Termination rates

A phone call between subscribers to two different networks usually means that both networks require a payment for carrying the call.

The commonest arrangement for this globally is calling party pays. This means that the originator of the call pays the full cost. The network from which the call originates is charged by the network on which the call terminates. This charge is the termination charge.

As the termination charge is not likely to be something that people take into account when choosing a network, the level of termination charges is not really subject to competition. For this reason, termination rates are regulated in Europe and elsewhere.

Historically, termination rates have been high and therefore generated high revenues at high margins. Changes to termination rates (by regulators) have a significant impact on telecoms companies' profits.

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