Market Reform and Regulation
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advantage over smaller operators trying to enter the market (because their customers would be likely to make more off-net calls than those on large networks). But it is worth noting that the real impact of MTRs on competition is a subject of debate among policy makers, operators, and academics. Some parties have argued that high on-net/off-net price differentials have no impact on competition (Hoernig 2006). It is possible that competitive strategy does affect operators’ decisions on interconnection rates. In South Africa, for example, mobile interconnection rates increased by 500 percent over the three years before the launch of the third mobile operator, Cell C (Esselaar and others 2010). In Kenya, one of the smaller mobile operators complained to the national regulatory authority (NRA) in 2007 about the practice of the dominant mobile operator of charging much lower prices for calls made within its network than for calls made to other networks: Early in the year, Celtel wrote to the CCK complaining of alleged monopolistic practices by Safaricom, including the locking in of subscribers through high charges to other networks. Safaricom currently charges its subscribers up to Ksh50 ($0.71) per minute to access the Celtel network, and Ksh45 ($0.64) a minute for calls to Telkom. In contrast, calls terminating within the network are charged as little as Ksh8 ($0.11) per minute. On its part, Celtel charges as low as Ksh16 ($0.22) per minute to call other networks. (The East African 2007)
The regulation of MTRs in Africa is discussed in more detail in the section on regulatory issues. MVNOs are “virtual� operators that establish a brand and a retail business but use the network of another mobile operator. This enhances competition at the retail level but does not significantly affect competition at the infrastructure level. MNP allows customers to transfer their phone number to a new network if they decide to leave their old provider. This eliminates an important barrier to customer switching, which enhances competition among operators. African regulators are gradually introducing more regulatory controls on MTRs, but most African countries have not yet adopted the other regulatory measures aimed at promoting competition. One major exception is South Africa: Although it has not yet introduced the formal regulatory control of MTRs, it has introduced both MVNOs and MNP. Virgin Mobile was launched as an MVNO in 2005 using the infrastructure of Cell C, one of the three licensed network operators, and MNP was launched in November 2006.