Ofcom lowers mobile costs to call other networks

The cost of mobile phone calls between networks should have halved by 2015 as a result of an Ofcom decision, on mobile termination rates (MTR).

The cost of mobile phone calls between networks should have halved by 2015 as a result of an Ofcom decision, on mobile termination rates (MTR).

MTRs are the wholesale charges a mobile operator levies on other phone companies to complete calls.

Vodafone, O2, T-mobile and Orange lost their battle to maintain the cost of carrying calls from other networks, but Ofcom declined to let the originating network keep all the money from the call, the regulator said on Tuesday (March 15).

Ofcom said it would base the rates on so-called pure long run incremental costs (LRIC). The rates come into force on 1 April this year and run until 31 March 2015.

Ofcom said in most cases, this will lead to a single wholesale charge on different networks, which will fall sharply each year.

"This simpler regime will benefit consumers by promoting competition, and make it easier for operators to comply," it said in a statement.

"On the basis of charges set using pure LRIC, MTRs would, by 2015, be less than half of the charges calculated on a LRIC+ basis," Ofcom said.

Ofcom said it had considered arguments from Vodafone, O2, T-Mobile and Orange to use LRIC+, which included a mark-up for joint and common costs, such as the cost of the spectrum used by the network. They said LRCI+ allocated costs efficiently, allowed full cost recovery and was well understood and proven.

"Pure" LRIC, Ofcom's preferred method, followed a 2009 European Commission recommendation that fixed and mobile termination rates be limited to the incremental cost of providing call termination to other communications providers.

BT, H3G, as well as politicians and the "Terminate the Rate" lobby group supported pure LRIC, arguing it provided more incentives for innovation and efficiency, and an overall gain in welfare, Ofcom said.

Ofcom said "radical" proposals to let the sender keep all the revenue or to deregulate MTRs completely had failed to win support. Almost all submissions had supported either pure LRIC or LRIC+, it said.

Ofcom said its April 2010 MTR consultation attracted responses from the four national mobile operators, as well as BT, COLT, Cable & Wireless, Asda, Tesco, Virgin Mobile and Lycamobile. It also received responses from 13 smaller communications providers, seven trade and consumer groups, and over 44,000 e-mails from Terminate The Rate. It also received letters from 43 MPs, who lodged an early day motion in support of Terminate The Rate's position, and from the European Commission.

Proposed MTRs (pence per minute - 2008/09 prices)
  2010/11 20011/12 2012/13 20013/14 2014/15
Vodafone / O2 / Everything Everywhere 4.180 2.664 1.698 1.083 0.690
H3G8 4.480 2.664 1.698 1.083 0.690
Other designated mobile communications providers Set on the basis of being fair and reasonable

Source: Ofcom

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