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13|09|06

Regulation in wholesale mobile termination markets

Ofcom today proposed new controls on wholesale mobile voice call termination charges that would come into effect when the current regulation expires in March 2007.

The wholesale mobile call termination rate is the fee that mobile network operators (MNOs) charge to connect calls that are made from another fixed or mobile network. In June 2004 Ofcom concluded that MNOs are able to control the cost of connecting others to their network and that regulation was required to protect consumers from excessive prices.

Ofcom imposed a limit on average termination charges of 5.63 pence per minute (ppm) or 6.31 ppm, depending on the extent to which operators can use 900MHz or 1800MHz spectrum bands for their networks. Up to this point, restrictions on charges have only applied to calls connected using operators’ 2G networks.

These controls expire at the end of March 2007. In March 2006, Ofcom consulted on its view that the controls remain necessary, and proposed to extend regulation to include the connection of calls to 3G networks.

Ofcom has considered responses to the March consultation, and has confirmed its proposed view that:

• the connection of voice calls to the networks of Vodafone, O2, Orange, T-Mobile and 3 each constitute a separate economic market;
• there is no evidence of technological or market developments that would bring pressure to bear on wholesale termination rates in the medium term;
• BT and other purchasers of wholesale call termination services are unable to exercise buying power to the extent that prices are competitive;
• each MNO has significant market power in the market for termination of voice calls on their 2G and 3G networks; and
• regulation, therefore, remains necessary to protect consumers from unduly high prices.

Ofcom proposes that:

• the average termination charges of Vodafone, O2, T-Mobile and Orange should be reduced to approximately 5.3ppm across 2G and 3G networks by 2010/11;
• the average termination charge of 3 should be reduced to approximately 6.0ppm by 2010/11;
• Ofcom is consulting on how quickly these reductions should be implemented and on the precise level of the controls; and
• these controls should expire on 31 March 2011.

Wholesale SMS termination market review

Ofcom has also announced today that it intends to carry out a review of the wholesale SMS (text message) termination market in 2007.

Wholesale SMS termination allows an operator to send its customers’ text messages to networks other than its own. Without it, customers would only be able to send messages to people on their own MNO’s network.

Ofcom today announced that it intends to commence a review of this market in 2007. The review will take 12 – 18 months and is likely to involve at least one and possibly a series of consultations. The process and timetable for this review will be determined after discussions with stakeholders.

Responses

The deadline for responses to Ofcom’s consultation on mobile call termination is 22 November 2006. After considering these responses, Ofcom expects to publish a concluding statement early in 2007.

The documents can be found in the Related Items.

Ends.

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