3 and BT say “terminate the rate”

IDC research director for European consumer mobile, John Delaney commented on 3 UK, BT, consumer and business groups that have joined forces to call for a significant cut in the cost of calling mobile phones. The Terminate the Rate Campaign is calling for a cut in Mobile Termination Rates (MTRs) in the UK, to about 20% of current levels.

In addition to 3 and BT, campaign members include Carers UK, Money Supermarket, the GMB Union and the Federation of Small Businesses.

Delaney said: “In our view, it’s clear that the days of cost plus mobile termination rates (MTRs) are drawing to a close. The rationale for introducing them in the early days of mobile was, putting it simply, that when someone called from an already built fixed network to a newly built and more expensive mobile network, the mobile operator should be able to charge the fixed operator for terminating its customer’s call.

“We’re now in a different and more symmetrical world, where both fixed and mobile voice networks are mature, and both fixed and mobile operators are making large investments in broadband data networks. On that basis, it’s hard to see a disinterested argument in favour of allowing mobile operators to continue indefinitely charging more for termination than is necessary to recover their costs,” stated Delaney.

“However, even if we accept the proposition, advanced by the EU and propounded by Terminate The Rate, that MTRs should come down to cost-only levels, we are still begging two important questions. Firstly, what elements can legitimately be counted as part of a mobile operator’s costs, and what figure should be placed on them? Secondly, how quickly should the reduction happen?” he commented.

Delaney said the answer to the first question is highly debatable, and the EU’s rather swinging stance on the issue looks like an opening position for some detailed negotiations. The purpose of the new Terminate The Rate campaign seems to be to answer the second question with the single word, ‘now’.

“In our view, there are significant risks of unintended and detrimental consequences, in an immediate move to cost-only MTRs. Even if we only consider the annual fixed to mobile revenues, estimated at £750 million in the UK, a cut in MTRs of the size demanded by Terminate The Rate would result in an average loss of roughly £150 million to £200 million for each of the big four UK mobile operators,” continued Delaney. “They are already seeing heavy pressure on both revenues and profits, with the prospect of more pain on the way as a result of continued economic recession.

“It’s hard to envisage them simply swallowing an immediate revenue cut of that magnitude. Their possible responses are hypothetical, of course, but they could include things that would impact negatively on consumers, for example, fewer call centre staff, expiring prepaid credit, minimum top ups, higher charges for out-of-bundle calls, or lower handset subsidies.

“So do we regret the launch of Terminate The Rate? On the contrary, we welcome it,” enthused Delaney. “There is no clear right or wrong answer to the two questions we identified. Therefore, we believe a satisfactory outcome is most likely to be achieved by having a vigorous lobby contesting each side of the issue. We look forward to a damn good argument!”

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