Page 197 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

however, may simply use blunt force: by slashing USSD pricing to a level they believe will stimulate the DFS
market. 113

Regulators may use a cost-based model to determine pricing, although there are only a few apparent cases
of where this complex exercise has been undertaken, at least in telecommunication-cost related instances.
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Where regulators have mandated – or proposed - USSD channel access prices, MNOs have complained that
the set charges are below market value and do not compensate MNOs for the additional investments needed
for network capacity to absorb increased traffic from USSD and ensure the sustainable delivery of quality
service. Further, MNOs may complain that they are then not compensated for the opportunity costs of lost
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call revenue due to their signaling channel being used by low-cost USSD DFS sessions.
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5.2.6.2 Competition aspects

A regular feature of the DFS ecosystem is commercial disputes between MNOs and other SPs over the cost of
USSD access and the consequence of dropped USSD sessions. Such complaints have emerged in Nigeria, India,
Uganda, Zimbabwe, Kenya, and Bangladesh. As noted above however, this is not necessarily the norm as
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there are many instances of sound commercial arrangements between MNOs and third parties, for example
in Tanzania, Malawi and South Africa.

They may also relate to differential pricing, whereby the MNO provides cheaper access pricing to a favored
party such as its DFS subsidiary.

Competition issues have been raised by MNOs in respect of being forced by regulations to provide access
services to other SPs in the DFS ecosystem.

5.2.6.3 Country examples

Bangladesh

By regulation, MNOs in Bangladesh are mostly only permitted to act as bearers - usually via USSD - for banks
and other DFS SPs. Currently, access to USSD is provided on a revenue sharing basis. That is, instead of a unit
or time-based charge, the MNOs are compensated only for those USSD sessions where the DFS providers earn
revenue. USSD usage charges vary from MNO to MNO for MFS providers.
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According to the MNOs, this revenue sharing model is unsustainable for them as the transactions which
exhaustively use the USSD channel are extensively misused and mostly free of cost as 86% of USSD traffic and
100% of SMS are being provided for free. The MNOs indicate that they are not incentivized to provide access
and sustainability depends on a justified return for the consumption of the used resource. Universal access is
even more important to MNOs and overall Quality of service (QOS), they indicate, is being affected because of
‘free’ usage of telecom resources/ spectrum, which also reduces the value of spectrum if this is forced through.

113 See the India country example below.
114 See for example in Zimbabwe, where the telecommunications regulator, POTRAZ, used a bottom-up costing model to set a floor
price on mobile data and bearer access. This however resulted in large retail price increases for voice and bearer services, market
confusion, and consumer anger.
115 They also express concern that by mandating a price and commercial arrangement for the provision of USSD, regulators preclude
businesses from striking innovative partnerships and commercial arrangements that may be more advantageous for consumers.
116 Mas, I (2012) What is the Telecom Regulator’s Role in Fostering Mobile Money?, available at https:// goo. gl/ X9cDFQ
117 Hanouch & Chen (2015) ibid
118 Grameenphone, the largest MNO, charges all MFS providers - except bKash - up to 0.25% of the cost of the cash out value. Other
MNOs charge 1.8 to 1.85% for cash out, of which the MNOs take 7% to 15%. For example, for a BDT 1000 cash out, the PSP
charge to the customer is BDT 18.5. An MNO will get 7% of the BDT 18.5 amount.

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