given the opportunity it will provide for customers to voice their concerns regarding not just about the pricing effect of MTRs but its impact on the quality of service across the various networks.

Importantly, the public engagement will also open discussions on challenges that come with having a dominant player in the telecommunications sector and the interventions required to bring the sector back to its erstwhile thriving, competitive state.

The reality of policymaking is that decisions must be based on balancing priorities. Consumer interests must be balanced against investor interests, national fiscal revenue against consumer spending.

Globally, Kenya leads the pack of countries with liberalised markets experiencing extreme incumbent industry concentration where the leading operator holds huge share in revenue and transaction value.

Despite the phenomenal growth of our telecommunications industry and the innovativeness it has ushered, we are beginning to lag behind regional peers owing to the failure in our regulatory arena. Entrenched incumbency and constrained consumer choice is slowly starting to hinder innovation in digital content production and consumption.

The writer is a communication consultant at The Bael Limited.

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