2 September 2010

Charge reductions could have consequences, regulator warns

06/10/2008

A shake-up in mobile phone charges by the European Commission could have unintended consequences for the consumer.

These plans to slash phone bills – by which the fees that mobile phone operators charge for handling each other’s calls would be cut by 70 per cent – could negatively affect those on low incomes who like to use ‘pay-as-you-go’, argue uk telecoms regulator Ofcom and the UK government. Ofcom believes that should the fees be trimmed back, phone companies might then try to recoup the lost revenue from customers in other ways.

Publishing a joint statement in response to the EC’s proposals, Ofcom and the Department for Business, Enterprise and Regulatory Reform (BERR) said the aim of cutting call costs for consumers should be applauded, yet cautioned that plans to alter the tariff structure could lead to lower bills for the caller but higher costs for the person receiving the call. Lower-spending customers could be on the receiving end.

Back in June, EU telecoms commissioner Viviane Reding pointed out that the disparity in call termination rates between different countries meant that consumers were being ripped off. In her words, call termination markets in the EU needed a ‘regulatory plumber’ to increase competition.

As for Ofcom, it has already agreed mobile phone termination rates in the UK until March 2011 and is reluctant to alter rates now. ‘The Commission has been unduly optimistic in assuming that the fundamental changes it has proposed should take effect by 2011,’ the BERR and Ofcom statement said. Mobile industry giants themselves, for whom termination fees account for up to 20 per cent of sales, are lobbying for more gradual reductions.

Sector: Mobile Telecommunications

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