3, BT unite to make calls cheaper

The UK mobile market’s plucky underdog, 3 UK, and incumbent fixed line carrier BT formed an unlikely alliance this week in a bid to kill off the termination rate and bring mobile prices down for consumers.

Banding together under the “terminate the rate” slogan, the two carriers are lobbying to abolish mobile termination rates – the wholesale charges that operators make to connect calls to each others’ networks.

The MTR (mobile termination rate) currently sits at around 4.7p or more for every minute of the call, and critics claim it is largely responsible for the so called “bill shock” suffered by consumers.

Without these charges, 3 UK CEO, Kevin Russell said that he could foresee a time when mobile operators will be able to offer unlimited call, text and data packages for £35 per month. BT and 3 are hoping to pressure Ofcom into reducing MTRs to reflect “actual cost,” or about 1p per minute.

While BT’s involvement in the campaign as a fixed line player is obvious, 3 supports the abolishment of MTRs because it has the smallest customer base, making the highest proportion of calls to other networks.

On the same day, UK communications regulator Ofcom, published a review of mobile termination rates, examining how rates could be set from 2011 to 2015. This follows Ofcom’s actions in 2007 to set wholesale termination rates to fall annually until 2011 – a move expected to result in termination rates falling by around a quarter over that four year period.

Ofcom said lower termination rates are likely to mean that mobile operators have more flexibility in designing competitive call packages, and pass these benefits and any reduced prices onto consumers.

The consultation sets out six options including maintaining the current system, to a system where the customer’s own network is responsible for all costs of making and receiving phone calls, bringing rates down almost to zero, and is even considering deregulation.

However, there is also noise being made about the receiving party pays model used in the US, where incoming call minutes are counted as part of the user’s monthly bundle. And backers of the termination rate model argue that prepay users would be hardest hit by changes to the MTR, as operators hike retail prices to recover costs.