RD281 - ETNO Reflection Document on Termination Rates

Considerable work has been invested by operators and regulators to develop and implement Termination Rates (TR) regulation. This has led to valuable, accepted regulatory practices on which business is based and which should not be unnecessarily disrupted. The experience currently gained should be integrated in the future Recommendation.

ETNO finds regulating termination rates should be done in relation to today’s main challenge which is the take-off of mobile data services, as a complement and not as a substitute to mobile voice service. The recommended scope of relevant costs to regulate termination rates should correspond to Long Run Average Incremental Costs, as it is already the case today. The paper spells out differences in network cost allocation - for voice and data - between fixed and mobile networks.

Disruption of Termination Rates (TR) regulation would jeopardise the ability of fixed and mobile operators to address today’s challenges:

Over the last decade, considerable work has been invested by operators and regulators to develop and implement TR regulation. This has led to a set of accepted regulatory practices on which business is based and which should not be disrupted. The experience gained during this period should be integrated in the future Recommendation.

Regulating termination rates should be done in relation to today’s main challenge which is the take-off of mobile data services as a complement and not as a substitute to mobile voice service. Disruptive TR regulation could seriously jeopardise the ability of the market to tackle this challenge.  

The recommended scope of relevant costs to regulate termination rates should correspond to Long Run Average Incremental Costs, as it is already the case today. In the case of mobile networks and services, all network costs including coverage costs are traffic related, which is not the case for the fixed network. Concerning voice-data mobile cost allocation, the scope of voice incremental cost is much larger than the scope of data incremental costs when cost drivers are analysed in detail. Common voice-data costs should be allocated in function of demand characteristics, which means today to voice services.

The reference efficient operator must be defined per country. It should integrate dimensioning and cost parameters as observed in real networks.