OUR reduces mobile termination rate

The Office of Utilities Regulation (OUR) has established an interim termination rate of J$5 per minute on mobile networks, effective July 15.

Termination rates currently charged and paid by Digicel and LIME currently range between J$8.86 and J$9.19 per minute, according to information supplied by the networks to the OUR.

The rate determination is dated Monday, June 4 and will be implemented for all calls of both domestic and international origin, the OUR said in a release.

This rate will remain in place pending the completion of a long run incremental cost model which will be used to determine the mobile termination rate in the long term, the Office said.

The power to set the interim rate was conferred on the OUR, with the recent passage and signing of the Telecommunications (Amendment) Act 2012.

Mobile termination rates are the fees mobile telephone companies charge other carriers to terminate calls on their networks.

The OUR said that given the fragile state of the competition which now exists in the sector, the Office is of the view that there is need for an interim termination rate pending the completion of a cost study, “to prevent the two remaining mobile operators from leveraging their dominance in terminating calls on their respective networks.”

The OUR notes that different termination rates currently exist, and is especially evident with respect to the rate paid by fixed networks to mobile networks relative to the rates it receives from those mobile networks.

“The rate that some fixed networks pay to mobile networks for termination is several multiples above that which it receives from those networks when it terminates a call,” said the determination.

“This is especially true for LIME’s fixed network due to the fact that unlike the other fixed networks which can set reciprocal rates, LIME’s fixed termination rate is regulated to reflect cost,” said the OUR.

Given that mobile networks are charging termination rates above the actual cost of providing the service, “it essentially means that these mobile networks are receiving a transfer from the fixed networks which they can use to subsidise other services or increase their profit,” the regulator said.

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