Feeds

Ofcom's termination cap will hurt profits, 3 UK says

Everyone else is bigger than us

Providing a secure and efficient Helpdesk

3 UK has lodged a complaint with the Competition Appeal Tribunal against Ofcom's capping of termination rates, claiming it will restrict its ability to turn a profit.

The termination rate is the amount paid to the receiving operator when a call is made into their network - so when a T-Mobile customer calls a 3 customer, T-Mobile pays 3 for handling the call.

The problem is that 3 customers don't have enough mates on other networks calling them, so while the other four networks find their termination rate payments being roughly equal, 3 finds itself paying out - to the tune of £50m in 2006, according to 3 UK chief executive Kevin Russell.

Last time Ofcom examined the termination rates, in 2004, 3 was excluded from capping as it wasn't considered to have SMP (Significant Market Power) - other operators has caps imposed. 3 was later deemed to have SMP over calls coming into its own network.

But the caps are now expiring, so Ofcom wants to force the other operators to cut their termination rates to 5.1 pence per minute by April 2010. It plans to do so in four equal steps over the next four years, and wants 3 UK to cut its rate to 5.9 pence per minute over the same period.

But Kevin Russell (in a FT interview) said the cap will jeopardise 3's drive to profitability, which is already running six months late.

The answer, of course, is to get more people to call into the 3 network, or reduce the number of calls made out of it. But that would mean increasing prices, a move 3 can't afford to take.

It almost seems that this attack on Ofcom is an attempt to shift blame when 3 fails to announce profitability again this year. ®

Choosing a cloud hosting partner with confidence

More from The Register

next story
Same old iPad? NO. The new 'soft SIMs' are BIG NEWS
AppleSIM 'ware to allow quick switch of carriers
Brits: Google, can you scrape 60k pages from web, pleeease
Hey, c'mon Choc Factory, it's our 'right to be forgotten'
Of COURSE Stephen Elop's to blame for Nokia woes, says author
'Google did have some unique propositions for Nokia'
FCC, Google cast eye over millimetre wireless
The smaller the wave, the bigger 5G's chances of success
It's even GRIMMER up North after MEGA SKY BROADBAND OUTAGE
By 'eck! Eccles cake production thrown into jeopardy
Mobile coverage on trains really is pants
You thought it was just *insert your provider here*, but now we have numbers
Don't mess with Texas ('cos it's getting Google Fiber and you're not)
A bit late, but company says 1Gbps Austin network almost ready to compete with AT&T
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Win a year’s supply of chocolate
There is no techie angle to this competition so we're not going to pretend there is, but everyone loves chocolate so who cares.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.