Friday, July 3, 2009

Uganda To Introduce New Interconnection Rules

A new telecommunications interconnection framework that will see mobile phone providers in Uganda charge each other a similar fee when they carry the other's traffic will come into force on Sept. 1.
 
A new telecommunications interconnection framework that will see mobile phone providers in Uganda charge each other a similar fee when they carry the other's traffic will come into force on Sept. 1.
 
The industry regulator, Uganda Communications Commission (UCC), is stepping in to regulate a key price factor, which today is determined by the operators.
 
The news has been very well received by new players, which have been choking on high interconnection fees set by the incumbents, whose profit margins will drop when a set rate is finally applied.
 
Zul Javaid, the chief executive of Warid Telecom Uganda, said he was happy a new framework is on its way but he has always held the view that interconnection should have been regulated before the sector was opened to competition in 2006.
 
He said interconnection is a large factor in pricing and as new operators, they are limited in how far they can push tariffs downward. "So a dominant player can still prevent new players from influencing price, but this is of course good news," Javaid said.
 
He said that the problem today is operators charge different rates for different operators and that lack of consistency in pricing has been a major problem.
 
"Today, when Warid sends a call to the market leader [MTN Uganda], we have to pay them eight U.S. cents per minute to complete [terminate] that call. But when Uganda Telecom sends a call to the market leader, it only pays four U.S. cents," Javaid said. Warid charges US$0.14 per minute for a call across the other networks and out of that, Warid pays $0.03 in government taxes, pays another $0.08 as interconnection fees to the market leader.
 
"From the [remaining] two U.S. cents, I have to pay all my costs including staff salaries, network maintenance costs, electricity, etc., and that has not been sustainable, so I have to thank UCC for doing this because it is better late than never," Javaid said.
 
He said that at the end of the day, a lower interconnection rate could result in lower tariffs for users and that leads to increased communication.
 
Yesse Oenga, the managing director Zain Uganda, said pricing as a factor will no longer be an issue among the providers, adding that the set charges mean operators will be in a better position to cover operational costs.
 
In a statement, UCC outlined the reasons behind the move, saying the decision was informed by a consultation study on interconnection, retail costs and pricing that was undertaken by PricewaterhouseCoopers London on behalf of UCC.
 
According to the statement, due for release on July 1, the retail rate will be fixed at $0.04.
 
A fixed interconnection rate is common internationally. But today, every one of the five players in the Uganda market charges one another a different interconnection fee and this is largely determined by how strong in terms of subscriber base they are.
 
The term interconnection refers to the commercial arrangements under which service providers connect their equipment, networks and services to each other in order to allow their customers to access services and networks of other services providers.
 
New players coming into the Uganda market have in the past been critical of the existing policy of leaving the pricing interconnection to the players.
 
The argument is that unregulated interconnection fees stifle competition, kill innovation, hold back penetration, prevents additional investment in the sector and users get cheated as a result.

1 comment:

I am a Fractal said...

The way the internet works, is members must interconnect, for free, if they care to be a part of the network. there are no fees. period. not allowed.

when you have fees, you stifle innovation, because you have to measure data, and there is far less of an incentive to upgrade.

the free interconnection rules that the internet has had for years has caused the internet to grow in amazing leaps and bounds. that's what we need for all networks.

more importantly, no company or entity should be allowed to be in the business of making network infrastructure as well as in the business of any kind of content creation or delivery, including phone service. if a company cares to be in the phone business, they should get onto the shared internet like everybody else. if they care to lay cables, they must interconnect, and they cannot show any favoritism to any of their clients, such as phone or tv companies.