Ofcom Reduces Termination Charges

Ofcom have announced new charge controls limiting the amount that mobile network operators (MNOs) are able to charge other telephone companies for connecting calls on their mobile networks.
 
Ofcom expects this to result in significant savings for consumers over the four year period that the charge controls will apply.

For the first time, mobile voice call termination charge controls will apply to Hutchison and other providers of 3G services, as well as 2G network operators who were previously subject to regulation. Taken as a whole, Ofcom expects an average annual reduction in wholesale charges of £400-500 million over four years; savings which Ofcom expects to be passed through to retail customers.

Ofcom has decided to reduce the level of average wholesale charges across the board.

  • 3 will be subject to charge controls of 5.9 pence per minute (ppm) in today’s prices, a reduction of around 45% from today’s charges.
  • The average wholesale charges of Vodafone, O2, Orange and T-Mobile will be reduced to 5.1 ppm in today’s prices and will apply when connecting calls on both 2G and 3G networks.
  • For Orange and T-Mobile this represents a reduction of around 20%; and for Vodafone and O2 a reduction of around 10%.
  • The reductions from current levels will take place in a number of stages between 1 April and the expiry of the regulations in 2011.

The current charge controls expire on 31 March 2007. In June 2005 Ofcom began a review of the market to decide whether regulation remain necessary. Today’s statement marks the conclusion of this review. Following extensive consultation, Ofcom has decided that:

  • Each of the five MNOs (3, O2, Orange, T-Mobile and Vodafone) continues to have significant market power in the market for termination of voice calls on its network(s). Charge controls therefore remain necessary to protect consumers from unduly high prices;
  • the charge controls should apply for four years from 1 April 2007; and
  • each MNO must connect calls to its network from any operator on a fair and reasonable basis, and charges should be transparent.
  • Separately today, Ofcom has published a consultation on whether to amend the charge control for each of the five MNOs in light of concerns that operators may not have the right incentives to offer number portability to consumers that wish to switch to another network. The closing date for responses to this consultation is 5 June 2007.

Ofcom has also published its assessment of whether 3 has significant market power in its mobile voice call termination market in the period up to 31 March 2007. This, along with the statement on mobile call termination and the consultation on amendments to the charge controls, can be found at www.ofcom.org.uk