As African telecommunications regulators continue to lower interconnection rates to make calls across networks cheaper, operators are claiming that their expansion plans will be negatively affected due to a resulting decline in revenue.In East Africa and Kenya in particular, operators including Orange, Safaricom and Telkom Kenya have united in their resolve to block additional interconnection fee cuts.The Communication Commission of Kenya (CCK) is set to significantly reduce interconnection rates in the next two months in order to make calls across networks cheaper and fuel competition.The operators want the CCK to shelve the rate cuts to protect the sector from competition that may curtail further investment and expansion. The CCK, however, said it will go ahead with the new rates.Interconnection refers to the commercial arrangement under which service providers connect their equipment, networks and services to each other in order to allow their customers to access the networks of multiple service providers.

Since the arrival of mobile communication in Africa more than 15 years ago, mobile service providers have been left to determine their own interconnection rates, but many African governments are now taking steps to regulate the fees.

In South Africa and Uganda, operators claimed a significant decline in revenue following the reduction in interconnection rates last year. In Zambia, low interconnection rates are expected to be put into effect this year.

Some telecom analysts are warning that if the region continues to experience further declines in calling rates, massive job losses, deteriorating quality of service and loss of government revenue will be inevitable.

"There must be a limit to how reductions are made by regulators. Otherwise operators will be forced to reduce their workforce and governments' revenue will also reduce," said Amos Kalunga, telecom analyst from Computer Society of Zambia.

But while acknowledging that there has been a significant decline in revenue by operators as a result of reduced interconnection rates, Protea Hirschel, an ICT industry analyst from Frost and Sullivan South Africa, said, "growth in other areas does compensate for lower interconnection revenue."

As an illustration, Hirschel said, Vodacom reported an 18 percent decline in interconnection revenue for the six months to September 2010 from the equivalent period a year earlier. For the three months to Dec. 31, interconnection revenue for Vodacom declined to 15.8 percent.

"Nonetheless revenue grew by 4.7 percent year on year. In other words, revenue did not decline," even though the growth rate was not as high as it had been, said Hirschel in an e-mail exchange May 11.

Hirschel said although growth rates have been affected, operators are not actually incurring losses as a result of lower interconnection rates.

Though Safaricom claims that low termination rates may have a negative impact on infrastructure investment, Hirschel said that this is a typical argument given by operators when faced with a reduction in interconnection rates.

The cut in interconnection rates in Kenya and Uganda resulted in the current price war and cheaper services in a bid by operators to maintain and wrestle customers from other networks, successfully cutting Safaricom market share in the process.

"I think the greatest tell on this issue is that GSMs, who are pushing down the voice prices, are not complaining about low interconnection charges," said Brian Herlihy, Seacom cable CEO.

There are fears, however, that high interconnection charges will scare away new entrants in the region's telecom market.

"A new entrant would have to pay more in interconnection charges to other operators than they would receive back because most calls would be outbound from them and not inbound to them," explained Chris Wilson, director of Aptivate International IT Development, an organization that provides IT services for international development.