Ofcom wants further termination charge cuts

UK telecoms regulator OFCOM, announced Thursday that price controls on the termination charges British mobile operators apply to other networks’ calls are to be maintained beyond March, 2007, when the current regulation expires.

The regulator intends to demand further cuts in the termination fees, with a target of “around 5.3 pence per minute” for Vodafone, O2, T-Mobile and Orange and 6 pence per minute for 3UK. The operators would be obliged to apply this cut by 2010/2011, with the controls being reviewed in March, 2011.

No distinction is to be made between 2G and 3G networks. Since June, 2004, Ofcom controls have been applied to 2G termination, eventually setting a price cap of 5.63 pence per minute for 900MHz networks and 6.31p for 1800MHz networks.

In a statement the regulator said: “The connection of voice calls to the networks of Vodafone, O2, T-Mobile, Orange, and 3 each constitute a separate economic market; there is no evidence of technological developments that would bring pressure to bear on wholesale termination rates in the medium term. BT and other purchasers of wholesale call termination services are unable to exercise buying power to the extent that prices would be competitive; each MNO has significant market power in the market for termination of voice calls on their 2G and 3G networks.”

Mobile network operators have historically defended the charges arguing that a market existed for termination and that they were competing. However, each operator has, by definition, a monopoly of termination for calls to its own subscribers. Were other networks to “take their trade elsewhere”, this would mean the end of interworking between landlines and competing GSM networks.

Ofcom also announced a review of its position on SMS interconnection, to take place next year. Responses to the call termination consultation are to be submitted by the 22nd November 2006.