Oftel orders reduction in mobile call costs

Telecommunications regulator Oftel has ordered that operators must reduce their network termination charges, saving the consumer an estimated £800m over the next four years.

Network termination charges are responsible for the differing charge per minute levied by your telephone provider when calling mobiles on different networks. The Director General of Telecommunications, David Edmonds, said:

"As the caller pays the price of calling a mobile phone and has no choice about the network to which the call is being made, there is no incentive on operators to reduce termination charges.

"Over the last three years operators’ costs have continued to fall and call volumes have increased. As a result, Oftel believes that termination charges are still above costs.

"Consumers on all four networks should benefit from these reduced costs. I therefore propose to continue with a charge control of RPI – 12 per cent for the next four years that applies to all four mobile operators. There will be no initial step change."

He went on, saying that with the new charge controls, consumers will save "an estimated £800m over the four years", with an estimated reduction in operators revenue of £600m. The new charge controls will not apply to calls made over 3G networks.

Concluding his statement on the new controls, Edmonds said:

"The emphasis is on competition rather than regulation as the means of improving services for consumers further. It targets regulatory intervention more precisely on issues of the greatest concern and responds positively to operators’ fears about more intrusive regulation."

This was, however, just one part of Oftel's regular review of the mobile market. The regulator found that Vodafone and BT Cellnet "continue to price calls on average at levels higher than would be seen in a truly competitive marketplace", meaning that Edmonds could not "conclude that the mobile market is effectively competitive", and that "the designation under EC Directives of Vodafone and BT Cellnet as operators with significant market power will remain in place".

However, the Director General has removed some existing regulation, citing "massive turbulence in financial markets" as one of the reasons; the emphasis is now on "proportionate regulation", allowing "the mobile companies to invest in new infrastructure".

The two main announcements, other than the charge controls, made by David Edmonds were:

"I propose to withdraw the market influence determinations that oblige Vodafone and BT Cellnet to supply airtime to independent service providers. Both Vodafone and BT Cellnet have said that the withdrawal of this rule will enable them to offer more innovative commercial deals to service providers. Oftel will monitor developments with service providers closely.

"I have also concluded that no controls on retail price on calls from mobile telephones are needed. There will be no requirement on the operators to grant access on cost-based terms nor to sell wholesale unbranded airtime to service providers."

In conclusion, the Director General said the review amounted to "a forward-looking and balanced package for the evolving mobile market". For further details, see Oftel's Effective Competition Review: Mobile - final statement, and the charge-control specific review document.