NCA’s draft guidelines on tariff transparency targeted mainly at the SMP

The National Communications Authority (NCA) has published draft guidelines seeking public input for a regulation that will ensure telecom tariff and billing transparency, and the document seem to target the significant market power (SMP).

The very title of the draft document – “Draft Guideline for Tariff Business Rules Documentation – SMP”, clearly indicates that it is mainly targeted at the SMP in Ghana telecom space.

The only SMP in Ghana’s telecoms industry now is MTN Ghana. So, it goes without saying that MTN is a key target, if not the main target of the new draft guidelines.

Indeed, apart of the term “SMP” in the heading, key provisions of the guidelines clearly indicates that this whole thing is mainly targeted at ensuring that the declaration of MTN as SMP will yield some dividends for the industry in terms of correcting the market imbalance.

It has been more than three years since MTN was declared SMP, but the industry is yet to witness a single positive dividend. The status quo, in terms of the structure and trajectory of the industry remains unchanged in spite of the SMP declaration. In fact, MTN seems to be growing at a faster rate now than in the pre-SMP era.

Three years after declaring MTN SMP, the increase subscriber base by 12%, while the telcos supposed to benefit from that regulatory intervention, lost subscriber base and market share significantly over the period. Again, the revenue numbers paints a more problematic picture, as MTN is currently recording almost 90% share of total mobile finance revenues.

Directive to increase prices

Already, the NCA has asked MTN not to have the lowest tariffs for any services on the market. The directive is intended to make MTN less attractive to Ghanaians. Indeed, it led to MTN increasing the prices of all its services, which generated a widespread outcry from customers. Those who are ignorant that the price increases were due to a directive from NCA, called MTN out. But the few who know the truth, directed their bullets at the NCA.

MTN itself seem to play a certain game to seemingly protect the regulator by giving two different reasons for the price increase. At one point, they said the price increases were due to rising cost of operations, while in a different forum they blamed it on regulatory requirements.

These new guidelines, which is mainly aimed at ensuring that the pricing practices of the SMP (MTN) are fully regulated by the NCA, while the non-SMPs enjoy some freedom in determining their tariffs, is expected to work the magic for the NCA in terms of correcting the market imbalance. So far, the NCA has failed woefully to make the SMP declaration of MTN count.

Indeed, the NCA itself has contributed to its failure to correct the market imbalance by following money and either directly selling or allowing MTN to acquire more superior spectrum from other players after declaring them SMP. It does not make logical sense, but NCA did it anyway.

So, let’s look at some of the details of the draft guideline that indicate clearly that this is mainly about the SMP, that is MTN.

Right from the INTRODUCTION of the 19-page draft guidelines, on Page 6, Paragraph 6 downwards, the documents started singling out the SMP as follows:

In the case of electronic communication services provided by a “Service Provider that has Significant Market Power (SMP)”, or where “the Authority detects anti-competitive pricing or acts of unfair competition”, the Authority is mandated to regulate the tariffs in accordance with Section 25(1) of the Electronic Communications Act, ACT 775. “The Authority may establish price regulation regimes, which may include setting, review, and approval of prices by Regulation”, as per Section 25(2) of the Act (ACT 775), for Service Providers falling under these categories.

Additionally, Section 25(4) of the Act mandates the Authority to “prescribe a method to regulate the cost of the service” for the dominant service provider “by establishing a ceiling on the cost, or by other methods that it considers appropriate”.

The regulation of tariffs for SMP aims to ensure that the rates provided by the service provider are fair, reasonable, and non-discriminatory, in accordance with Section 25(3) of the Act.

Thus, an SMP shall be guided by SMP Directives as the Authority may prescribe, in accordance with its mandate.

Page 9: MODALITIES OF TARIFF ANALYSIS

Overview

Before an SMP is given the nod to implement a new tariff or make changes to their existing tariffs, there should be an analysis to determine if the tariffs are competitive and in compliance with the applicable SMP directives.

The modalities for the analysis of tariffs should take into consideration the Significant Market Power (SMP) directives, economic indicators, taxes, government policies, etc. For any tariff adjustment, the Operator or Service Provider is supposed to send a justification to the Authority.

The following are the SMP directives that should be considered when performing the analysis

1. Same Prices for on-net and off-net transactions.
2. Tariff plans should be used for both On-net and Off-net transactions

iii. All local price points shall be above the prevailing interconnect rates

1. SMP tariff for all services should not be the lowest among competition

Analysis of Existing Tariffs

SMP Player

All tariffs except for IDD and international roaming tariffs shall not be below the prevailing interconnect rate for voice and SMS services. This is derived by dividing the purchase amount (amount of bundle/promotions) by the allocated minutes. For example, for a bundle with a price of GHS 5 and allocated minutes of 120 minutes the effective rate will be 0.0417GHS/Min.

For a combo bundle (that is a bundle consisting of Voice, Data and SMS) the allocation rule as communicated by the Operators to the NCA should be taken into consideration. For example, a combo bundle which costs GHS6 with voice allocation of 60 minutes and data allocation of 500MB and a rule of 60:40. That is, 60% of the cost of the bundle finances the voice allocation and the remaining 40% is for data. This means that the cost for voice allocations is GHS3.6 with an effective rate of 0.06GHS/Min and the remaining GHS2.4 is the cost of the data.

The effective rate for IDD, roaming, Legacy, bundles and promotional tariffs of an SMP Player should not be the lowest in the industry at all times. In the event that an SMP player has the highest price, the difference between the tariff for the SMP player(s) and the non-SMP player with the highest price should not be beyond 10%.

The difference between the previous and the proposed tariffs/allocation or effective rate must be such that it provides sufficient room for price competitiveness of the non-SMPs without being exploitative to the consumer.

Non-SMP Players

Same modality in respect to interconnect under section 5.2.1.1 would be applied to non-SMP players.

Analysis of New Tariffs

The new tariff should not be below the interconnect rate as outlined in section 5.2.1.1.

Comparison of new tariff to similar tariffs offered in different jurisdiction.

5.3.3 Comparison of new tariff to similar tariffs offered in Ghana.

5.3.4 Any comparison must consider the comparability of the underlining product/service by examining:

5.3.4.1 Effective Rate per Minute or Mega-bite (ERM/ERMB).

5.3.4.2 Validity of Offer.

5.3.4.3 Any additional Bolt-ons.

5.3.4.4 A minimum percentage (20%) of users/subscriptions to prevent price manipulation.’

Additional Metrics for SMP Tariff Analysis

Economic Indicators

Tax and Levies

Fuel and Utilities Cost

Exchange Rate

Inflation

Page 11: TIME WINDOW FOR THE INTRODUCTION OF NEW TARIFFS

Overview – Paragraph 3 onwards:

The designation of an SMP in 2020 came with a number of regulatory interventions and directives including the prior approval of tariffs (Legacy Tariffs, Promotions, Bundles for Voice, SMS and Data) of the SMP. Prior to the declaration of an SMP in the market, Mobile Network Operators were required to only inform the regulator of any change in tariffs Seven (7) days before its effective date.

However, after the declaration of an SMP by the regulator, the following directives were issued relative to tariff adjustment;

Existing Tariff Amendment Frequency and Notification

Approval of Tariffs

Operator(s) or Service Provider(s) designated as Significant Market Power or an entity that is dominant shall resubmit the tariffs or prices for existing services for approval within fourteen (14) calendar days after being requested to do so.

Operator(s) or Service Provider(s) designated as Significant Market Power or an entity that is dominant shall obtain the prior approval of the Authority before introducing any new tariffs or prices for all services, that is, default and other packaged services including promotions.

The Significant Market Power or dominant operator shall submit the proposed tariffs to the Authority prior to their introduction.

The Authority shall review and communicate its decision on the proposed tariffs to the Service Provider within thirty (30) calendar days upon receipt of the proposed tariffs or prices.

Notwithstanding (6.2.1.3) above, the Authority may by a written notice extend the period to communicate its decision on the proposed tariffs.

An SMP operator shall ensure that the approved tariffs shall be published in a manner and for a period as may be determined by the Authority.

Non-SMPs are still not required to seek approval before tariff adjustment, they are only required to inform the regulator of the planned adjustments before implementation.

 

Page 12: Frequency for the Introduction of New Tariffs and Notification Window

Rationale

The introduction of new tariff frequency and notification window has become necessary due to a directive that requires an SMP not to have the lowest price of any service in the market. This means, whenever a non-SMP decides to review tariffs upwards, an SMP will also have to review their tariffs to make sure they are in compliance with the directive of not being the lowest in the market. While an SMP is required to seek approval from the regulator on any tariff adjustments, non-SMPs are not required to do so. However, due to the fact that the adjustment of tariffs on non-SMPs directly affects the tariffs of an SMP, the following guidelines are recommended to be followed to ensure certainty in the market;

A non-SMP who intends to adjust tariffs should inform the regulator in writing, 45 days before the effective date of the tariff adjustment.

The information contained in the notification to the regulator shall include, but not limited to:

A description of the products and services included in the tariff adjustment or a new offer;

A description of the target customer segment;

Proposed effective date for the launch of the adjustment or the new offer;

A detailed description of the proposed terms and conditions applicable to the adjustment or offer;

A description of the commercial rationale for making the proposed change or introducing the new offer;

A detailed description of the current prices for the service in question in the case of a price change, (providing or specifying recurrent and non-recurrent price components) – both as a bundle and on a standalone offer;

Pricing principle applied in developing the proposed price (e.g. cost- based, etc.);

Any other information the Operator may deem relevant to help the regulator arrive at a decision on the adjustment or new offer.

The authority may require a non-SMP who intends to adjust tariffs or introduce new offers to make a presentation or provide further details of the reasons for the adjustment/new offer.

A service provider shall not adjust tariff of the same product more than once in a quarter within a year, unless the Authority determines that the adjustments are justified based on prevailing economic dynamics and competition. In the event that a tariff adjustment by a non-SMP requires an SMP to adjust its tariffs in order to be compliant with any of the directives that are obligatory to an SMP, this limitation shall not apply.

Upon receipt of a notification of tariff adjustment from a non-SMP, the Authority shall conduct an independent assessment of the adjustment within 14 days to determine whether the adjustments;

1. are fair and reasonable
2. will affect the position of an SMP not being the lowest in the market

Where the adjustments affect the position of an SMP not being the lowest in the market, the Authority shall notify in writing, the SMP, the proposed adjustments of the non-SMP and direct the SMP to also adjust tariffs to comply with the directive of not being the lowest in the market.

An SMP upon receipt of the notification, shall within 14 days, present a proposed adjustment of tariffs to the Authority for consideration and approval.

The Authority after consideration and approval of the proposed adjustment from an SMP shall direct the SMP to implement the adjustments within 14 days (notwithstanding the procedure for the implementation of tariff adjustments)

The non-SMP shall be notified in writing to implement their tariff adjustments, 7 days after an SMP has implemented their tariff adjustment.

Notwithstanding the above, an SMP who intends to adjust tariffs shall follow all existing protocols and guidelines issued by the Authority previously and shall comply with all existing directives as may apply.

Notes from Techfocus24:

All Ghanaians are required to read through the guidelines and make suggestions to ensure that the final regulation that will be sanctioned meets the aspirations of the people of Ghana. We have up to March 8, 2024 (barely one week to go) to make our voices count on this matter.

Personally, I thought there were provisions on tariffs for value-added services (VAS), so I could make suggestions on how the billing is communicated in a way to ensure that if telcos and their VAS partners steal from customers, it will be easy to verify the theft. But NCA seems to have a completely different agenda with this whole draft guidelines. I could not figure out where that suggestion will fit it.

 

Source:techfocus24