Landline to Mobile prices to fall
Plans by Ofcom to slash the cost of calling a mobile phone could stifle investment in the next generation of super-fast mobile broadband networks, end free mobile handsets for contract customers, price millions of pay-as-you-go users out of the market and lead to a flood of job losses, mobile phone industry executives said tonight.
The regulator today prepared for a fight with the UK’s big four networks – O2,Orange, T-Mobile and Vodafone proposed a huge drop in the termination rate to 90%, the charge the operators levy on each other and on fixed-line companies such as BT to connect calls, when the current price cap regime ends in 2011.
But Ofcom is adamant that the mobile phone companies should be allowed to use mobile termination rates only to recoup the actual cost of carrying other people’s calls. The rates had been subsidising other parts of their businesses but operators will now have to recoup the cost of activities such as investing in new networks from the retail market. That could mean higher bills and an end to contract customers getting a new phone.
Ofcom admits it could even lead to customers being charged to receive calls – as they are on some US networks. In practice, however, mobile networks are likely instead to slash costs – possibly through job losses – and increase call charges, especially for pre-pay users who make up 60% of UK customers.
As for the threat that the new prices will force the mobile phone companies to halt investment in super-fast mobile broadband networks using so-called 4G – or LTE – technology, an Ofcom spokesperson said it expected future investment in mobile networks to be driven by the growing demand for data services, so “network investment will therefore be less dependent on mobile voice call termination charges than it was in the past”.
Ofcom has, however, performed a strategic U-turn, in effect backing plans set out by the European commission two years ago. Ofcom said that it had carried out extensive research and now believes that termination rates should only be allowed to recoup the cost of carrying calls. It will consult on the proposals until June and make a decision towards the end of the year.
BT and 3 mobile have campaigned for a long time for rates to come down, they both welcomed Ofcom’s move. It is believed that reductions in mobile termination rates are good for businesses and consumers alike and BT will make sure its customers see the benefit with cheaper calls to mobiles, including fixed price all-you-can-eat packages that take the worry out of calling mobile phones.
