Oftel publishes mobile call termination market review

Action is necessary because consumers pay too much for making calls to mobile phones as they have no choice but to incur the high connection charge set by the operator of the network they are calling.

Oftel is reviewing the calls to mobile phones market as part of its work to implement the new EC Directives on electronic communications networks by 25 July

This is a separate review from the recent Competition Commission investigation into call termination rates, which was carried out under the current telecoms regulatory framework. The Commission made recommendations for charge controls over the next three years, but the introduction of the new Directives means Oftel is required to carry out a fresh review under the terms and procedures of the Directives, before reaching its own conclusions.

The key proposals set out Oftel’s review of the calls to mobile phones market are to:

• Protect consumers from excessive call termination charges through a continuation of controls to reduce the amount mobile operators charge to connect calls to their networks;
• Promote competition between operators by ensuring equal access and no undue discrimination against other operators for terminating calls onto the mobile networks; and
• Not impose regulation on the 3G market as these are new and innovative services and regulatory controls would be disproportionate while the market is developing.

David Edmonds, Director General of Telecommunications said today:

"Calls to mobile phones is a separate market from the mobile retail market and has no effective competition, because consumers cannot choose between terminating networks when they make a call to a mobile phone.

"Calling someone on their mobile phone is expensive because consumers have no option but to pay the connection charge set by the operator of the network they call.

"Oftel believes that measures are needed to require the mobile operators to reduce their call termination charges, which should result in cheaper calls to mobile phones.

"Oftel’s proposals are in line with the Competition Commission’s original recommendations and consist of three annual cuts of around 15 per cent over the next three years.

"In line with Oftel’s earlier commitments, we do not to intend to place any regulation on the 3G market. These are new and innovative services and inappropriate regulation at this stage could damage the evolution of this new market."

The consultation period ends on 24 July 2003.

Oftel has also published today a consultation document on whether the current requirement on O2 and Vodafone to negotiate an agreement with 3G new entrant operator Hutchison 3G (3) to allow customers of 3 to roam over their 2G network should continue. Under the new EC Directives all licences will be revoked which means the current obligation on O2 and Vodafone to offer roaming will fall away.

Oftel believes that 3 will continue to need access to national roaming while it is building its 3G network, so the obligation should therefore remain, and apply to all four 2G mobile network operators.

Notes to Editors

• Review of the mobile wholesale voice call termination markets available from Oftel’s website at http://www.oftel.gov.uk/publications/eu_directives/2003/ctm/ctm0503.pdfand National roaming condition is available at http://www.oftel.gov.uk/publications/eu_directives/2003/eu_roam/roam0503.pdf.Hard copies are available to the media from Oftel's Press Office, telephone 020 7634 8991, and to the public from Oftel's Research and Information Unit, telephone 020 7634 8761.
• In January Oftel published the findings of the Competition Commission’s inquiry into call termination charges to mobile networks. The Commission recommended a one off cut of RPI minus15 per cent to be implemented by 24 July 2003, and three further annual reductions of RPI minus15 per cent (RPI minus14 for Orange and T-Mobile). Oftel modified the mobile operators’ licence in April to require the first 15 per cent reduction by July. The CC inquiry was carried out under the current telecoms regulatory framework. However, because of the introduction in July of the new regulatory framework contained in the EC Directives on electronic communications networks, Oftel is required to carry out this fresh review of the mobile termination market, under the terms and procedures set out in the new Directives. Given the conclusions of the CC Report, made only a few months before the market review, it was an important part of the evidence considered.
• Oftel is carrying out other market reviews as part of its work to implement the new EC Electronic Communications Directives by 25 July. Oftel assesses the level of competition in the markets and decides on the appropriate level of regulation to promote competition and protect consumers. Oftel has already published market reviews on narrowband wholesale services, broadband wholesale services, retail markets, fixed geographic call termination, wholesale international services, unmetered Internet call termination, leased lines and the mobile call origination markets.
• The current national roaming condition was imposed on Vodafone and O2 at the time of the 3G spectrum auction. That condition had an end date of 31 December 2009 and was designed to enable new entrant 3G operators to provide basic mobile services nationwide to their customers whilst they were still rolling out their 3G network, just as the 2G network operators would be able to.
• The effective terms of the new national roaming condition remain substantially unchanged from the old condition. The condition ensures 3 has access to at least one national roaming agreement. Once 3 has one agreement in place, the condition does not allow it to ask Oftel to resolve a dispute about a second agreement. At present, 3 has a national roaming agreement with O2 and its customers can roam onto O2’s 2G network whenever they are outside 3’s 3G coverage. Whilst the agreement between O2 and 3 remains in place, a new national roaming condition on the other 2G mobile network operators would not require them to provide roaming to 3.