Fixed to mobile calls in Colombia average US$ 0.33 per minute, the second highest rate in Latin America, behind Uruguay at US$ 0.34. The regional average is US$ 0.22 a minute. However, interconnection rates are an important part of the business case for mobile companies, according to Wally Swain of the Yankee Group.

"It's lose all the way around for the mobile operators. Rates go down, revenue doesn't go up correspondingly as it is relatively inelastic. Then they have higher costs. It's a complete transfer of wealth from mobile companies to state owned fixed companies," Swain said.

"Experiments in Colombia and in other countries have not resulted in any elastic behaviour or further revenue so there is no reason for mobile operators to change," Swain added.

Perhaps the mobile operators could compensate by lowering mobile to fixed rates, in the hope that this would generate more traffic. But rates for these calls have come down a lot over the years and now average 300 pesos (US$ 0.13) a minute. The only operator with room to reduce these rates is Ola, which has negotiated a much lower interconnection fee (around US$ 0.07), according to Marc Einstein, of Pyramid Research. Competitors Bellsouth (Telefónica) and Comcel (América Móvil) are paying around US$ 0.20.

It may not be in the mobile operators' interests for interconnection rates to drop in Colombia, given that ETB and EPM already own Ola, while state-owned Colombia Telecomunicaciones (Telecom) has said it expects to decide before year-end about how to enter the mobile market.

"I think regulators tend to look at their regional neighbours as a benchmark. And I think that Colombia's prices for Comcel and Bellsouth are higher than the regional average. But on the other hand, many other markets are facing the same problem and we've seen relatively slow progress in Peru and Ecuador," said Einstein.

Source: Business News Americas