Recently, the Nigerian Communications Commission (NCC) announced new (and lower) interconnect rates to take effect from December 31, 2009. Interconnection rate represents the rate which

Subscribers hoping for lower telecoms tariffs

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Recently, the Nigerian Communications Commission (NCC) announced new (and lower) interconnect rates to take effect from December 31, 2009.

ncc logoInterconnection rate represents the rate which a telecommunications operator pays to another operator on whose network a call is terminated.

The Guardian newspaper reports on this development:

With this development, call terminations on new entrants’ networks are graduated from N10.12 from December 31, 2009 to N8.20 in 2012 while call terminations on older operator’s networks is fixed at N8.20 over the same period.

Another major feature of the new rates is the determination of Interconnect Rates for Short Messaging Services (SMS), for the first time in the country.

It is clear that the NCC is weilding the new rates as a means to regulate tariff in the industry. Lower interconnect rates mean that network operators can further drop their tariffs, as tariffs are often directly related to interconnect rates.

In the backdrop of this, consumers across the country are hopeful for lower telecoms tariffs soon. How soon this will be is a different matter. However, with Glo promising to crash mobile data rates soon, courtesy of its new submarine cable and the new interconnect rates, 2010 is looking on the bright side for telecoms subscribers in Nigeria.

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  1. I doubt if interconnect rates have any bearing on call rates charged by our operators.

    This is why I say so: if you PAY a lower interconnect rate as an Operator, you also GET PAID a lower rate for calls that terminate on your network!

    Mathematically speaking, there is NO difference to your bottomline!,

    I therefore do not envisage any reduction in call rates on account of this downward adjustment. If there is any, it will for other extraneous and unrelated factors. But let us wait and see..

  2. EyeBeeKay,

    Well, interconnect rates do have a bearing on the tariffs of any operators worldwide, including ours.

    Also, your statement that lower interconnect rates (without a corresponding drop in consumer tariffs) makes no difference to an operator’s bottomline is fundamentally flawed and very untrue.

  3. Haba, EyeBeeKay! Cool down small now.

    Mathematically speaking, there is A WORLD OF A DIFFERENCE to the operators’ bottomline.

    Lower interconnect rates without a corresponding drop in call tariffs mean greater profit margin for the operators.

    I doubt that the NCC, whose intentions in dropping the interconnect rate have been clearly spelt out, will look the other way should the operators refuce to lower their tariffs.

  4. The way I understand bottomline (as regards interconnectivity rates) is:

    the DIFFERENCE between – what you pay other networks (on which calls originating from your network TERMINATE). and what other networks pay you (for calls originating from them and TERMINATing on your network).

    A vertical movement (up or down) does not, therefore, necessary affect your bottomline.

    What affects your bottomline positively is if there are comparative more calls TERMINATing on your network compared to those originating FROM yours.

    A high subscriber base does not even necessarily guarantee a net POSITIVE income on the interconnectivity thing! If a majority of your subscribers make calls to other networks (rather than RECEIVE calls), they actually cost / lose you money (as far as interconnectivity charges go)!

  5. Well, EyeBeeKay, your understanding of the issue is incomplete. If operators get a lower interconnect rate without dropping their tariffs, that leaves them a greater margin to reap from across board. Though it is not the only factor that affects bottomline, it is untrue to say that it does not affect the operators’ bottomline.

    Without any other factors on ground changing, a vertical movement in interconnect rates puts more money in an operator’s pockets, especially the more outgoing traffic that the operator in question has. For operators who have very little outgoing calls, there is also an impact, but it is likely to be more negative than positive. Note that I said all other fctors not changing.

    It is very basic business management principle. Do the math.

  6. So far so good, I’m loving Etisalat’s EasyCliq Off Network tarriff cos @ 50K/SEC = N30/MIN, it’s the cheapest. Unfortunately they zapped my money today. I called a friend in Havana, Cuba banking on the supposed N72/MIN displayed on their website only to hear you have 1min left after I had spent a minute and 25secs talking with him. I paid N1,000 for 1MIN 25SECS. Na wa oh! I forgive them sha 😉

    Hopefully as they make money with lower interconnect tariffs, we too will get lower call tariffs.

  7. i dont think it really makes any difference…MTN charges almost three time the interconnection rate for intranet calls..that really speaks a lot about their business strategy and the same applies to others too

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