Special Telecom Analysis: The On-Net Price Regulation Debate


Accra, 16 March, 2015 – Modern day telecom analysts say the democratisation of telecoms has become a ‘critical public infrastructure’ in this age and is fundamentally one of the greatest innovations that ever surfaced on planet earth.

Since the telecoms industry in Ghana was liberalised close to the turn of the new millennium, we have experienced a holistic embrace of telecom services by Ghanaians beyond any form of imagination.

In this vein, can you imagine waking up one day to learn that the bundled-product you buy for say GH¢1, which guarantees you 100minutes, 20MB of data and 100SMS has suddenly shot up to GH¢4 (which is a 300% increment in the tariffs)? Or imagine if an entrepreneur suddenly realises that communicating with his key suppliers and staff on a ‘closed-user group’ for literally 1p a minute is now 4p?

Well that period might soon be upon us if the National Communications Authority (NCA) is allowed to enforce its recent directive from 1st of May, 2015.

Reports are rife in the media that the NCA, regulator of the telecoms industry, is on the verge of enforcing a directive to revise ‘on-net’ domestic mobile tariff (non-regulated retail tariffs for calls on an operator’s own network) from the current average of 1-pesewa to 4-pesewas with effect from the1st of May this year.

The directive, should it become effective, will mean that the diverse bundled-product offerings at the disposal of mobile users stand the risk of being completely scrapped off the market.

On-net call discounts, which allow customers to pay less for calls which remain within their own home network, have been a feature of telecommunications markets for many years.

In a letter dated December 18, 2014 to all Operators, the NCA, amongst other things, fixed the wholesale termination rate (the rate chargeable between operators for allowing an interconnection) at 4p for 2015, 5p for 2016 and 6p for 2017; in addition itadded the insertion that “all domestic traffic shall be retailed at a rate greater than or equal to that of the interconnect rate to ensure sustainability of the industry and promote fair competition”.

The insertion is an unprecedented move and is what has led to the mixed reaction by operators such as Vodafone, who point out that this is against the interest of consumers who presently enjoy low per minute call rates of 1-pesewas.

Should the directive be enforced, there’s every chance that bundling offerings will be heavily affected because these usually have an average price per minute of 1 to 2-pesewas. A bundle offer affords the customer more talk-time and data while paying less; it is usually delivered with the intention of giving the customer value-for-money in the spirit of affordability and empowerment.

For Small and Medium-scale enterprises (SMEs), such products afford them the ease to engage their numerous customers, especially, on ‘closed-groupuser’ platforms and also makes doing business very easy and comfortable. By taking this all-important benefit away; there’s every potential it will create one of the most uncomfortable situations this industry has ever witnessed and is certainly going to increase the operational costs of SMEs.

In a free-market economy, as Ghana likes to pride itself, the forces of demand and supply dictate the way private/corporate organisations operate. Ghana has a peculiar telecoms sector; in that for a country with about 25million people, there are already six mobile telecommunication companies coupled with three additional LTE (Long Term Evolution) Operators. This poses a kind of saturationthat isas complex as it gets or can be identified anywhere across the globe.

This has made the telecoms industry undoubtedly competitive; aggressive subscriber drive by Telcos using innovative and creative products to create and keep their customers is currently the order of the day. Innovative companies such as Vodafone have devised a lot of unique product bundling, utilising its on-net price regime to satisfy the bespoke needs of its diverse customers.

It therefore becomes imperative to establish why the NCA, as a regulator with a mandate to protect the customer from unfair pricing, is rather restricting competition and demanding increase in prices which will alienate existingcustomers and lower income earners.

The implementation of this directive will create difficulties for the customer as they will have to pay more for calls they make.Typical examples of the value loss to consumers from the implementation of this directive can be seen in the pre-implementation and post prices of bundles and the value afforded offered by one operator. Here’s an example:

Prior to 1st of May 2015:
With a credit balance of GH¢1, a Vodafone customer can subscribe for a One Ghana Cedis bundle by dialling 7272and would be entitled to make 100 minutes on-net calls, 5 mins off-net calls, 20MB data and 100 SMS.

With a credit balance of GH¢5, a Vodafone customer can subscribe for a Red rush bundle by dialling 5353 and would be entitled to make a 300 minutes on-net calls, 30 minutes off-net calls, 5 mins calls to USA, Canada and UK landlines , 100MB data and 100 SMS.

With a credit balance of GH¢11, a Vodafone customer can subscribe for a Supreme value bundle by dialling7070and would be entitled to make a 1000 minute on-net calls.

If the directive is implemented Post 1st of May 2015:

One Ghana cedis bundle will now require a balance ofGH¢4.00to allow for subscription, the Red rush bundle will now retail at GH¢20.00 and Supreme value atGH¢44.00with the same bundle offerings previously provided at the lower rates.

In essence; the direct impact on the customer can be summed in the following ways:

• The alienation of low income subscribers – as they will be unable to afford the 300% increment and thus prevent them from being empowered to create and improve relationships using the telecommunication platform.

• The directive also directly affects the choice customers have to access varied and bespoke products that meet their needs.

• General telecom revenues will be reduced; especially as a greater number of customers will substantially reduce their rate of communication and data usage.

• It will create increased customer dissatisfaction due to the rise in call tariffs.

For a company such as Vodafone, there’s the professional arrangement with its enterprise customers where contracts are signed and, in some instances, for about two years. This directive will, therefore, require the cancellation of these contracts and the redesigning of the products which will come at a risk to the company and will potentially create reputational risk issues.

In addition, it is well documented that Vodafone’s bundle propositions are heavily patronised across the country; largely in some places with high proportions of low income earners – this directive will, therefore, impact negatively on these constituents that the NCA is required by law to protect.

There’s, therefore, every certainty that this directive by the regulator will generate a lot of talking points in the industry, from consumers and the media in the days to come. A lot of questions need to be addressed by the regulator in order for the directive to witness the light of day.

The arbitrary nature in which the directive was introduced without a thorough stakeholder engagement and industry financial impact assessment prior to the introduction of this directive leaves much to be desired;

– Is the NCA, by this directive, seeking to regulate on-net price tariffs for Mobile Operators despite contrary evidence that it cannot do so by the present legal framework?

– Did the NCA satisfy all righteousness and processes before jumping to issue this directive?

– Has the interest of the customer – the very essence of the regulator’s protection and support – gone out of the window?

– Was a market analysis conducted by the regulator to ascertain key issues before arriving at this intervention?

The NCA needs to explain why it is seeking to prevent customers from accessing mobile telephony offerings at a lower price in favour of a higher amount – can that be construed as not caring for the customer?

Again, has the NCA the approved mandate to regulate ‘on-net’ pricing for Telecom companies in Ghana as per the law of the land?

Is the democratisation of the mobile telephony agenda still alive?

Your move…. NCA!!


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