After consultations with industry stakeholder, the telecoms regulator has decided to reduce the ‘mobile termination rate’ (MTR) from Rs0.7 per minute to Rs0.5 per minute. (MTR is essentially the price Operator A charges to Operator B in return for forwarding the latter’s users’ calls to users on its own network). This development is going to have implications for both telecom operators and users.
For some background, the MTR has been following a gradual downward trajectory since 2000 – in those early years of mobile telephony, the MTR was at a steep level of Rs2 per minute. Over the past two decades, the MTR has been sequentially brought down to Rs0.7 per minute until 2020. This has had the effect of making cellphone calls affordable for users in this low-income market.
Gradually-reducing MTR has helped mobile network operators to offer cheaper subscription bundles, where mobile calls were clubbed first with SMS, and later with mobile broadband (data) plans, offering subscribers simplicity in usage and visibility on their communication spending. With a further-reduced MTR, the ability of operators to offer affordable bundles and more off-net minutes (calls made to users on other networks) will increase.
As for the operators, the MTR reduction potentially affects them differently. Compared to an operator with a large subscription share, an operator with a lower subscription share has to connect higher share of its users’ calls to other operators. As there is a nearly 30 percent drop in MTR, the inter-connection costs paid by smaller operators to larger operators may see a corresponding decrease. Larger operators will witness cost savings, too, but smaller ones would benefit proportionally more.
With the quality of service going down, there are some who fear that the MTR reduction will further restrict the operators’ ability to earn decent returns in this low-revenue market and invest more in network quality. This concern is unwarranted. Operators need to look towards monetizing their “data” (mobile broadband) networks for better returns. Continuing to milk “voice” calls (which are being overtaken by “data” calls on platforms like WhatsApp) through old tools like MTR is unsustainable.
Next door in India, MTR has been almost zero, and it has benefitted customers and competition. The PTA’s consultation paper on the subject, which was released earlier this summer, had flagged Pakistan’s MTR as much higher – in terms of both local currency and PPP-adjusted dollars – compared with India, Bangladesh and Sri Lanka. The PTA proposed sharp reduction in MTR to Rs0.3 per minute by October 2021. In the end, the regulator seems to have found a middle ground.
In the final decision last week, the MTR has been brought down by the PTA to Rs0.5 per minute, effective January 1, 2022. The rate will further come down to Rs0.4 per minute from July 1, 2022. A year later, the MTR will decrease to Rs0.3 per minute from July 1, 2023. Let’s see how this regulatory move eventually impacts operators’ ability to offer more affordable (or free?) off-net calls to their customers! Doing so will benefit users living in low-internet-availability zone comparatively more.