Why are call rates to Papua New Guinea from overseas so expensive? The answer’s not quite as simple as you might think, as Business Advantage PNG discovered.

Telecommunications services have been getting cheaper all over the world over the last decade.

In most developed countries, it’s now possible to connect with colleagues and friends across the world for not much more than a local call.

But deregulation, advanced technology and more competition have had far less impact on inbound call rates to Papua New Guinea.

For example, standard rates from Australian carriers to PNG range from A$0.66 (K1.52) per minute up to A$2.38 (K5.50). Even Skype, the internet protocol-based global phone service that has driven down international call rates drastically over the past five years, charges AUD$1.07 (K2.47) per minute for a call from Australia to Papua New Guinea.

Compare this with the cost of calls from PNG and there’s a clear discrepancy. Calls start from 79 toea (AUD$0.34) to K2.45 (AUD$1.05) per minute to call Australia, depending on the carrier and package.

Impediments

So, what’s going on?

Wency Noruka, Divisional Manager, Wholesale at Telikom PNG Limited, says PNG’s telecommunications market was opened up to competitive forces in 2007, but there are still ‘inherent impediments to exchanging international traffic affordably between carriers’.

‘Prices used by Australian telcos for calls into PNG do not reflect the low rates that Telikom currently provides,’ he tells Business Advantage PNG. ‘High prices for calls from Australia to PNG appear to be influenced by two key factors: a blended PNG termination rate that is skewed towards the higher costs imposed by PNG’s mobile operators for calls incoming into PNG; and Australian telcos maintaining high retail prices for such calls.’

Industry sources suggest the disparity between the cost of inbound and outbound call charges goes back to 2001, when an accord to charge the same rates for incoming and outgoing calls between most countries broke down in PNG.

When the rates for overseas carriers were raised, industry sources claim, call volumes inevitably dropped. PNG used to be a top five call destination for Australians. These days, it’s outside the top 20.

The view from overseas

Australian telecommunications providers such as Telstra and Optus were hesitant to talk specifically about individual country call rates, saying only that every international market has different factors affecting how they charge.

What the Australian carriers won’t say out loud is that these interconnect and call termination costs are heavily dependent on the size of the market in question. It may just be that PNG isn’t a big enough market to matter

While carriers are unwilling to explain their own cost structures, an industry economist told Business Advantage PNG the call rates of Internet operator Skype were instructive. The Papua New Guinea termination rate, he said, would be no higher than the A$1.07 (K2.47) Skype charges per minute for a call made from an Australian computer to a fixed or mobile service in Papua New Guinea.

PNG calls not given priority

The disparity between what Telikom charges overseas carriers and what it pays to send calls overseas has also affected the priority given to inbound calls, according to industry sources.

The result is that it is ‘almost impossible’ to call PNG from many countries because it is not worth the trouble of overseas carriers to make the connections work.

High call costs: the impact on business

There is unquestionably an impact on business in all this. High inbound rates act as as disincentive for overseas customers to contact PNG-based exporters and service providers and act as an additonal and unwelcome impost on those businesses with a presence in both PNG and other countries.

John Leahy, President of the Papua New Guinea Chamber of Commerce and Industry, says the business community would welcome lower rates.

‘Access and reliability (of phone networks) is improving,’ he notes. ‘Domestic call rates have started to come down a bit (but) calling in is still not too cheap.’

Can regulation help?

Regulation of call rates remains a difficult prospect, but Wency Noruka says industry regulator, the National Information and Communications Technology Authority (NICTA), can have a role to play.

‘A key factor to reducing call rates into Papua New Guinea requires removing the reluctance by mobile operators to allow Telikom to handle international incoming calls on their behalf,’ he said. (Currently, calls to Digicel PNG come direct into the country through its own gateway.)

‘(NICTA needs to) ensure that any PNG carriers can collect any minutes from international partners on behalf of other PNG carriers and exchange them with other carriers at near-domestic rates.’

As for immediate prospects of lower call rates, it’s probably not worth waiting on the line for an answer.