3 and Orange face-off on MNP and termination rates

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3 continued to play the role of network agitator and consumer champ at a Westminster telecoms forum last month.

Its lobbying over mobile termination rates and number portability, which it says costs it millions of pounds and denies everyday users cheaper mobile rates, spilled into its own breakfast meeting with journalists last week, organised to clarify its position for any hack who may be in doubt.

Mobile termination rates, capped by Ofcom last year and slated for review by Ofcom in 2011, cost the network around £190 million a year, according to 3 UK chief executive Kevin Russell; according to him, easy and unfair profit for its bigger competitors.

Russell said: “The reality is we have £190 million less in our bank account, and the rest of the industry has £190 million more in theirs to compete against us. That’s the real impact of the competition, and we think that’s unfair.”

With fewer subscribers than its main UK rivals (Vodafone, O2, Orange and T-Mobile), 3 is terminating a disproportionate percentage of mobile calls/texts on other networks, compared with calls terminating on its own.

The way termination rates work, 3 is penalised for its relative diminutiveness. It is a tremendous disadvantage to challenger brands, argued 3.

Russell said inter-network rates in the UK are 5-6p per-minute for a cross-network call, and 3p for a cross-network text.

The actual cost to the network of terminating a call originating on a rival’s network is less than 1p, and even less for a text. Punters are getting robbed because 3 is forced to keep rates artificially high to cover these termination charges.

“We have the ability to offer UK consumers prices of 2-3p per minute, but I am actually charging 8p or 9p, and the only thing stopping us doing it is mobile termination rates,” said Russell.

“We can’t use this price structure for consumers because there is an artificial price we have to pay over instead.

“Either bring termination rates down to a level more consistent with the actual cost, or adopt a bill-and-keep strategy, where effectively traffic is exchanged across the industry without any charge.”

But at the Westminster forum, Orange hit back strongly at comments made on mobile termination rates by 3 UK regulatory director Tim Lord, and also on the need for further review and discussion of them by Ofcom.

“Let’s not pretend 3’s stance is anything to do with the interests of consumers,” said Orange UK head of government policy and mobile regulation Simon Grossman.

Pointing to recent moves by 3 that run contrary to consumer interests – its introduction of a £4.50 penalty for consumers not paying bills by direct debit, and its move from per-second to per-minute billing – Grossman twisted the knife.

He said: “Let’s not pretend…  3’s only motivated by its own financial predicament.”

Which leads on to mobile number portability, a related issue so far as 3’s UK revenues go, as well as its discourse on network benevolence.

“It’s a basic consumer right to take your number from one operator to another, and it should be a seamless process without the customer doing anything,” said Russell at the breakfast meeting.

The ‘big four’ networks, of course, scored a minor victory in their battle over number portability with Ofcom (and 3, implicitly) in the Competition Appeals Tribunal last month.

Ofcom’s proposals to enforce number transfer time from two days to two hours – cut from five days already this year – were rejected, for

Vodafone led the incumbent network protest, arguing each would lose more than £35 million per annum if the two-day porting window was shut on them, and with it their opportunity to talk customers out of churning with mind-boggling tariff incentives.

Two-hour porting systems are already in place in Ireland and other markets – and championed there by the likes of Vodafone and O2 – and make the UK system obsolete, said 3’s Lord at the Westminster forum.

Frustrated, Lord also called Vodafone’s appeal to the Tribunal to have Ofcom’s two-hour proposal overturned a waste of industry money and an affront to consumers.

Ofcom came under fire, too, for its ineffectual implementation of the process.

“Ofcom made sufficient [technical and legal] errors [to enable Vodafone to appeal]…  It was then open for the industry to say it doesn’t matter that there’s been a technical and legal problem with this decision, as it’s clearly the right thing to do.

“The industry has spent millions of pounds preparing to implement the Ofcom decision and we were weeks away from doing that work.

“But the four incumbent operators sat there and said, ‘No, we’d like to put the project on ice; we will wait for Ofcom to reconsult, which will take nine to 12 months, and the consumer can sod off.”

But again, Orange’s Grossman hit back. “I can’t stay silent any longer, it’s just too hard,” he said.

He cast Ofcom’s presentation of the facts in support of 3 and number porting as misleading, and its consideration of advice from the establishment National Consumer Council as neglectful.

Full article in Mobile News issue 425 (October 20, 2008).

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