UK mobile networks to cease rates rip-off

The long-running battle between the four main British mobile network operators and regulators has finally come to an end.

The battle - involving Orange, Vodafone, T-mobile and 02 (formerly known as BT Cellnet) - was over “termination charges” which mobile phone operators charge to other telecoms companies for connecting calls to their networks.

Capping curtailed
Oftel first proposed capping termination charges two years ago when it found a peak rate national call over BT’s network cost 24p. The same call to a different network cost 60p of which 39p represented the termination charge.

The mobile phone operators refused to accept cost reductions and the matter was referred to the Competition Commission.

Mobile phone operators have responded by saying there is sufficient competition in the mobile market to keep charges under control.

But the National Consumer Council (NCC) disagrees.

“The market is still far from competitive, despite what the operators say,” said NCC director, Anna Bradley.

“There is little consumers can do to avoid these charges, whether they are calling from a fixed-line or a different mobile network.

“These charges account for about two-thirds of the final call charges, but are well above the operators’ actual costs.”

Legal backing

It appears the High Court agrees as Mr Justice Moses last week ruled the Competition Commission could take action against the firms.

He said the commission had adopted “a reasonable and justifiable approach.”

Termination charges will be cut by 15 per cent from 25th July, after which they will be capped at inflation minus 15 per cent for 02 and Vodafone; and inflation minus 14 per cent for Orange and T-mobile.

This means the average consumer will save about £18 per year by 2005-06.

Consumer groups welcomed the ruling.

“The mobile phone companies have dragged their feet all the way. They have been making a fortune at the expense of consumers,” said Diane Gaston, spokesperson for the NCC.

Mobile phone operators claim the high termination charges served to subsidise cheap handset prices may increase as a result of the High Court ruling.

“The Competition Commission did not suggest mobile phone operators weren’t entitled to recoup their investment,” a T-mobile spokesperson said.

"They just aren't allowed to do it in this way anymore."

So we may yet see mobile phone companies increase prices elsewhere, such as handset prices or subscription charges in order to offset the £190 million they stand to lose from this ruling.

Consumer watchdog the NCC has said it will be watching mobile firms closely as, no doubt, will consumers.