Understanding Termination Rates and Their Impact

Termination rates can be a complex and nuanced topic, but understanding them is crucial for businesses and individuals alike. Termination rates are a measure of how often a service or contract is terminated, and they can vary widely depending on the industry and type of agreement.

Termination rates can have a significant impact on a business's bottom line, with high termination rates leading to increased costs and lost revenue. For example, a study found that high termination rates in the telecommunications industry can result in losses of up to 10% of total revenue.

Termination rates can also be influenced by factors such as contract length and customer satisfaction. A longer contract may have a lower termination rate, as customers are more committed to seeing it through. Conversely, a shorter contract may have a higher termination rate, as customers are more likely to cancel if they're not satisfied with the service.

Termination rates can also be used to identify areas for improvement in a business. By analyzing termination rates, a company can pinpoint where their services or contracts are falling short and make adjustments to improve customer satisfaction and retention.

For more insights, see: Customer Proprietary Network Information

Before 2006, the regulatory framework for mobile call termination was set via a series of decisions and opinions.

These decisions were issued between 2001 and 2005, with the first one being the designation of Belgacom Mobile as an SMP operator on February 2, 2001.

Designation of SMP operators was a significant step in regulating the mobile call termination market.

On February 18, 2002, the designation of SMP operators for interconnection and mobile networks was made, further outlining the regulatory framework.

Opinions on interconnection tariffs were also issued, with the first one on December 17, 2001, and another on July 25, 2001.

These opinions provided guidance on the tariffs for interconnection between different mobile operators.

Here are the key decisions and opinions issued before 2006:

These decisions and opinions laid the groundwork for the regulation of mobile call termination in the years to come.

In emerging markets, there's a growing trend to replicate the European Commission's (EC) approach to Mobile Termination Rates (MTRs).

The EC proposed a new cost-standard called pure-LRIC, which is being considered for use across the European Union (EU).

This recommendation has sparked controversy within Europe, with some questioning whether this is the efficient level of MTRs.

The EC's main driver behind this proposal was to move towards a uniform rate across the EU, consistent with a single economic market.

In 2017, the provisions for the call termination market were reorganized by a decision on May 26th of that year.

Several operators were designated as having significant market power and were imposed obligations to fulfill. These operators include Telenet Group, Proximus, and Orange.

The European Commission set maximum FTR and MTR Eurorates in 2021, which had a significant impact on the market.

A pre-consultation was held regarding the end of the validity of the BRIO and BMRIO reference offers, highlighting the ongoing need for market analysis and regulation.

The European Commission communicated on December 13th, 2022, regarding the negotiation of interconnection agreements, showing the importance of cooperation between operators.

New termination rates come into effect on July 1st every year, with the latest change happening in 2021.

The maximum wholesale price for fixed termination is now EUR 0.07 cents per minute, billed on a per-second basis from the first second.

Mobile termination rates, however, remain unchanged until December 31st, 2023, due to derogations provided for in article 4 of the Regulation.

The table below shows the maximum mobile and fixed termination prices applicable in Portugal, including those currently in force and those resulting from the provisions of articles 4 and 5 of the Regulation.

The rates are charged per second, from the first second, and are exclusive of VAT.

ICASA initiated the Cost Modelling Phase in May 2023 to review the pro-competitive conditions imposed on relevant licensees in terms of the Call Termination Regulations 2014.

The review was triggered by section 67(8) of the Electronic Communications Act, 2005, and regulation 8 of the Regulations. ICASA published the Call Termination Rate Review Notice on May 26, 2023.

The methodology for the review involves a bottom-up and top-down shell model approach. ICASA provided a response to stakeholder requests for clarification on this approach on June 21, 2023.

The review process has involved several submissions from stakeholders, including Cell C, MTN, Telkom, and Vodacom. These submissions were made between September 14, 2023, and June 4, 2024.

ICASA has also published several briefing notes and cost models as part of the review process. These include the TD fixed cost model, TD mobile cost model, BU fixed cost model, and BU mobile cost model.

Here is a summary of the key milestones in the review process:

ICASA has also published several draft regulations and cost models as part of the review process. These include the Draft Call Termination Amendment Regulations and the BU fixed cost model v6.

According to research, termination rates in the US have been steadily increasing over the past decade, with a 25% rise between 2010 and 2019.

In the retail industry, for example, termination rates are significantly higher than in other sectors, with 35% of employees being let go in the first year of employment.

Termination rates are often influenced by company size, with smaller companies experiencing higher rates of termination, averaging 40% compared to larger companies.

In industries with high turnover rates, such as food service and hospitality, termination rates can be as high as 50% within the first year of employment.

The average cost of termination per employee in the US is estimated to be around $4,000, which can add up quickly for companies with high turnover rates.

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