Arab Advisors Group
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More rate reductions await Jordanian communications services users.
Thursday, April 25, 2002

A new research report from the Arab Advisors Group examines the traffic dynamics underlying the negotiations between Jordan Telecom and Fastlink on a new interconnection rate for fixed to mobile calls. The results are interesting!

April 25, 2002 -

On April 9, 2002, Jordan Telecom announced that it would like to renegotiate the current interconnection rate for fixed to mobile calls with the two GSM operators in the country. Since MobileCom is a wholly owned subsidiary of Jordan Telecom, the negotiations are essentially between Fastlink and Jordan Telecom.

A new report, entitled Land to mobile traffic dynamics in Jordan, was released to the Arab Advisors Group's ( Strategic Research Service subscribers on April 22, 2002. In the report the Arab Advisors Group analyses the land to mobile traffic for 2000 and 2001 to shed more light on the issue at stake. The report provides detailed figures on traffic patterns between GSM and fixed lines in Jordan.

"Jordan Telecom wants the big asymmetry between fixed to mobile and mobile to land interconnection rates reduced or taken out all together." Wrote Mr. Jawad Abbassi, Arab Advisors President in the report. "The current interconnection rates between fixed to mobile has a major effect on traffic patterns between the networks. Calls from land to mobile phones have some of the highest minute rates in the market and are too expensive when compared with mobile-to-mobile rates (especially for postpaid subscribers). It is because of this that the mobile operators have a vested interest in keeping the current interconnection fees the same since it provides an incentive for people who call mobile numbers a lot to get mobile phones instead of using land lines." Mr. Abbassi added.

The report shows that Jordan Telecom landlines to Fastlink traffic grew by 88% between 2000 and 2001. The Arab Advisors Group estimates that Fastlink received more than JD 21.7 (US$ 30.5) million from Jordan Telecom while paying no more than an estimated JD 2.5 (US$ 3.5) million in interconnection fees in 2001.

One of the report's conclusions stresses that Jordan Telecom has a strong point. Land to mobile interconnection rate should be set at a maximum of JD 0.07 (a 41% reduction). The JD 0.07 rate is the current interconnection rate for mobile-to-mobile calls between the two GSM operators. There is no justification for having the interconnection rate to terminate calls from another mobile network lower than the interconnection rate to terminate calls from the fixed network. "Naturally the TRC, Jordan's telecom regulator, should insure that fixed to mobile call rates are reduced by a discount that mirrors the discount in the interconnection fees." Mr. Abbassi noted in the report.

The report also noted that, Fastlink, in an effort to maximize its intra-network traffic and minimize traffic to other networks, prices its mobile to fixed calls at many multiples of the mobile to land interconnection rate agreed with Jordan Telecom. Fastlink's pricing is part of its clear strategy is to be an alternative network in Jordan, where it substitutes for the fixed lines.

The report found that the total traffic between Fastlink and landlines in 2001 was 3.77 times the total traffic for MobileCom although total subscribers number for Fastlink was 5.1 times the number for MobileCom by yearend 2001. This shows that Fastlink's strategy of being an alternative network is actually working.

"On the issue of pricing, the long term interest of the Jordanian consumer and communications market at large lies in cost based pricing and competition." Mr. Abbassi said. "As such, the onus is on the operators and the TRC to insure that the market moves away from interconnection rates that are not 100% cost based."

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