Ofcom forces mobile networks to cut charges
Telecommunications regulator Ofcom announced this morning that it is forcing mobile phone network operators to cut the amount that they charge for connecting a call.
Ofcom said this will cut wholesale bills by up to £500m a year between now and 2011.
With charges falling by up to 45%, the move could make it significantly cheaper to call a mobile phone from a landline.
The watchdog hopes competition means mobile phone bills will be cut.
However, O2 said the savings could be passed on to mobile phone consumers in the form of improved service rather than lower bills.
The controls relate to mobile termination rates, a wholesale charge which an operator levies when it accepts a call from a customer on a rival network, or on a fixed-line network such as BT's.
Under Ofcom's new rules, Vodafone and O2 will be forced to cut their termination charges by 10% to 5.1p a minute. Orange and T-Mobile must also charge 5.1p a minute, a 20% reduction. The third-generation (3G) mobile operator, 3, which has nearly four million UK customers, must cut its rate by 45% to 5.9p a minute.
These charges will be phased in through a series of smaller cuts, starting on April 1. Ofcom said this morning it expected that they will lead to "significant savings for consumers" over the four-year period that they will apply.
"The real savings will be for landline customers," explained an Ofcom spokesman.
O2 spokesman Simon Gordon said that the mobile operator will pass on the cost savings to customers, but indicated that it may not lead to significantly lower call charges.
"We are compelled to compete, as the UK mobile market is a massive bunfight," said Mr Gordon, pointing out that there are several virtual mobile operators who sell airtime as well as the five network operators.
"This saving will be passed on, but it's a question of how. It may be with a better handset range, or a better mobile internet service," Mr Gordon added.
A Vodafone spokeswoman said that Ofcom's ruling was broadly in line with expectations.
Ofcom had previously been attacked by both BT and the European commission, after it proposed setting a rate of between 4.8p and 5.8p for Vodafone, O2, Orange and T-Mobile. The commission had argued that the proposal was flawed as it included a valuation for 3G spectrum that was based on the prices paid when 3G licences were auctioned in 2000.
The operators paid a total of £22.5bn for the 3G licences, which allow them to offer bandwidth-intensive services such as video calls and faster web access. This figure is now widely seen as excessive, but only O2 has taken the decision to writedown the value of its 3G spectrum.
A spokesman for the European commission said it would be "looking into Ofcom's decision with interest to see if they have taken our comments into account when making their final decision".
Under European law, Ofcom must consider the commission's views but is not compelled to agree with them. If the commission feels its views were ignored, it could initiate legal action against Ofcom.
The Ofcom spokesman said that it had taken the commission's views "fully into account" when reaching its decision.
Mobile termination rates also affect BT, as it must pay them when one of its fixed-line customers calls a mobile phone. A BT spokesman said it was still digesting Ofcom's ruling, but explained that it was concerned that fixed-line customers are being forced to subsidise the cost of the 3G licences.
Graeme Wearden
Tuesday March 27, 2007
Guardian Unlimited
© Guardian News and Media Limited 2007
Telecommunications regulator Ofcom announced this morning that it is forcing mobile phone network operators to cut the amount that they charge for connecting a call.
Ofcom said this will cut wholesale bills by up to £500m a year between now and 2011.
With charges falling by up to 45%, the move could make it significantly cheaper to call a mobile phone from a landline.
The watchdog hopes competition means mobile phone bills will be cut.
However, O2 said the savings could be passed on to mobile phone consumers in the form of improved service rather than lower bills.
The controls relate to mobile termination rates, a wholesale charge which an operator levies when it accepts a call from a customer on a rival network, or on a fixed-line network such as BT's.
Under Ofcom's new rules, Vodafone and O2 will be forced to cut their termination charges by 10% to 5.1p a minute. Orange and T-Mobile must also charge 5.1p a minute, a 20% reduction. The third-generation (3G) mobile operator, 3, which has nearly four million UK customers, must cut its rate by 45% to 5.9p a minute.
These charges will be phased in through a series of smaller cuts, starting on April 1. Ofcom said this morning it expected that they will lead to "significant savings for consumers" over the four-year period that they will apply.
"The real savings will be for landline customers," explained an Ofcom spokesman.
O2 spokesman Simon Gordon said that the mobile operator will pass on the cost savings to customers, but indicated that it may not lead to significantly lower call charges.
"We are compelled to compete, as the UK mobile market is a massive bunfight," said Mr Gordon, pointing out that there are several virtual mobile operators who sell airtime as well as the five network operators.
"This saving will be passed on, but it's a question of how. It may be with a better handset range, or a better mobile internet service," Mr Gordon added.
A Vodafone spokeswoman said that Ofcom's ruling was broadly in line with expectations.
Ofcom had previously been attacked by both BT and the European commission, after it proposed setting a rate of between 4.8p and 5.8p for Vodafone, O2, Orange and T-Mobile. The commission had argued that the proposal was flawed as it included a valuation for 3G spectrum that was based on the prices paid when 3G licences were auctioned in 2000.
The operators paid a total of £22.5bn for the 3G licences, which allow them to offer bandwidth-intensive services such as video calls and faster web access. This figure is now widely seen as excessive, but only O2 has taken the decision to writedown the value of its 3G spectrum.
A spokesman for the European commission said it would be "looking into Ofcom's decision with interest to see if they have taken our comments into account when making their final decision".
Under European law, Ofcom must consider the commission's views but is not compelled to agree with them. If the commission feels its views were ignored, it could initiate legal action against Ofcom.
The Ofcom spokesman said that it had taken the commission's views "fully into account" when reaching its decision.
Mobile termination rates also affect BT, as it must pay them when one of its fixed-line customers calls a mobile phone. A BT spokesman said it was still digesting Ofcom's ruling, but explained that it was concerned that fixed-line customers are being forced to subsidise the cost of the 3G licences.
Graeme Wearden
Tuesday March 27, 2007
Guardian Unlimited
© Guardian News and Media Limited 2007
