Ofcom seeks to drive UK termination rates down further

poundUK regulator Ofcom has published proposals that could see mobile termination rates in Great Britain drop by almost 90 per cent over the next five years. Currently O2, Orange, T-Mobile and Vodaone’s UK operations charge 4.3 pence per minute for termination, while 3UK charges 4.6p. Ofcom is determined that this should drop to just 0.5p by March 2015.

As well as impacting on the termination rates the mobile carriers charge one another, the proposed lower costs are designed to make it cheaper for UK consumers to call mobiles from a landline. There are still 32.7 million homes in the UK with a landline connection, Ofcom said.

“The UK mobile market has changed significantly since Ofcom last set termination rates in 2007,” the regulator said in a statement. “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.”

O2 is currently the largest carrier in the UK by subscriber numbers. A spokesman for the firm said it would be witholding judgement on the proposals for the time being. “We will need to assess the full effect of Ofcom’s proposals to understand how this could affect us,” he said. “Of course these are just proposals at this stage, and we will be responding fully to the consultation in due course. In particular we will be examining why Ofcom has had a change of heart on the use of pure LRIC as a means of assessing cost, which it had previously strongly criticised.”

The adoption of pure LRIC (long running incremental costs) has been under discussion by European regulators, Ofcom said in its recent Wholesale Market Review. The alternative, LRIC+, allows for overheads such as the cost of spectrum to be taken into account.

Ofcom also announced that UK number portability regulations would be tightened subject to another consultation. This would enable consumers to port their mobile number between operators within one working day, rather than two, as is current practice.

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