Ofcom announces mobile charges to be cut
Ofcom has announced that they will be implementing a reduction in mobile call termination rates which will benefit UK consumers.
Termination rates are the wholesale charges that mobile operators make to other operators to connect calls to their networks. The changes will take effect from April 1st and will place a cap on the rates charged by the big four national operators, 3UK, O2, Everything Everywhere and Vodafone.
The rates will reduce from their current level of 4.3 pence to 2.66 pence from April 1st and will continue to fall over the next four years to 0.69 pence per call by 2014. However, Ofcom’s measures fall short of the reduction the European Commission had advised, that it should reduce the cost to 0.5 pence per termination charge by 2012.
Ernest Doku, technology expert at uSwitch.com, said: "Today's ruling will affect anyone that dials up a mobile phone number, be it from a mobile or landline. Consumers have been unwittingly lining the pockets of the mobile phone "cartel" with billions of pounds. These hidden charges have up until now cost as much as 4p for every minute of every call made.
"It is still disappointing that Ofcom has not taken on board the European Commission's recommendation to reduce these rates in half the time, reaching 0.69p by the end of 2012 instead of 2014.
The changes should ensure an 80 per cent reduction in termination charges over the next four years. Consumers should benefit in two separate ways. Firstly, through reduced cost landline services and secondly through an increase in the choice of mobile packages that operators are able to provide because the operators will have more pricing flexibility.
Mike Wilson, mobile manager at moneysupermarket.com said:
"Today's announcement is what hard pressed customers have been waiting for. They will finally get a fairer deal on their landline to mobile and cross network mobile calls. For too long consumers have paid over the odds for the calls they make and from April 2011 the charge applied will be significantly cheaper, and will continue to be reduced over the next three years.
However, there are concerns that the savings made by mobile operators are passed onto consumers. The way that mobile operators make their money is changing. An increase in data exchange means that this has now overtaken voice calls as the main method that mobile phones are now used for.
According to research by Ofcom, data traffic has increased by 104 per cent over the last year. Mobile termination rates only apply to calls rather than data exchange and data revenue has increased by 90 per cent between the final quarter of 2007 to the final quarter of 2009 and its revenue share is likely to increase, meaning that income to mobile operators from termination charges is a decreasing proportion of income.
Ernest Doku added: "In theory, mobile bills should also come down - but in reality, the networks may look to introduce charges elsewhere to make up for the loss in income.
In 2007, Ofcom set wholesale termination rates to fall by 35 per cent in real terms from 2007, to March 2011, and the new proposals will increase the rate and continue this policy taking into account the different mobile market environment we are now in.
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