Mobile phone operators to be forced to cut prices

Aissetou N'Gom

Ofcom, the UK telecoms regulator, said on Wednesday it planned to cut the prices that mobile phone operators can charge for connecting calls from rival networks or landlines. These changes would come into effect when the current regulation expires in March 2007.

Ofcom said it had imposed a limit on average termination charges of 5.63p per minute (ppm) or 6.31 ppm, depending on the extent to which operators can use 900MHz or 1800MHz spectrum bands for their networks.Generally speaking, lower frequencies allow carriers to provide coverage for a larger area, while higher frequencies allow carriers to provide service to more customers in a given area. These figures are subject to review and could change by half a pence.

Until now, restrictions on charges have only applied to calls connected using operators' 2G networks (ie Vodafone, O2, T-Mobile and Orange). Ofcom said it was unnecessary to place restrictions on 3G as too few customers were using the service at the point of the assessment.

In March 2006, Ofcom consulted on its view that the controls remain necessary, and proposed to extend regulation to include the connection of calls to 3G networks as 3 now had more than 1m customers. After considering responses to the March consultation, Ofcom confirmed that the connection of voice calls to the networks of Vodafone, O2, Orange, T-Mobile and 3 each constitute a separate economic market.

Regulation, therefore, remains necessary to protect consumers from unduly high prices. Ofcom therefore proposes that the average termination charges of Vodafone, O2, T-Mobile and Orange should be reduced to approximately 5.3ppm across 2G and 3G networks by 2010/11. The average termination charge of 3 should be reduced to approximately 6.0ppm by 2010/11.

This will be the first time that 3 has been subject to restrictions. Ofcom is consulting on how quickly these reductions should be implemented, they may stagger the changes or have one large reduction. These controls should expire on 31 March 2011. Ofcom states that the changes are not a response to customer issues as no consumer groups have voiced their concerns to Ofcom.

John Earl, a spokesman for Vodafone, said: "We're pleased to see that Ofcom is taking into account the cost of running a 2g and 3g network. We feel it's very positive that they have gone to a lot of effort to understand the way in which this running works. For us it's good that we have clarity on the termination through 2010 to 2011 and we welcome the move to a more level playing field of wholesale call termination services."

Edward Brewster, a spokesperson for 3, said that the proposals were in line with the announcements made earlier this year and that the company was reviewing the proposals with interest and would respond in due course.

Ofcom also announced that it intends to carry out a review of the wholesale SMS (text message) termination market in 2007.

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