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Oftel refers mobile companies to Competition Commission

They swear to fight it all the way

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Oftel has referred the UK's mobile operators to the Competition Commission over their inter-network charges.

Oftel announced on 26 September that it was going to enforce an RPI -12 per cent control on mobile calls (i.e. if inflation - as measured by the Retail Price Index - goes up by five per cent, then prices will have to go down by 7 per cent).

It gave mobile companies a month to reply which they promptly did, calling it "flawed, inconsistent and incomplete". Oftel has refused to back down, claiming that mobile operators are ripping consumers off by charging "termination" rates when someone calls from one network to another. And so it has taken the step of referring the issue to the Competition Commission.

In a press release today, Oftel chief David Edmonds, said: "I regret that the operators have rejected the measures, as our proposals are proportionate and fair for consumers and the industry alike. [I] will now ask the Competition Commission to consider whether it is in the public interest for termination charges to be regulated. I am confident that charge controls are an appropriate measure to protect consumers."

He gave an example: "A peak rate national call over BT's network is currently 24 pence for three minutes, while the same call to a mobile network is 60 pence for three minutes, of which 39 pence is the termination charge."

The mobile operators are not amused. One2One has put out a response which begins: "We are disappointed that Oftel has announced its intention to refer its proposals on call termination charges to the Competition Commission."

The UK market is the most competitive in Europe, according to One2One which slams Oftel's "limited focus on one small, isolated aspect of the customer offering". It will be "vigorously contesting Oftel's arguments during the course of any Competition Commission inquiry".

BT Cellnet has called Oftel's price control "crude" and vowed to fight as well. A spokeswoman told us: "It is not in the customers' interests to impose this. Prices are coming down and we believe the market should now be decided through competition."

Vodafone will also contest Oftel's claims, a spokesman telling us that the controls "are not an appropriate form of regulation".

Orange has put out a five-page rebuke saying it "doubt the wisdom" of Oftel’s plan "to micro-manage one aspect of a successful, competitive industry". It calls the price control "anti-competitive and against the consumer interest".

Oftel's press release draws reference to a precedent for its decision. It points out that the new price controls are a review of ones due to expire in March 2002. These controls were originally created after an investigation by the Monopolies and Mergers Commission (now the Competition Commission) into Vodafone and BT Cellnet's termination charges in 1998. It stemmed from an Oftel referral. ®

Related Link

Oftel's press release

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Oftel strengthens mobile price controls
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