Old-guard network operators will fight Ofcom’s proposed rule to slash mobile termination rates (MTRs) on the grounds UK consumers will suffer and market, innovation will be stifled. They will also argue the Government’s Digital Britain plan to hook up the country to fibre optic broadband will come unstuck if they are hobbled by lower MTRs.
Ofcom went further than the market expected last week, by requesting operators reduce MTRs to 0.5p by March 2015, and by degrees in the interim.
Operators currently charge rival firms 4.4p per minute to terminate calls on their networks. A consultation period for operators to object to Ofcom’s plan is open until June 23. O2, Orange and Vodafone are expected to unite in response.
Orange said it was “shocked and disappointed” by Ofcom’s action, and suggested measures would be taken to make up for the shotfall in revenue if the action is passed. It suggested handset subsidies could be stopped, customers could be charged to receive calls and innovation will stall.
A spokesperson said: “This is a backward step for Britain. If these measures are put in place they will stifle innovation. Any incoming Government should be mindful of what these ill-considered proposals mean for the future of their country.”
A Vodafone spokesperson said: “A cut of this magnitude deters future investment, makes it less likely that the UK will continue to lead in mobile communications and is at odds with the Government’s vision of a Digital Britain.”
O2 said it will “need to assess” the full proposal but will respond to the consultation.
But BT and 3, the UK’s biggest fixed line provider and smallest mobile network, looked forward to the potential savings legislation might afford them.
A BT spokesperson said: “Reductions in MTRs are good for businesses and consumers. BT will make customers see the benefit with cheaper calls to mobiles, including fixed price all-you-caneat packages that take the worry out calling mobile phones.”
3 director of regulatory affairs Stephen Lerner said: “We expect retail prices to reduce by over 25 per cent and to be aggressive and take market share in the voice market as a result.”
Both said the ruling should be made binding sooner. “It will be four years before customers see the full benefit, and mobile operators have already had plenty of notice,” said BT.
From April 1, 2011, operators will be required to reduce MTRs to 4.3p per minute. This rate will drop further to 2.5p per minute between 2011 and 2012, 1.5p per minute between 2012 and 2013, 0.9p per minute between 2013 and 2014 and 0.5p per minute between 2014 and 2015.