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07|06|05

Ofcom consults on plans to extend existing mobile call termination charge controls for a further year

Ofcom today published proposals to extend existing charge controls in the 2G mobile voice call termination market for a further 12 months to 31 March 2007. In June 2004 Ofcom imposed conditions on operators of second generation (2G) mobile telephony networks, limiting the amount each is able to charge other fixed and mobile operators to connect incoming calls to its 2G mobile network.

Consumers have no control over the amount they pay another mobile network to connect a call to the number they are dialling. Therefore, and in order to protect the interests of consumers, Ofcom’s predecessor Oftel began an investigation of mobile call termination charges, with referral in 1998 to the then-Monopolies and Mergers Commission. Mobile operators appealed against Oftel’s decision to impose price controls; however, in January 2003, the Competition Commission supported Oftel’s conclusions. Ofcom completed that investigation on 1 June 2004 and imposed direct controls on 2G mobile network operators.

Ofcom’s statement of June 2004 found that each of the five mobile phone operators - Vodafone, O2, Orange, T-Mobile and ‘3’ - had Significant Market Power (SMP) in this market. Charge controls were not imposed on ‘3’.

Ofcom is proposing to extend the present charge controls on 2G MNOs for a period of one year when, otherwise, they would expire on 31 March 2006.

Ofcom has conducted an analysis of the costs of terminating calls on 2G networks and has updated its charge controls accordingly. It has taken into account a number of factors including demand, equipment costs and cost of capital.

Although operators are able to vary the cost of terminating a call according to time of day, the maximum average amount must meet the charge controls set by Ofcom in the June 2004 statement. These will continue to reflect the differences in properties between the two bands of spectrum currently used for 2G services and are proposed to remain as follows:

• for Vodafone and O2, which use both the 900MHz and 1800MHz bands: 5.63 pence per minute, down from 8 pence per minute prior to September 2004; and
• for T-Mobile and Orange , using bands at 1800MHz: 6.31 pence per minute, down from 9.5 pence per minute in September 2004.

Ofcom does not propose any change in the other obligations that were imposed in June 2004, which are unaffected by this proposal. Termination charges on 3G networks are currently unregulated and Ofcom does not propose as part of this consultation to change this.

At the same time, Ofcom is consulting more generally on how regulation might be applied to this market from April 2007. It is keen to explore how technological developments or other industry initiatives might remove the need for charge controls in the future.

The closing date for responses to both consultations is 30 August 2005. The documents can be found at www.ofcom.org.uk.

Ends.

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