Why you get lesser off-net minutes on your bundle offer?

off-net minutes on mobile call

Would you like to make cheaper off-net calls? Soon Pakistani mobile phone users are going to save a bit more money on their off-net calls.

Pakistan Telecommunication Authority (PTA) has started to make the arrangements in response to the pleas of cellular operators who have been pursuing the authority for years. And as soon as a decision is reached, telecom subscribers are going to see their monthly mobile expense reduced on off-net calls.

But why always the off-net minutes are expensive? Usually, as it is the practice, subscribers always get more on-net free minutes than off-net minutes on their subscribed packages. For example, ‘Monthly All Network Offer’ for Jazz customers gives them liberty to avail 1200 on-net minutes but only offers 100 off-net minutes. Similarly ‘Haftawar Sahulat Offer’ from Telenor gives 1000 on-net minutes but only 70 off-net minutes to its customers.

The primary reason behind the least off-net minutes offerings is the money that an operator has to pay to other operators while sending a call.

If a Jazz customer would call the Telenor customer, Jazz will pay Telenor certain amount of money for letting its user’s call land on later’s network. It’s a sort of rent that networks (cellular operators) charge and in telecom terminology it is referred to as Mobile Termination Rate (MTR). It is very obvious that lesser the rent (MTR) the more off-net minutes will be offered to customers.

History of Termination Charges

On December 1st, 2000 PTA had determined the MTR of Rs. 2.20 per minute after it implemented Calling Party Pays (CPP) Regime and gradually in next ten years it brought down the rate to 0.90 paisas per minute.

Termination Charges

The practice should have been continued in the later years, but the process came to a halt in 2010 and ever since, telecom consumers have been made to pay much higher than what is being practiced in the neighboring countries.

In India, this rate is 0.06 (INR) per minute and similarly 0.18, 0.27, 0.0365 and 0.005 in Bangladesh, Thailand, Malaysia, and the UK respectively in their local currencies.

PTA has recently observed, particularly after the Mobilink and Warid merger, that that rates in Pakistan (0.90) are 110% higher than the mean benchmark (MTR) and almost 198% higher than other countries (the median benchmark). And due to the very same reason, the off-net call rates are higher and furthermore, it also keeps the door opened for grey calls to land in Pakistan.

How to move forward?

So now PTA has decided to reduce the rates from December 1st, 2017 to 0.80 paisas till November 30th, 2018 and then further reduce them to 0.70 paisas per minute in the succeeding year applicable from December 1st, 2018. In this regard, it has designed an initial proposal and asked the operators to submit their feedback before a rate is fixed for the entire industry.

Industry analysts are of the opinion that rate reduction will not only help the industry make more money in comparison to previous years but it will also impact positively the Average Revenue Per User (ARPU) which currently stands in Pakistan at USD 2.91 — the second lowest after Bangladesh.

“It should be a regular practice on the part of PTA to revise the Mobile Termination Rate every 2 to 3 years in accordance with the global practices”, commented Parvaiz Iftikhar, Former CEO of USF and an ICT Consultant & Analyst.

“Whenever the termination rates are higher, it is rewarding for bigger cellular operators, however, and at the same time, it is killing for smaller operators who pay hundred of millions of rupees every month to their larger rivals. There must be a detailed study before fixing anything, and nothing should be implemented against the international recognized practices”, added Iftikhar.

But only reducing the MTR after an almost a seven years of delay wouldn’t serve the industry alone. Since the last determination, the telecom industry has changed significantly in Pakistan. 3G and 4G technologies are well in practice, mobile cellular subscribers have hugely increased from mere 88 million in 2008 to more than 139 million, and similarly, the telecom revenues have jumped from Rs. 279.6 billion in 2008 to Rs. 456.4 billion in 2016.

There is no more Warid, Mobilink bought it last year and became Jazz — a single entity catering to nearly 64 million subscribers. Ufone which was once a number 3 operator in a market of 5 has now gone down to number 4 position, and there is Zong which primarily relies on the price war.

Large operators by the number of subscribers always have lesser to lose. They can afford to announce any number of on-net minutes since there is no outside payment involved and similarly, consumers are always willing to join them because they find many of their friends and family members on that network.

PTA must not forget to consider the lifeline of smaller operators. Therefore, bringing down rates only by 5% to 10% would still not minimize the challenges for the smaller operators.

“In my opinion, the rate should be same for every operator, but PTA must consider its responsibility to create level playing field for everyone. Its action should be justified, and no single operator should receive the blow because of its decision. And i must say it again that there should be a detailed study before moving on”, Iftikhar continued explaining the mechanism.

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