While the price benefits and flexibility of VoIP systems in business are extensive, voice termination can involve PSTN or mobile networks in different countries which can affect call quality and costs. Voice, or call termination, can be packaged and sold as an entity in its own right.
A carrier can purchase and deal in VoIP routes, call termination and services accessing a global network of providers. While the price of using telecoms technology has largely decreased in the past few years, some countries – particularly developing nations – see incoming calls as a revenue generator, with inflated prices for terminating calls. As far back as 2009, a Recommendation on Termination Rates aimed to harmonise termination rates and make them cost-efficient. This initiative has been largely successful in the EU, although some divergences remain.
Resistance in Romania
The Romanian telecoms regulator, known as ANCOM, wants to retain termination charges that were derived in 2014 from figures which are now out of date. The European Commission has commenced an investigation into Romania’s termination rates, which are considered to be high when compared with the charges for termination in other EU nations.
The telecoms and VOIP market changes rapidly, and the Commission believes that the rates set by ANCOM – both FTRs (Fixed Termination Rates) and MTRs (Mobile Termination Rates) do not comply with the Regulatory Framework at present levels. ANCOM has failed to provide an adequate argument for maintaining its FTR and MTR rates at Romania’s current rates when considered in the context of recent developments in the communications market.
Under ANCOM’s proposal, regulated providers would continue to pay MTR capped at 0.96 eurocents per minute, and FTR would continue to be capped at 0.14 eurocents per minute. This charge would be included in the final bills received by consumers, for calls made to a number of different operators.
These tariffs were originally levied in 2014, based on a BU-LRIC model which was developed during 2013 and 2014. An LRIC, or Long Run Incremental Cost model, is often used in telecoms regulation to determine how much competitors pay for services that an operator with a lot of market power supplies. A Bottom-Up LRIC is used to calculate mobile and fixed costs depending on factors such as cost of the network infrastructure and its technical characteristics, demand for the services and engineering algorithms.
However, this BU-LRIC model is now out of date and yet ANCOM has not demonstrated any interest in reviewing it, or even adding some current figures into the mix. Regulators in other countries have updated similar models with relevant data.
In its proposal, ANCOM stated that it did not anticipate beginning the long process of making changes to its pure BU-LRIC system until at least next year. ANCOM has indicated that first it must review the EU’s official stance on recommendations on termination rates and adopt the European Electronic Communications Code.
The Commission is not convinced that ANCOM has supplied sufficient evidence to demonstrate that its plan to leave its cost model unchanged is complying with the current regulatory framework. In particular, the Commission has concerns that the MTRs and the FTRs that were determined in 2014 are a reflection of a provider that is a hypothetically efficient supplier. This is a necessary parameter, as set out in EU Recommendation on Termination Rates.
In addition, the FTR proposed is the most expensive BU-LRIC charge in the EU, according to the most recent (June 2017) BEREC (Body of European Regulators for Electronic Communications) figures. These figures also demonstrated that the MTR proposed is also more than the average pure BU-LRIC rate in the EU.
Differences in wholesale voice termination
As models have been updated and termination rates are following a general trend downwards in other member states of the EU, the Commission has some concerns that the difference between termination rates in Romania and other members of the EU is going to become even larger in the next few years.
The Commission has concluded that MTRs and FTRs in Romania fail to comply with the regulatory framework, as ANCOM has not shown that its pricing structure is appropriate given current conditions in the telecoms market. It is also thought that ANCOM’s rate could lead to the formation of an internal barrier in the market, as Romanian operators could continue to levy higher MTRs and FTRs.
The Commission has three months for discussion of this case with ANCOM and BEREC to ensure EU law is being upheld. At the conclusion of the investigation, the Commission may eliminate its reservations, or issue a directive asking ANCOM to withdraw or amend its proposal. If ANCOM does not do this, in the absence of any valid justification, the Commission has the right to consider other legal measures.
