Every call made in telecoms networks requires the participation of many different telecom operators. For example, whenever a call is made by a subscriber of one telecom network to another subscriber on another network, an expense is incurred somewhere behind the scene. Such expenses are referred to as MTR.
What Is Mobile Termination Rate (MTR)?
Mobile Termination Rate (MTR) is the amount that one telecom company charges another for the termination of (completion of) a call in their network.
- MTR is the interconnection charge between telecom companies for completion of calls
- It is charged from the caller network to the receiving network
- Occurs when calls shift networks
- It affects the cost of calls and the income of telecoms
- It is normally managed by telecom regulatory bodies
Simply put, if a customer of Network A calls a customer of Network B, Network A will pay Network B the MTR fee.
How Mobile Termination Rates Work
Telecommunications networks are interconnected systems. Phone calls typically traverse several telecommunications companies before reaching their final destination.
Basic Call Process
- Phone call originates in Network A
- Phone call transits via interconnect systems
- Phone call arrives at Network B (destination network)
- Network B terminates the phone call
- Network B bills Network A for MTR costs
This system guarantees “any-to-any connectivity” among networks.
Why MTR Exists
Telecom providers make significant investments in terms of infrastructure, towers, bandwidth, and maintenance. MTR pays the receiving network for:
- Usage of network infrastructure
- Operation and maintenance
- Management of incoming traffic
- Quality of calls and connections
Without MTR, telecom providers would not receive any compensation for managing incoming calls from other networks.
Key Factors That Affect MTR
There is no set MTR worldwide since it differs from one country to another and market to market.
Major Influencing Elements
- Regulation policies: Governments frequently restrict or regulate charges
- Network expenses: Infrastructure and operational costs
- Market rivalry: Increased competition tends to bring down MTR
- Technology: Voice over Internet Protocol (VoIP) technology
- Volume of traffic: It might impact pricing methods
In general, regulators try to maintain the costliness of MTR.
Types of Termination Rates
1. Mobile Termination Rate (MTR)
Used for calls terminating in a mobile network.
2. Fixed Termination Rate (FTR)
Used for calls terminating in a fixed network.
Similar but distinct in their nature.
Impact of MTR on Consumers
Even though users do not directly perceive the impact of MTR, it influences the cost of calls.
How It Impacts You
- Increased MTR leads to increased call costs, particularly interconnection fees
- Decreased MTR means reduced call costs and increased competition
- Impacts roaming services and international calling charges
- Also impacts the design of telecommunications plans
In many nations, MTR reduction has resulted in decreased call costs.
Role of Regulation in MTR
In most cases, MTR is regulated since the individual networks have an access monopoly on their users.
Why Is Regulation Necessary?
- It ensures that the operator does not overcharge its competitors
- It ensures fair competition within the telecom industry
- It keeps the prices of consumers low
- It promotes market efficiency
For instance, within the European Union, regulators have limited MTR to extremely low levels (about 0.2 eurocents/min).
Pricing Models Related to MTR
1. Callers Pay (CPP)
The caller pays the total charge that includes MTR
Popular around the world
2. Recipient Pays (RPP)
The recipient pays a portion of the calling charges
3. Bill-and-Keep Scheme
No inter-operator charges for terminating calls
Some countries use this system for simplicity
These systems decide how the MTR costs are split between users and operators.
Pros and Cons of Mobile Termination Rates
Pros:
- Promotes equity in operator remuneration
- Aids network development and maintenance
- Favors network interoperability
- Maintains service quality
Cons:
- Raises cost of calls to customers
- Distracts competition from regulatory controls
- Complicated pricing scheme
- Monopoly power on termination
When MTR Becomes Important
Critical Instances
- Heavy intra-network calling traffic
- International or roaming calls
- Regulatory policy shifts
- Telecom pricing policies
Who Needs to Know MTR?
- Telecom service providers and regulators
- Companies relying on telecom networks
- Organizations dealing with high call traffic
- Price analysts monitoring telecom pricing
Common Challenges with MTR
- Determining fair and cost-oriented rates
- Striking a balance between competition and operational profit
- Adjusting for VoIP and internet communication
- Controlling rate disparities internationally
As the telecommunications industry moves towards data-based communication, the importance of MTR is changing.
Best Practices for Telecom Stakeholders
- Consider using cost-based pricing strategies
- Comply with regulatory requirements
- Watch market indicators
- Build an effective network system
- Keep pace with IP telecommunication developments
Frequently asked questions
What is the meaning of mobile termination rate in layman’s language?
It means the charge incurred by one telecommunication company for connecting a phone call to the other company’s customer.
Which party pays the mobile termination rate?
The originating telecommunication company makes the payment to the receiving telecommunication company.
Why are mobile termination rates different from one nation to another?
It depends on various factors like regulations, competition, infrastructure cost, etc.
Do end-users pay the MTR?
No, the end-users do not pay it directly.
