Ofcom pops cap on mobile termination charges

Ofcom has slapped cap on mobile call termination fees, after deciding there is little chance of competition bringing the charges down naturally.

UK comms regulator Ofcom has been controlling the amount that operators can charge for terminating calls ever since the initial investigation by Ofcom’s predecessor, Oftel, won an appeal against such control in 2003. Operators charge for calls coming into their networks, and without capping they would be at liberty to charge as much as they wished. The end-customer tends to blame their own operator for the high cost of the call, as that’s all they see on their bill.

In June last year Ofcom extended their control for another year, capping Vodafone and O2 at 5.63 pence per minute, with T-Mobile and Orange being allowed to charge 6.31 pence due to the higher cost of their spectrum (1800MHz). The caps only applied to 2G services, and the operator 3 was exempted for that reason, as well as being too small to worry about.

The latest proposal from Ofcom is that all termination charges should be capped at 5.3 pence per minute by 2011, when the regulator will look again at the whole situation.

Responses to the proposal will be accepted until November 22, with the final regulation being published early in 2007.

During 2007 Offcom will also be looking at the whole question of SMS termination fees, which it hasn’t looked at before. The SMS business is was worth £2.1bn in 2005, according to Ofcom, which is a lot of messages at an average of 6.3 pence per message.

With the French regulator already imposing a cap on SMS termination, and Europe making noises about doing something, Ofcom needs to be looking at the issue.

While competition has driven down prices for customers, regulation is still very necessary to keep the hidden costs of communications from getting out of hand.