Ofcom to cut mobile termination rates

The Office of Communications (Ofcom) late last week mulled over plans to cut mobile operator termination rates after the Competition Commission ruled they had been set too high.

The ruling upheld BT's successful 2007 appeal against the rates set by Ofcom that determine the how much operators pay to connect incoming calls over other networks.

The original argument focused on the rates set by Ofcom based on its estimated administration costs and the amount each operator paid in the auction of 3G licences, versus their actual worth.

The commission said that termination rates for T-Mobile, Vodafone, Orange and O2 should drop from 5.1 pence per minute set by Ofcom to four pence by 2011. It also said that this reduction should eventually be passed onto consumers.

And in the case of the UK's fifth network operator 3, it said the 5.9 pence rate set by Ofcom should be reduced to 4.4 pence per minute.

Kevin Russell, 3's chief executive, said the rates were unfair and that they should be cut further to match those charged by fixed-line operators of around 0.4 pence.

He stated: "High mobile termination rates area barrier to effective competition, provide an artificial price floor for mobile calls and lead to an unnecessary subsidy from fixed-line customers to the mobile industry."

Ofcom will now wait for the commission's proposals to be reviewed by the Competition Appeals Tribunal (CAT) at its next termination rates case management meeting, which is scheduled for 2 February.