Vodafone chief Guy Laurence: “Low income families will start paying more”
Vodafone and O2 have reiterated their opposition to mobile termination rates (MTRs) after Three talked up the success of the Terminate the Rate campaign.
Ofcom has proposed to slash MTRs from around 4.3p per minute to 0.5p per minute by 2014/15, with average cuts of around 42 per cent made each year until then.
Three and BT claimed over 40,000 consumers have written to Ofcom to voice their support for reducing MTRs in the UK in the latest stage of regulator Ofcom’s consultation, which closed last week.
More than 150,000 have signed the Terminate the Rate online petition.
BT Retail consumer managing director John Petter said: “There are still those who are arguing to keep MTRs high out of narrow self-interest, but the breadth and weight of support that Ofcom has seen for its position must now hasten the end of the UK’s high mobile termination rate regime.”
Three UK chief executive Kevin Russell said: “Ofcom’s proposal gives a clear direction that will open up competition and deliver far better value for all consumers.”
However, rival operators said lower MTRs will single out prepay customers, particularly those on lower incomes.
Vodafone said lower MTR rates will make it harder for it to support customers on prepay that don’t make a lot of calls, with low income customers likely to be hardest hit as minimum spend impositions or higher device costs are brought in.
In a 200-page submission in response to Ofcom’s consultation, Vodafone said customers will suffer adversely if MTRs fall by more than 4 per cent a year, or to 3.7p per minute by 2014/15, as a faster rate will outstrip any operator cost reductions made over the same period.
Vodafone said over four million mobile subscribers would disconnect if prices rise as a result of lower MTRs, with 2.6 million of those disproportionately ranked in the D and E socio-economic grades and spending around £10 a month on mobile telephony.
Vodafone said subscribers will need to spend more than £25 a month on mobile services to benefit under Ofcom’s proposals.
It also called Ofcom’s cost model into question and said it has used the wrong LRIC and LRIC+ rates. Vodafone said Ofcom should consider a voucher scheme or a subsidised tariff to coincide with reduced MTRs, or introduce two-part interconnection charges in order to protect what it calls ‘vulnerable mobile users’.
Vodafone UK chief Guy Laurence (pictured) said: “Ofcom’s proposals to slash our incoming call revenues are likely to mean that low income families will start paying more to use their phones because the money we receive from incoming calls will disappear.
“This revenue has allowed us to support low spenders. We see these proposals as unnecessary intervention which tax low income families and should be reconsidered.”
O2 said it also feared for prepay customers, with a spokesperson saying: “Ofcom’s proposals on mobile termination rates are deeply flawed. At the heart of Ofcom’s arguments is the intention that prepay customers should pay a fixed fee.
“We think that this would be extremely damaging for our prepay customers who want the flexibility to just pay for what they use. It may prompt some prepay customers to stop using their mobiles.”
Orange declined to comment.