Connected Research

Union policy research in the 21st century

Ofcom lowers the rate

with one comment

As if needing to prove what good value for money it represents, Ofcom followed up yesterday’s announcement of its annual plan and budget with its long-awaited proposals on mobile termination rates. These will see termination rates – the costs levied on other network providers when calls made from their networks land (or ‘terminate’) on mobile networks – fall steadily over the lifetime of the next period of mobile regulation (between 2011 and 2015) from 4.3p/minute now (and 4.6p on 3’s network) to 0.5p/minute. Termination rates were 23p/minute in 1995.

Ofcom believes that this cut will lead to cheaper calls and, although it is a little shy of giving figures, partly because there is no regulatory compulsion on operators to pass on the savings, other than via other regulated products (as well as via the weight of Ofcom’s publicly-expressed expectations in this area), the newspapers (e.g. here and here) have happily done them for it (although as The Guardian‘s version suggests, this is likely somewhat to overstate the case). Nevertheless, the suggested annual costs stripped out by the move represent some six times Ofcom’s total annual budget.

In contrast to yesterday’s announcement of the outcome of its investigation into the pay TV market, there was no subsequent wailing and gnashing of teeth from those subject to the announcement (though Orange has had one or two things to say [registration required; limited viewing time]; while, in contrast, Terminate the Rate, supported by 3 and BT, amongst others, was clearly rather chuffed). Mobile operators are likely to challenge the proposals during the consultation period but, publicly, there has been little reaction from them. This could be because operators have already discounted the cuts – which have been long expected, given their origins within EU attempts to lower mobile termination rates under Viviane Reding, the previous Commissioner – or because, as Robert Peston suggests on his BBC blog, they are likely to respond by shifting their business model to accommodate them. It is also true that, as the next charge control period comes to an end, pressure on these rates is likely still to be present, as Ofcom believes that:

As the market adapts [i.e. to the current proposed reductions], we believe that further reductions in termination rates will promote competition, the development of innovative tariff packages and the growth of genuinely converged fixed and mobile services. [para 1.13]

The review of termination rates – these are proposals and, as such, are subject to consultation – will conclude with a statement later in the year.


Written by Calvin

01/04/2010 at 3:49 pm

Posted in Telecoms regulation

Tagged with , , ,

One Response

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  1. Good news for some but beware regulators bearing gifts. As The Guardian has pointed out, this loss of revenue for the mobile operators will be recouped from somewhere else and all our experience shows that employers will often react to lower revenue by cutting costs – such as jobs and training.

    Adrian Askew

    01/04/2010 at 4:32 pm

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