UK Comms Regulator Wants Lower Mobile Termination Rates

U.K. communications regulator Ofcom has proposed to reduce mobile termination rates -- the price operators pay to connect calls to other networks. The new rates should result in cheaper phone calls from fixed-line to mobile phones, the regulator said on Thursday.

The proposal follows recommendations made last year by the European Commission to lower termination rates across Europe. So U.K. consumers aren't the only likely to see cheaper rates on phone calls. Businesses and households will benefit to the tune of at least €2 billion over the four years from 2009 to 2012, the Commission said in May last year.

In 2010, regulators in Belgium and Portugal have already lowered mobile termination rates, according to market research company Fitch Ratings.

Ofcom proposes lowering termination rates from £0.043 (US$0.065) per minute to to £0.005 a minute by 2015.

This means fixed-line operators will pay less to mobile operators when their subscribers call a mobile phone, and Ofcom expects that these savings will be passed on to consumers

In Europe, mobile termination rates were last year around ten times higher than fixed-line termination rates, according to the European Commission. The difference was one of the reasons it took action.

Smaller mobile operators -- which pass on more calls than they receive, and therefore pay more to their larger competitors -- also stand to gain from the rate changes. 3 U.K. has been campaigning for mobile termination rates to be reduced for a long time, and its subscribers can now expect cheaper calls, according to a spokesman.

Large mobile operators are understandably not as happy. Vodafone thinks a cut of the magnitude Ofcom is proposing deters future investments, it said in a statement.

The European Commission doesn't agree, and instead it thinks the higher mobile termination rates are an indirect subsidy that benefits large mobile operators to the detriment of smaller mobile operators and fixed-line operators. In the process, money is funneled away from investments in upgrades to high-speed internet networks, the Commission said.

Mobile termination rate cuts are likely to reduce European mobile operators' service revenue growth by up to 3 percent per year over the next three to four years, according to Fitch Ratings, which on Tuesday published a report on the subject entitled European telecoms - mobile termination rates are a drag.