Lower Termination Rates for All: A New Hope

European smaller mobile operators have changed their strategies on regulated mobile termination rates.



In the last ten years smaller operators have always argued that size and market's entry matters when speaking about termination rates. Smaller operators due to lack of economies of scale and scope and the market's situation would have the right to ask for premium rates for terminating calls on their networks.

The Mobile Challengers Group (Italy's Wind, Poland's Play, Turkey's Avea, Bouygues Telecom, E-Plus, Base and 3 Europe) is promoting a change of course. They argue that, since termination rates based on LRIC are way above costs, Regulators imposing these pricing methodologies are promoting the position of a handful of large operators to the detriment of new entrants.

The Mobile Challengers Groups realized that "network economy matters", they terminate less calls that they send. They are net payers to large operators. For example, 3 has large outflows of cash due to terminations.

Their solution looks 'simple', reducing termination rates at 'marginal' costs.

They did not present, however, solid evidences on the level of reductions necessary to solve the problem and, as support, a cost model reproducing an efficient marginal cost for termination. The lack of evidences and weak/faulty arguments do not facilitate the regulator's work.


Picture Source: http://www.flickr.com/photos/63878179@N00/956430203/