Ofcom slashes wholesale mobile phone charges

From 1 April, all the mobile network operators will reduce their wholesale charges

Ofcom slashed wholesale mobile phone charges yesterday by an amount averaging £400-500 million annually, which, they said, will “result in significant savings for consumers over the four-year period that the charge controls will apply”.

Mobile network operator (MNO) 3’s charges drop to 5.9 pence per minute (ppm), 45 percent less, while the average wholesale charges of Vodafone, O2, Orange and T-Mobile will be reduced to 5.1 ppm. Orange's and T-mobile’s charges drop 20 percent while Vodafone and O2 will reduce their prices by 10 percent. All reductions will apply to both 2G and 3G calls.

Ofcom will phase the reductions in from 1 April this year and they will apply through to 2011, when they will expire. However, Ovum principal analyst Stefano Nicoletti pointed out that despite the technology, the market maturity of MNOs’ networks and the years of regulation, “the cost of terminating calls on mobile networks in Europe is still substantially higher than on fixed networks”.

Fixed network operator Cable & Wireless CEO Jim Marsh argued that “Ofcom's rates are overly generous to the mobile operators”, and that fixed line customers calling mobile users were effectively subsidising the retail rates MNOs offered to their users. “To be clear, we're talking around £1.5 billion over the next four years - that's not small beer,” he added.

Ovum’s Nicoletti also pointed out that MNOs’ rates were also substantially higher than in other parts of the world. “In the US, for example, where the RPP (receiving party pays) system applies at retail level, mobile rates are set at the same rates as fixed rates, at $0.09,” he explained.