Two of the UK’s largest fixed-line carriers have slammed new controls governing the cost of making a fixed-line call to a mobile phone, after the UK regulator Ofcom instructed mobile operators to cut connection fees.
The current controls governing the cost of making a fixed-line call to a mobile phone were set to expire at the end of this month. Following a two-year review, Ofcom on Tuesday set new charge controls that limit the amount mobile operators are able to charge other telephone companies for connecting calls to their networks.
Ofcom said that it expects this to result in significant savings for consumers over the four-year period that the controls will apply. It expects an average annual reduction in wholesale charges of 400m pounds ($786m) to 500m pounds ($983m) over four years; savings which Ofcom expects to be passed through to retail customers.
The new mobile voice call termination charge controls will now apply equally to 2G as well as 3G mobile operators in the UK, meaning that Hutchison 3G (3) will join Vodafone, Orange, T-Mobile and O2 in being subject to the new rates.
Ofcom decided to reduce the level of average wholesale charges across the board. Lowly fifth-placed operator 3 is subject to charge controls of 5.9 pence ($11.60) per minute (ppm), a reduction of around 45% from current charges.
Meanwhile, the average wholesale charges of the big four (Vodafone, O2, Orange and T-Mobile) will be reduced to 5.1 ppm ($10.02) in current prices. Ofcom said that for Orange and T-Mobile, this represents a reduction of around 20%; and for Vodafone and O2 a reduction of around 10%.
However, in a rare case of mutual agreement, two of the UK’s largest fixed-line carriers have slammed the new rates.
Ofcom’s rates are overly generous to the mobile operators, said Jim Marsh, CEO of Cable & Wireless Plc in a statement. Fixed network customers will bear the brunt by paying above the odds for calling mobile users — money which the mobile operators will use to subsidize the retail tariffs they offer to their own customers.
To be clear, we’re talking around 1.5bn pounds ($2.95bn) over the next four years… that’s not small beer, he added. C&W said it was working through the detail of Ofcom’s reasoning before deciding what action to take.
BT was equally damning.
This is a disappointing decision and is inconsistent with EU advice, said John Petter, COO at BT Retail. It seems strange that UK landline customers will have to subsidize the cost of the 3G licenses but get no benefit from them.
The mobile call termination rate has been too high for too long and will force UK landline customers to continue to subsidize the mobile industry, now in the region of 500m pounds ($983m) plus over the next four years, he added.
Meanwhile, the European Commission has also expressed concerns that Ofcom is allowing UK mobile operators who collectively paid a colossal 20bn pounds ($39bn) in 2000 for their 3G licenses to recoup too much of their cost. Ofcom’s latest controls are based on the prices the operators paid for their 3G licenses in 2000, rather than their current value.
Ofcom did not return Computer Business Review’s calls by the time of going to press.