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Does it make sense to regulate interconnection fees?

One of those patterns that has a lot of influence in forming local telco landscapes is the presence and the role of regulatory government institutions.

There is one in most every developed market, but the extent of its role and functions is what matters what matters. One of the main differences in the set of functions is whether the regulatory institution influences (or even dictates) interconnection prices between network operators or not.  

From a philosophical standpoint, having a public-sector institution enforcing interconnection prices is a matter of market ideology. On one end of the spectrum, the telecommunications industry in any country may be a place where the free market sets prices, or completely controlled by the state on the other end.

The question of, “what is generally the optimal position on this spectrum,” I will leave to the able hands of economists.

But what I would touch upon, however, is whether there is a need for fixing interconnection fees by a state authority in 2017.

In my opinion –no, there is not.

Simply put, fixed or enforced interconnection fees ensure that one carrier (and its user base) does not get cut away from other networks operated in a country by unreasonably high cross network fees. It’s a situation quite hard to even imagine from the viewpoint of a European surrounded by rather mature telecom landscapes.

In an advanced society, and even reasonably competitive markets, blocking another network operator with high interconnection fees is an unlikely situation to happen. And this is realized by many countries –for example, in Poland, where the interconnection fees were recently deregulated.

In an era of flat monthly fees and service bundles, countless 3rd party communication platforms, and the rise of text-based communication, “borderless” has become the standard.

Think about number portability and other transformations we have seen.

The telecommunications industry has become a competition won by opening doors, instead of putting up walls.

Joosep Pintsaar
2017-09-05 00:00:00 UTC