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01|06|04

Ofcom decision on mobile call termination charges

Ofcom today announced its decision on mobile call termination charges. This follows a series of examinations of mobile network operators' wholesale charges for connecting incoming calls to their networks.

Ofcom's predecessor regulator Oftel began the investigation of mobile call termination charges, with referral in 1998 to the then-Monopolies and Mergers Commission. Mobile operators were subsequently required to comply with price controls of RPI minus 9%.

In 2001 Oftel proposed price controls of RPI minus 12%. Mobile operators contested this proposal and the matter was referred to the Competition Commission.

In its report, published in January 2003, the Competition Commission supported Oftel's conclusions and recommended an immediate reduction of RPI minus 15% with three further annual reductions each of RPI minus 15%, to expire in March 2006.

Against the background of the Competition Commission's recommendations, Oftel undertook consultations with stakeholders in May and December 2003 for the purposes of a Market Review required under the new Communications Act 2003.

Ofcom has now taken forward the outcome of those consultations. Ofcom has concluded that direct controls should be imposed on the charges to operators for terminating calls on the 2G mobile networks of Vodafone, O2, Orange and T-Mobile. The controls will be geared to reflect the differences in the properties of the two bands of spectrum - 900MHz and 1800 MHz - used for 2G services in the UK.

For operators using the 900MHz bands - Vodafone and O2 - Ofcom has concluded that average termination charges should be reduced from around 8 pence per minute to 5.63 pence per minute.

For operators using only the 1800MHz bands - T-Mobile and Orange - Ofcom has concluded that average termination charges should be reduced from around 9.5 pence per minute to 6.31 pence per minute.

All four operators will be required to ensure their average charges in the period between the beginning of September 2004 and March 2005 reflect these reductions. Average charges must then remain at that level until March 2006.

As at present, mobile operators will be permitted to vary the charges by time of day.

The regulated charges will not apply to termination on new 3G networks.

Ofcom Chief Executive Stephen Carter said: "Today's decision closes a lengthy process, where we have concluded that price controls are currently a necessary market mechanism."

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