Ofcom under fire over mobile charges

The European Commission attacked Ofcom on Monday, accusing the UK communications watchdog of keeping wholesale mobile prices artificially inflated because of the high price of 3G licences.

The EC claims that Ofcom’s approach would be detrimental to fair competition in the UK mobile market and lead to higher consumer prices for consumers.

Wholesale tariffs are the prices charged by the five UK mobile operators for terminating calls to their customers and are subject to regulation aimed at reducing mobile termination rates to target prices within three years from April 2007.

The target prices are £0.053 per minute for 2G/3G networks and £0.06 per minute for 3G operators, with 3 UK being the only pureplay 3G operator.

Ofcom’s proposed remedies also include 3G spectrum costs, which adds, on average £0.012 per minute to the mobile termination rates for 2G/3G operators and £0.019 per minute for the 3G-only operator.

But the EC considers that the mobile termination rate charges proposed by Ofcom disproportionately reflect their historical 3G spectrum auction value and do not appear to reflect their current value. As such, Ofcom’s proposed tariffs would keep termination values higher than necessary due to 3G spectrum cost valuations which risk overestimating the costs.

The UK mobile operators paid around £22bn in total for their 3G licenses in 2000. They are worth significantly less than that today.

“I am concerned that Ofcom’s approach to calculate 3G spectrum costs could hinder the movement towards lower mobile interconnection prices,” said Information Society and Media Commissioner, Viviane Reding. “The Commission believes that such costs should not be calculated on the basis of prices paid during the spectrum auctions, which are in today’s context inflated. Otherwise, distortions of competition and higher prices for mobile customers could be the result. I therefore ask Ofcom to reassess their method of calculating mobile termination rates in the UK.”