Today the local telecoms regulatory authority POTRAZ held a meeting to announce the results of research conducted to determine the implementation of a new pricing model for local telecommunications services. The process to look into a new pricing model has been ongoing since 2012 with the report presented today offering hypothetical tariffs for the 5 years from 2012 to 2016.
The Long Run Incremental Cost (LRIC) method which POTRAZ is set to adopt for setting tariffs assumes a Bottom Up price determination format that factors in technical considerations such as network infrastructure capabilities and efficiencies. The Top Down model currently used is cost based.
One important factor emphasised repeatedly was how the LRIC model is based on hypothetically efficient networks designed on the basis of network information and financial data gathered from players in the sector, using parameters, assumptions and methodologies that reflect international best practice, adjusted to suit the Zimbabwean situation and regulatory objectives to be achieved.
POTRAZ was involved in an extensive consultative process with all operators in telecoms to come with the LRIC model so as to have a clear representation of what the industry can propose as tariffs.
Although we haven’t been given the full report which will only be made available to key stakeholders at alter stage we did manage to glean some highlights from the presentation made as well as the discussions regarding the results and the model implementation which are still underway.
- In terms of termination rates for mobile network voice calls the LRIC model suggests that the optimum rate for the year 2014 should be 2.55c per call as opposed to the current rate of 7c
- The optimum rate for SMS in 2014 should be 0.56c
- The optimum rate for data in 2014 should be 0.39c per MB
- Services like voice and SMS are the only ones being used extensively but the network technology currently available in Zimbabwe is able to support sophisticated data services such as 3G radio, ADSL VPN and leased lines
- POTRAZ has mentioned that the results of the research will not result in an immediate change in tariffs as there are inefficiencies in the market that make it a hypothetical model for the time being.
- The sharing of infrastructure which is important for market efficiencies is something that POTRAZ is working on as it is currently involved in consultations with all operators to ensure an accommodative process.
- The model created in the process will not be shared with the operators but they will be given an opportunity to view it and apply their own data to determine how it implicates their own operations
The project was conducted with guidance from global research firm Detecon International which been involved in similar projects in other countries across Africa, Asia and Europe. Deloitte Zimbabwe acted as the local consultants offering services covering costing specifics.