Ofcom says mobile charges ruling will save us £800m

The regulator's slashing termination rates. So lower bills for us - and lower profits for mobile providers...

Last Updated: 31 Aug 2010

Ofcom’s latest targets are the mobile phone companies: today the regulator announced that it plans to slash termination rates – what the mobile providers charge for connecting calls from one network to another – by almost 90% over the next four years. This should make it much cheaper to call mobiles, particularly from landlines, potentially knocking about £800m off our mobile phone bills during the period. Great news for us, but not so good for Orange, Vodafone and 02, who make a big chunk of their revenues this way. So the only problem could be that they try to make up this shortfall elsewhere…

Not content with picking a fight with Sky yesterday, Ofcom is also keen to cut the big mobile providers down to size. It said today that they will have to cut termination rates – which apply to calls to mobiles from landlines, and calls from one mobile network to another – from the current level of 4.3p a minute, down to 0.5p a minute by 2015. That’s an 88% reduction, a much bigger cut than analysts were expecting. Ofcom is basically saying that termination rates shouldn’t be much higher than the cost of the connection – which has come down hugely in recent years.

Ofcom says the move will encourage greater competition, because it takes out a big chunk of guaranteed income for the big boys – which should mean that smaller players find it easier to grab a piece of the action. And for similar reasons, it also wants to make it much easier for us to switch providers. By 2011, customers should be able to swap within one working day rather than two, while mobile providers will be forced to issue the codes that allow you to port across your mobile number within just two hours (although 3 reckons this still doesn’t go far enough, since the UK remains the only country in Europe where you have to ask permission to take your number with you).

So: good for consumers, and good for smaller players. But bad for the big boys: the BBC reckons they make about one-sixth of their revenues from these charges. So either they’ll just shrug their shoulders and write off this loss of revenue as just one of those things; or they’ll try and make up the difference by charging us more for stuff like web browsing (an increasingly large component of people’s phone bills). We know where our money is – although at least the level of competition in this crowded market will hopefully keep them fairly honest.

In today's bulletin:

Mandelson: Business leaders 'deceived' by Tory plans to scrap NI hike
Ofcom says mobile charges ruling will save us £800m
MT's new book: The Management Masterclass
Editor's blog: Say bye-bye to EMI?
Business in the raw: MT's new charity calendar

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