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The Arithmetic of PMB, PSB and Interconnectivity Telecommunications Charges in Nigeria

By

Mobolaji E. Aluko

alukome@aol.com

Burtonsville, MD, USA

Thursday, December 11, 2003

INTRODUCTION

One of the dividends of privatization, deregulation and consumer democracy in Nigeria has been the recent “forcing” of the GSM operators to include per second billing (PSB) into the mix of charges meted out to consumers.  Previously, only per minute billing (PMB) was available – at N50 per minute - and consumers howled loudly about such a “rip-off.”

Globacom (on August 22, 2003, upon its launching) was the first to introduce PSB into its GSM offering Glo-Mobile, and very quickly Econet (on November 26, 2003) and MTN (on December 1, 2003) followed suit. 

M-TEL, an offshoot of the fixed-line national operator NITEL, eschewed PMB entirely and introduced (on December 9, 2003) only PSB, favoring both MTEL and FWA (PTOs) in its charges as follows:

For calls within its network:

PSB: 63 kobo / second peak; 47 kobo / second off-peak; 20 kobo / second night; 99 kobo /second international

For calls to NITEL and to the PTOs (FWA):

PSB: 64 kobo / second peak; 47 kobo / second off-peak; 20 kobo / second night

For calls to GSM Operators:

PSB: 70 kobo / second peak; 57 kobo / second off-peak; 42 kobo / second

By the way, NITEL’s has only PMB charges are as follows:  N4.30; long distance up to N44

On Globacom, MTN and Econet, consumers now have two billing choices:

For calls within each network:

Globacom:  PSB:  70 kobo / second;   PMB: N35 / minute 

MTN:          PSB:  80 kobo / second;   PMB: N39 / minute peak, N36 / minute off-peak

Econet:        PSB:  80 kobo / second;   PMB: N40 / minute peak; N36 / minute off-peak

For calls outside of its network:

Globacom:  PSB:  70 kobo / second;   PMB: N39 / minute

MTN:          PSB:  80 kobo / second;   PMB: N44 / minute peak, N39 / minute off-peak

Econet:        PSB:  80 kobo / second;   PMB: N45 / minute peak, N40 / minute off-peak

Although the new prices by MTN and Econet are better than the N50 per minute previously charged, consumers are now faced with the dilemma of whether to register for PSB or PMB – not to talk about the N100 administrative switching fee - bearing in mind that if the PSB rates for each of the GSM operators are multiplied by 60, they are higher than the PMB rates by up to N4 - 9 per minute.

So what to do?

SPREADSHEETING THE CALCULATIONS

Arithmetically deciphering the situation described above is ideal for spreadsheet calculations. It reveals a few shockers for the unsuspecting GSM user that chooses PSB and expects to always pay less than PSM. 

To fix ideas, we will only consider the vanilla charge options offered by the operators.  The results are as follows:

For calls within each of their networks:

1. On MTN, your PSB charge will always be higher than your PSM charge if you speak for longer than 137 seconds – or 2.27 minutes during off-peak hours, or if you speak for longer than 244 seconds or 4.07 minutes during peak hours. 

2. The off-peak situation is the same for Econet (137 seconds or 2.27 minutes), but it is 251 seconds or 4.18 minutes during peak hours, so there is evidently no substantial difference between MTN and Econet, except that Econet has some plans that are N26 – N32 per minute.

3. Globacom’s situation cutoff is at 251 seconds or 4.18 minutes (it has no peak, off-peak option).

For peak periods outside their networks:

1. MTN’s PSB charges will always be higher after 606 seconds (10.10 minutes), on Globacom after 725 seconds (12.08 minutes) and on Econet after 844 seconds (14.07 minutes).

For off-peak periods outside of their networks:

     1.  MTN’s PSB charges will always be higher after 244 seconds (4.07 minutes)  while Econet’s PSB charges will always be higher than PMB after 251 seconds (or 4.18  minutes).

We must note that in addition to the above limits of times for each of the networks, there are WINDOWS of times BELOW those limits in which PSB is also more expensive than PMB. 

First, we confine ourselves here to calls within each network at peak times.  Windows of higher PSB charges are:

1. MTN:  49 – 60 seconds; 98 – 120 seconds; 147 – 180 seconds; 196 – 240 seconds;  [above 244 seconds and above always higher.]

2.  Econet:   51 – 60 seconds; 101 – 120 seconds; 151 – 180 seconds; 201 – 240 seconds; [251 seconds and above always higher]

3.  Globacom: 51 – 60 seconds; 101 – 120 seconds; 151 – 180 seconds; 201 – 240 seconds; [251 seconds and above always higher]; same as Econet

For calls outside each network at peak times, windows of higher PSB charges are as follows:

1. MTN: 56 – 60 seconds; 111 – 120 seconds; 166 – 180 seconds; 221 – 240 seconds; 276 – 300 seconds; 331 – 360 seconds; 386 – 420 seconds;  441 – 480 seconds;  496 – 540 seconds; 551 – 600 seconds; [above 606 seconds is always higher.]

2. Econet: 57 – 60 seconds; 113 – 120 seconds; 169 – 180 seconds; 226 – 240 seconds; 282 – 300 seconds; 338 – 360 seconds; 394 – 420 seconds;  451 – 480 seconds;  507 – 540 seconds; 563 – 600 seconds; 619 – 660 seconds; 676 – 720 seconds; 732 – 780 seconds; 788 – 840 seconds; [above 844 seconds is always higher.]

3. Globacom: 56 – 60 seconds; 112 – 120 seconds; 168 – 180 seconds; 223 – 240 seconds; 279 – 300 seconds; 335 – 360 seconds; 391 – 420 seconds;  446 – 480 seconds;  502 – 540 seconds; 558 – 600 seconds; 613 – 660 seconds; 669 – 720 seconds;[above 725 seconds is always higher.]

 Similar calculations can be made for off-peak windows.

It can be readily shown that with all of the GSM plans, only if you speak for less than 45 seconds are you guaranteed PSB charges being less than PMB charges.  For calls less than 30 seconds, the savings can be quite substantial (N5 – N44) if PSB is chosen over PMB.  However, the situation is sometimes reversed when the calls are longer than about 2.5 minutes (150 seconds) for the vanilla options.

INTERCONNECTIVITY CHARGES

It was announced recently that starting on January 1, 2004, interconnectivity charges will be as follows:

1. Calls terminating on any GSM Network:  N11.52

2. Calls terminating on a wired (NITEL) or fixed wireless (FWA PTOs) network: N5.52.

It is trivial to assert that such a charge structure is INCOMPATIBLE with PSB, because the operator will be incurring a loss until enough seconds of call have been accrued to cover the appropriate interconnectivity charge. NITEL callers will for example have to be on for at least 3 minutes to pay for the N11.52 GSM charge and at least 2 minutes to pay for a NITEL or FWA call!  To make a profit from a PSB call between MTN and ECONET (for example), callers would have to be on line for at least 14.4 minutes!

CONCLUSIONS

The dizzying array of choices in the GSM price war going on in Nigeria points to one thing: confusion for the consumer, and bulging bank accounts to the operators.

First, the first switching fee (currently N100) should have been waived, and represents an unprecedented windfall to the operators.

Secondly, another suggestion would be to opt for simplicity:  adopt the single MTEL-like PSB and dispense with the PMB, otherwise one would have to have two handsets: one for short calls and the other for longer calls! In the present situation, MTEL is clearly the price and simplicity winner, unless MTN, Econet and Globacom reduce their PSB prices accordingly.

Once PSB is adopted universally in Nigeria, then the interconnectivity charge should be based on a percentage of call charge UP TO A MAXIMUM of (say) 2 minutes – for example 20% of charge for GSM operators and 50% of charge for fixed operators up to 2 minutes.  Furthermore, rather than numerous N combination 2 swappings of monies between pairs of operators, the operation of a central hub (or a regional constellation of such hubs) featuring a multi-protocol tandem switch will make it easier for bills to be paid to a central administration unit of that hub in order to maintain its operations.

Finally, as a side-bar, the favorable charge by MTEL given to NITEL and other fixed wireless operators should also be given to the fixed-line arm of the SNO Globacom, otherwise NITEL can be rightly accused of anti-trust, anti-competitive practice.  This is due to the fact that despite their antecedents, both MTEL and NITEL MUST be seen to be separate entities, and should operate as such.

Your comments are welcome.

BIBLIOGRAPHY

http://uk.biz.yahoo.com/031126/80/ef0v3.html

Nigeria's Econet cuts rates in GSM price war

Wednesday November 26, 08:21 PM

MTEL rolls out in 36 states today

http://www.vanguardngr.com/articles/2002/cover/f309122003.html

Government cuts telephone connectivity rates

http://www.onlinenigeria.com/nm/anmviewer.asp?a==564&z=10

Resolving the Interconnectivity Battle In Nigeria - Some Suggestions” By Mobolaji E. Aluko

Sunday, November 16, 2003

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