Cut Mobile Termination Rates By 20 Percent Says UK Competition Commission

The four big UK mobile operators have had a massive setback as the Competition Commission rebuked a decision by Ofcom and backed BT's decision to appeal to the Telecommunications watchdog.

The issue being debated was (a) whether the phone companies had to decrease the amount they charge each other to connect calls to their own networks (b) and if yes, by how much.

Although it amounts to pence per minutes, termination charges are expected to generate more than £250 million over the next two years for the gang; the appeals were brought forward by BT Group PLC and Hutchinson Whampoa - the owner of Three for two separate issues.

Ofcom had previously decided that the connection charges for connecting to O2, Orange, T-Mobile and Vodafone should fall to 5.1 pence per minute but the Competition Commission went even further, asking for this to go down to 4.0 pence per minute by 2010/2011.

The telecommunications watchdog acknowledged that "the Competition Commissions recommendation to the Competition Appeals Tribunal ... is a considered and detailed response about a set of very complex issues.’"

Three's Chief executive was slightly more ecstatic. Kevin Russell welcomed the move saying it was in the right direction but did not go far enough. Three wants a more fundamental reform, due partly to the fact that the company perceives the four major mobile operators to be operating a quasi-cartel.

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Our Comments

Like the banks, the mobile phone companies are likely to increase charges elsewhere if the revenues generated by termination charges are substantially reduced. One trend that we could see in the UK is less generous subsidies for mainstream and top of the range phones. While paying to receive a call could become a reality soon.

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