Communications Commission of Kenya (CCK) director general Francis Wangusi has directed the CCK board to make an independent decision on September 27 concerning review of the Mobile Termination Rates (MTRs). CCK has however pointed out that the decision over the rates will not be influenced by any external forces. Earlier in July 2012, there were propositions that the mobile interconnection rates will be cut from KES 2.21 to KES 1.60 per minute.

MTR is the amount of money an operator, say Safaricom pays another operator like Airtel when its subscribers call the other network. Therefore, having low termination rates will encourage competition amongst the operators.

This will result to cheaper calling tariffs and customer-designed packages from the operators to the benefit of you as the subscriber as well as the service provider.

Policy initiatives to lower or eliminate Mobile Termination Rates (MTRs) reflect the belief that lower MTRs would lead to lower retail unit prices for most end-users, and that these lower retail unit prices would lead to higher consumption of mobile services per user on average.

Comparing Kenya's MTRs with other countries, they are visibly high. A high MTR raises the operational costs of smaller operators, thus making it difficult for them to compete aggressively with larger ones in terms of  pricing. A reduction in the MTR can enable smaller operators to lower the retail price per minute, which can have the effect of compelling larger operators to lower the retail price per minute in response (assuming that the market is reasonably competitive).

Different charging arrangements are used: Calling Party's Network Pays (CPNP) and Bill and Keep (BAK) on wholesale markets; and Calling Party Pays (CPP), Receiving Party Pays (RPP) and flat rates (with or without minute caps) on retail markets. Since we are in Kenya, only  CPNP/CPP and flat rate arrangements are applicable.

There has been a key regulatory challenge associated with call termination, which is, the termination monopoly. In Kenya for example, only Airtel, the network operator of the receiving party, is able to terminate a call to a particular subscriber of its network. Without any regulations or obligations, this monopoly is likely to express itself through excessive termination charges at the wholesale level.  Many CPNP countries like Kenya thus regulate termination rates (through the CCK) rather than permitting the excessive retail and wholesale prices that would result from unregulated free negotiation.

Under CPNP, the network operator of the receiving party is compensated for this service by the network operator of the originating party. In such markets, incoming calls are (usually) free of charge, which corresponds to a Calling Party Pays (CPP) retail arrangement.

The relationship and the flow of payments are portrayed in the illustration below.

[caption id="attachment_19985" align="alignnone" width="620"] The relationship and the flow of payments in MTR[/caption]