Terminators: 3 and BT on MTRs

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3 and ‘Terminate the Rate’ campaign partner BT are hoping their efforts will convince industry regulator Ofcom to get rid of  mobile termination rates (MTRs), or at best, reduce them further.

3 and BT claim the removal of MTRs will pave the way for improved deals, including unlimited call packages for both mobile and fixed line, and reducing the cost for a fixed line customer calling a mobile.

MTRs have been a much contended issue for (self-confessed) challenger network 3, who on numerous occasions in the past 12 months has called upon the press to bemoan the costs charged between networks for connecting cross network calls, which to date has cost 3 in excess of £200 million.

MTRs were initially set up as a way to support networks in both mobile and fixed line, to provide them with the finances needed to improve their operational infrastructure during a period of growth in the industry’s early days.

However, BT and 3 claim the industry has now moved beyond that and MTRs now simply exist to make money.

Last week’s announcement, held at London’s BT Tower, was made following the European Commission’s decision to look into changing the current MTR regime, which currently allows networks to charge 4.7p per minute to transfer calls from other networks.

The current pricing was decided in 2007 and is capped until the end of 2011. 3 and BT are looking to rally enough support to reduce MTRs now, as any decision made in 2011 will remain in place until 2015.

3’s motive for involvement is clear, beyond outright consumer concern. Being the youngest of the networks, it has a smaller customer base, which increases the chances of a customer on 3 making a call to another network, thus incurring 3 an MTR – a cost it must pass on to customers.

3 feels it is being penalised and argues that Ofcom is not fulfilling its obligations to competition which encourages best value for customers.

Section 3 (1) of the Ofcom Communication Act for General Duties states: “It shall be the principal duty of Ofcom, in carrying out their functions to further the interests of consumers in relevant markets, where appropriate by promoting competition.”

And in section 5: “In performing their duty under this section of furthering the interests of consumers, Ofcom must have regard, in particular, to the interests of those consumers in respect of choice, price, quality of service and value for money.”

3 chief executive Kevin Russell (pictured right) claims these commitments are not being fulfilled, and as a result, 3 is “subsidising” its “big four” rivals for a 4.7p per minute fee which, he claims, costs less than a penny wholesale. 

“Ofcom should carry out its duties,” says Russell. “Their principle duty for me is clear. Do things in the interest of consumers and promote competition. What was done in 2007 with mobile termination rates was not consistent with this. I’m very hopeful in 2011 it will be consistent with this.

“We will push this campaign all the way until we get a conclusion.”
Russell claims that “unfair” MTRs are preventing 3 from offering better value for customers. He even declared 3 would offer unlimited call packages to mobiles and landlines for £35 per month if MTRs were removed. 

“The (MTR) cost is artificial,” says Russell. “At 3, we would like our pricing to be lower. We can see significant opportunities to dramatically lower pricing in the UK market closer to one penny per minute, but we can’t. And that for us is a huge missed opportunity.

“We have paid out more than £200 million to the ‘big four’ and I sit back and look at that as money which would be better allocated to customers with better offers in the market.

“As the real cost of a call is actually below a penny, that’s the cost Ofcom should be working towards.”

BT, which is also charged 4.7p per-minute whenever its customers call a UK mobile, also shares this view but for different reasons.

BT claims the charge of MTRs from fixed line to mobile is 10 times higher than the charge set by Ofcom for a mobile network connecting to a fixed line, which is around 0.4p per minute.

BT’s MTR costs in 2008 was more than £750 million. It pleads a similar case to 3 – that this imbalance prevents BT from being able to offer better deals, such as inclusive and unlimited minutes to both mobile and fixed lines for a set fee.

John Petter, BT’s managing director for consumer (pictured left), claims: “MTRs impose an unfair tax on every household, business and organisation in the UK. They fatten the profits of the ‘big four’ players at the expense of competition and innovation and they perpetuate a system of billing which promotes confusion and anxiety.

“By lowering MTRs, UK households and businesses will get better value for money from calling a mobile phone from a landline and be rid of bill shock at the end of the month. Customer feedback tells us this is what they want to change, and that is what this campaign is about.

“As things stand, everyone is stuck with higher prices for calling mobiles from landlines. Currently we can’t give customers the unlimited tariffs they want.”

Full article in Mobile News issue 440 (June 1, 2009).

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