Lower mobile termination rates to benefit UK consumers
Ofcom today published proposals to reduce mobile termination rates - the wholesale charges that operators make to connect calls to each others' networks - to benefit UK consumers.
Benefitting consumers and promoting competition
Ofcom's proposals would reduce termination rates over four years. As rates fall and operators adapt, consumers will benefit from cheaper calls and competition in both the UK fixed telecoms and mobile markets.
Lower termination rates will enable cheaper calls to mobiles for the 32.7 million UK homes and businesses with a landline. The proposals will also mean that both landline and mobile operators have more flexibility in designing competitive call packages, promoting competition for the benefit of consumers.
The proposals in more detail
Following an initial consultation in May 2009, today Ofcom set out further detailed proposals on how rates should be set from 2011 to 2015.
Ofcom proposes to reduce termination rates from around 4.3p per minute to 0.5p per minute by March 2015.
Proposed average Mobile Termination Rates (pence per minute)*
|02, Orange/T-Mobile and Vodafone||4.3||2.5||1.5||0.9||0.5|
Other operators' rates should be set on a fair and reasonable basis
*based on 2008/09 prices
The proposed changes will have two effects:
- The payments between mobile operators for terminating calls will fall: this change will largely balance out across the mobile industry; and
- The payments made by fixed operators to mobile operators for terminating calls will fall and we expect these reductions to be passed on to consumers through competition.
The changing mobile market
The UK mobile market has changed significantly since Ofcom last set termination rates in 2007. Today there are many smaller communications providers offering mobile services to consumers including mobile virtual network operators (MVNOs), voice over IP providers (VOIP) as well as the four mobile operators with national mobile networks (3UK, O2, Vodafone and the merged Orange/T-Mobile). This means that there is more choice for consumers in the mobile market than ever before.
The way that consumers use mobile devices has also changed. Today's consumers are as likely to send text messages or emails as make phone calls, and mobiles are increasingly used to connect to the internet. According to Ofcom figures, the volume of data traffic over mobile networks has increased by 200% over the last year.
Ofcom proposes to change the way that mobile termination rates are regulated for the 2011 2015 period in the following ways:
- For the four operators with national mobile networks, Ofcom proposes a method for setting the rates from 2011 that only takes into account costs that are incurred directly from terminating calls, rather than additional so-called common costs, such as overheads; and
- For other mobile communications providers that are able to set their own termination rate, such as smaller or new entrant operators, these rates should be set on a fair and reasonable basis. This means that their rates are likely to be in line with the four national mobile network's rates. This will increase regulatory certainty and should help new mobile providers enter the market with innovative products and services.
NOTES FOR EDITORS
- In 2007 Ofcom set wholesale termination rates to fall annually until March 2011. This will result in termination rates falling by around a quarter over that four year period.
- In May 2009, the European Commission published a recommendation that member states should aim to set mobile termination rates in a way that only takes into account costs that are incurred directly from terminating calls. Ofcom has taken account of this recommendation when setting out these proposals. The Commission has indicated that they expect rates to be between around 1.5 to 3 euro cents by 2012 across member states.
- Under section 3 of the Communications Act 2003, Ofcom has a duty to further the interests of citizens in relation to communications matters and to further the interests of consumers in relevant markets, where appropriate by promoting competition.