Oftel has launched a consultation on whether the current price controls on the charges consumers pay for calls made to mobile phones on BT Cellnet and Vodafone’s networks should continue.

In the event that new controls are considered necessary, Oftel will consider whether the new controls should apply to all mobile operators.

The current price controls were set in 1998 following a reference by Oftel to the Monopolies and Mergers Commission (now the Competition Commission). The Commission concluded that the level of charges were too high.

The current controls on calls to BT Cellnet and Vodafone’s networks have already reduced call termination charges by 33 per cent.

Oftel will review the extent of competition in the provision of incoming calls in order to assess if new controls should be introduced when the current ones expire in 2002, or if other regulatory action is appropriate.

The review fits in with Oftel’s strategy to ensure that regulation is appropriate to the level of competition in the market.

David Edmonds, Director General of Telecommunications, said:

"Around two-thirds of the price consumers pay for calling a mobile phone on another network is made up of the termination charge – the portion of the price which their operator pays to the other mobile network.

"Oftel’s current price controls should save UK consumers £1 billion over three years.

"The mobile market has grown significantly since the current charge controls were introduced in 1999. I want to establish whether competition has developed sufficiently to keep prices down when the current controls expire in 2002. Otherwise further regulatory action may be needed to maintain the best deal for consumers."

The consultation will not deal with third generation mobile telephony. Oftel considers it would be inappropriate to propose measures now to regulate call termination on third generation networks as it is not clear how these networks are going to be used and whether competitive pressures will be adequate to constrain charges.

The consultation period lasts until 4 May. Oftel will publish its conclusions of its review by 31 July.

Notes to editors

1 Review of the Price Control on Calls to Mobiles is available from Oftel’s website at www.oftel.gov.uk/publications/mobile/ctom0201.htm. Copies are available to the media from Oftel’s Press office on 020 7634 8991 and to the public from the Research and Intelligence Unit on 020 7634 8761.

2. When a consumer calls a mobile from another network, around two-thirds of the price they pay for the call is made up of the termination charge – the portion of the price which their operator pays to the terminating mobile network. A call to a mobile is paid for by the caller, not the person who owns the mobile. The mobile network operator’s customer is not therefore directly affected by the level of charges for calling him. Thus the mobile operator is potentially in a position where it can set excessive charges for termination since these will be paid by customers of other networks.

3. For this reason, Oftel referred BT Cellnet and Vodafone to the MMC in 1998. This reference led to the current charge controls. Since then there have been a number of developments in mobile markets including the high growth of usage and the introduction of text messaging services. Oftel will review the impact of these and other developments to see what effect they are having on the extent of competitive pressure on call termination charges. If there is insufficient competitive pressure on charges for call terminations, operators would be able to set charges above the competitive level unless they were prevented from doing so by regulation. Excessive charges for call terminations would lead to consumers paying too much for calls to mobile phones.

4. This consultation considers termination charges for mobile calls to other mobile networks and fixed line calls to mobile networks. BT’s retention on calls to mobiles is being considered separately in Oftel’s Price Control Review, available on Oftel’s website at www.oftel.gov.uk/competition/mmr0201.htm. Oftel is also currently carrying out a review of competition in the mobile market.

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