Ofcom bankrolling mobile operators, alleges BT

BT has slammed Ofcom's new controls on mobile operator charges, accusing the regulator of continuing to subsidise 3G licence debts racked up in boom-era spectrum auctions.

The telco is unhappy the controls are not more stringent, because they set the wholesale termination charges it has to pay operators for calls to mobiles.

During Ofcom's two-year review, which led to the publication of a final report on Tuesday, the European Commission expressed concerns that operators who paid over-the-odds for 3G licences during the tech boom would be allowed to recoup too much of their cost. Part of Ofcom's calculations involved setting the level which the 3G licence component of termination charges should be capped - operators will be able to direct about a third of the total per minute charge towards paying their license fees.

Sources close to the issue say the Commission is concerned regulators may have been too reliant on operators' own accounting practices in setting that level. If Commission scrutineers find fault in the highly detailed document, infringement proceedings could be brought in European Court.

BT Retail operations chief John Petter said: "This is a disappointing decision and is inconsistent with EU advice. It seems strange that UK landline customers will have to subsidise the cost of the 3G licenses but get no benefit from them. The mobile call termination rate has been too high for too long and will force UK landline customers to continue to subsidise the mobile industry, now in the region of £500 million plus over the next four years".

Ofcom said the new levies of 5.1 pence per minute for O2, Orange, T-Mobile and Vodafone, and 5.9 pence per minute for 3G-only outfit 3, would bring retail customers up to £500m in savings over the next four years compared to the current regime, though no structure exists to enforce this.

A spokesman for the European Commission confirmed Brussels would be examining Ofcom's report in detail. He told The Register: "Given this could be a precedent for other countries we will be looking at this extremely closely." Article 7 of the Commission's 2002/21 EC directive, which governs regulation of domestic communications providers, says national regulators must take "utmost account" of the Commission's comments on the issue.

Ofcom did not return calls for comment.

Stephano Nicoletti, a telecoms regulation analyst with Ovum, said Ofcom had budged slightly from an earlier, more pro-operator stance. He said: "I believe Ofcom has taken into account [the Commission's] views." The report showed Ofcom had taken heed of the Commission's view that the 3G component of termination charges should be based on the current market value of the licences, rather than bubble-era prices, he said.

While disagreeing with BT over Ofcom's compliance with the Commission, Nicoletti said: "Despite years of regulation and the market reaching maturity, the cost of terminating a call in Europe is still many times higher for mobile than for fixed line. They seem not to have been effective in driving costs down." ®