Mobile Rates to Fall Further in the UK

(26 Jan 2009, BWCS Staff)

The Competition Commission in the UK has ruled that mobile termination rates should be cut by more than the amount recently suggested by telecoms regulator Ofcom. The decision follows a successful appeal by BT and could mean that the amount each operator pays to connect a call to another's network will have to be lowered significantly over the next two to three years.

Ofcom had set a lower rate for terminating calls to mobile networks at the end of March 2007 - at the time the regulator said this would mean cheaper calls for consumers. However, BT argued that the fees were still too high and that Ofcom had based its figures on the amount that the operators had paid for their 3G licences and not on what the franchises were actually worth. BT had also argued that Ofcom had failed to take into account reductions in the cost of administration.

The Competition Commission accepted some of BT's arguments, though did not believe that Ofcom should account for falls in the cost of administering networks. Accordingly, the Commission has come up with a revised set of prices for terminating calls, significantly lower than those proposed by the telecoms regulator. The new proposed termination rates for connecting to O2, Orange, T-Mobile and Vodafone should, the Commission argues, drop to £0.04p a minute, compared to Ofcom's proposed to £0.051 a minute. As far as relative newcomer 3 is concerned, the Commission believes that £0.044 is a more suitable per minute charge for terminating calls rather than the £0.059 proposed by Ofcom.

Not surprisingly there have been calls for rates to drop even further. Some analysts argue that this would remove one of the barriers to effective competition and stop termination rates providing an artificial price floor for mobile phone charges. The Commission's decision has been passed on to the Competition Appeals Tribunal (CAT), which will consider the proposals. The CAT will examine the subject at its next case-management conference on mobile termination rates on 2 February.


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