Ofcom slashes mobile termination rates

Ofcom has put its foot down and cut the cost of calling mobile phones from other networks and landlines.

The regulator has ruled that the fees mobile phone firms charge their competitors for handling calls from other networks – known as termination charges – will be slashed by 80 percent over the coming four years.

Currently we’re shelling out to cover the costs that mobile operators charge one another. These range from 4.18p and 4.48p for delivering the call to another network.

From the 1st April, Ofcom will place a cap on the rates charged by all four national mobile network operators – 3UK, O2, Everything Everywhere and Vodafone with the end result expected to have a reduced rate of 0.69p by 2014-15. However, for now it wants the cuts to fall to 2.66p.

Ofcom graph

 

And if regulators aren’t happy Ofcom has something to sweeten them up. It has said that although they will will lose money from the reduction in charges, they are earning more revenues from the rapid growth of data services, such as text messaging.

According to analysts the new charging structure could help smaller mobile phone operators to give better pricing and keep up with competition.

However, Ovum pointed out that the main beneficiaries will be consumers. It said that the main thing we will notice is lower bills when calling from, say, a BT landline to a mobile.

Ovum analyst Matthew Howett said: “Those that will feel the most pain will be the mobile network operators.”

He said that this was because these charges accounted for “a significant proportion of their revenues,” in some cases as much as 15 percent.

To claw back the money, he warned that these operators they may look to raise subscription charges.

“The regime after 2015 has yet to be determined, but having the cost of terminating a call in the mobile network at a level similar to in the fixed network will enable operators to choose from a range of alternative charging mechanisms – such as bill and keep, where call termination is priced at zero. Capacity-based interconnect could be another option, which becomes a lot more relevant in a world where data is king and the minute is no longer a relevant cost driver,” he said.

However, others aren’t too pleased and say the watchdog needs to do more.

Terminate the Rate, for example, says that the price cuts should be put in place quicker.