Continuation of regulation of mobile call termination charges

Ofcom have published outline proposals to continue controls on wholesale mobile call termination charges where there is evidence of market dominance when the current regulation expires in March 2007.

Ofcom believes that these charge controls, which have been in the market since 2004, remain necessary as the most appropriate means to protect consumers from excessive prices for calls to mobiles. Ofcom also proposes in its consultation, published today, that price controls should be imposed on dominant operators connecting calls to 3G networks as well as 2G networks.

Mobile network operators charge a fee to connect calls that are made from another fixed or mobile network. These mobile call termination charges generate more than £2 billion per year for operators and account for about half the price of a typical call from a BT fixed-line phone to a mobile.

Ofcom's last review of the mobile call termination market in June 2004 confirmed that mobile network operators control wholesale termination charges, as callers have no choice but to use an operator's network to call a customer whose mobile phone is on that network.

To protect consumers, Ofcom therefore imposed restrictions on the amount each of the four 2G mobile network operators could charge to connect a call to its 2G network. In December 2005 Ofcom announced that these charge controls would be extended for a further year.

Ofcom has now completed the second of three consultations on the subject of the mobile call termination market and is inviting comment on Ofcom's initial views, specifically that:

* mobile network operators appear to have a dominant position in connecting callers to subscribers on their own network;
* structural or technical change in the market - that might create competition and remove the need for regulation - is currently neither practicable nor feasible;
* the current charge controls - or controls similar to them - remain the most efficient and proportionate way to prevent excessive pricing;
* the increasing volume of calls to 3G networks suggests that charge controls should now apply to both 2G and 3G networks; and
* mobile network operators must continue to connect calls on their network subject to fair, reasonable and non-discriminatory terms, and ensure a transparent view of wholesale charges.

Ofcom has not yet taken a view as to the appropriate level of the proposed charge controls. This will form part of the subject of the third and final consultation later in 2006 when detailed cost modelling has been completed.

NEXT STEPS

The deadline for responses is 25 May 2006.
The full consultation document is published at http://www.ofcom.org.uk/consult/condocs/mct/.

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