Thursday, April 07, 2005

Paying by the number in Latvia

Read what I blog, don't read what I publish.
The Communications Department of the Latvian Ministry of Transport has proposed charging a fee for telephone numbering resources, suggesting an amount of LVL 0.50 per number per year, or LVL 0.0416 per customer line or unused number per month.
Well, the paper I work for wants to emphasize that (quoting Latvian Mobile Telephone president Juris Binde)these charges will put a damper on expected sharp declines in mobile phone rates.
This is an accurate reflection of Binde's views, whereas Tele2 issued a statement saying that the charges would not affect tariffs, but would cause additional costs to all operators.
As a journalist who has to take a critical attitude toward any and all sources, I was reluctant to emphasize the possible "braking effect" on future tariff reductions, as my paper has.
In my educated opinion, these statements are, well, just statements. I believe the effect of a LVL 0.0416 increase in cost per customer per month on future tariffs will be:


(a colorful American expression for nothing).

The total cost of numbering resources for LMT will be more than LVL 500 000, about 36 hours of turnover or around three days net earnings. It will be relatively higher for Tele2 with its prepaid dominance and lower ARPU.
However, under the proposed scheme, these costs will be avoidable if mobile and fixed operators give back a substantial part of their inventories of reserved numbers and adopt a "just in time" approach for taking numbering resources from the authorities. Certainly, Lattelekom has some 2.5 million unused numbers it would gladly dump, while the more than LVL 300 000 it would be paying for its active numbers can be recouping in any number of ways short of adding 4 santims to everyone's monthly bill.
In addition, the entry of the new third mobile operator will bring about sharp tariff cuts and no one can fail to match them or at least have a very strong value-for-money proposal as to why anyone should pay even a little more (initially, coverage and quality could be issues for Bite in Latvia). So the effect on tariff cuts will be zilch.
If there is anything to worry about, I would look at the way the EUR 150 million investment requirement will be formulated in Bite GSM's licence. If the government literally meant that all that money had to be spend shopping at Nortel, Nokia, Ericsson or – why not – Huawei in the space of a few years, building a physically independent network (down to the towers?), then someone will have to recover that investment. On the other hand, if it is a loose figure for spending over the life of the licence, it's another story. Then Bite can truly look for an optimal, low cost solution, perhaps buy carrier capacity from others, share towers (especially for UMTS, three on a pole is better than three poles on the same hilltop). This we shall see in the next few weeks.


Anonymous said...

Anyway the message behind those Tele2 and LMT statemets is "end-user will pay for this", face it.

Juris Kaža said...

Fair enough, but I don't see how it is worth the effort to bill for 4 santims a month. The extra cost will be saved in other ways.