Cellcos challenge Ofcom’s MTR reduction plan

20 May 2011

A number of the UK’s largest mobile network operators are reportedly seeking to overturn telecoms regulator Ofcom’s plans to enforce large cuts to interconnection rates, the Financial Times reports. Both Vodafone UK, the market’s third largest operator by subscribers, and Everything Everywhere, the joint venture between T-Mobile UK and Orange UK, are understood to have called on the Competition Appeal Tribunal (CAT) to request that Ofcom reduce the level of cuts that it had proposed back in March 2011. Second-placed player O2 UK meanwhile has indicated that it will support both companies in their efforts.

As previously reported by CommsUpdate, Ofcom announced that mobile termination rates (MTRs) for all of the country’s mobile network operators would be reduced from 1 April 2011. The watchdog revealed it was seeking an 80% reduction in interconnection charges over the next four years, claiming that the cuts will benefit consumers and promote competition, and under the new caps, from 1 April 2011 the MTR for Everything Everywhere, O2 UK and Vodafone UK was reduced to GBP0.0266 (USD0.042) per minute, down from the GBP0.0418 cap which had previously applied. This is scheduled to fall further, to GBP0.0170 on 1 April 2012, before dropping to GBP0.0108 and GBP0.0069 at 1 April 2013 and 1 April 2014 respectively. For Hutchison 3G UK meanwhile the same rates will apply going forward, although it will see a slightly bigger cut next month, as its current MTR cap is set at GBP0.0448. Vodafone has, however, reportedly argued that under a worst-case scenario, the charges should fall only to GBP0.0125 by 2014, and in its appeal to the CAT the cellco claims that Ofcom used the wrong cost methodology when calculating the level of the wholesale charges; it said Ofcom should adopt a methodology that would take account of the cost of radio spectrum owned by the mobile operators.

In separate but related news though fixed line incumbent BT is understood to be pressing for Ofcom to move faster in enforcing lower interconnections fees. According to Bloomberg, the telco has filed an appeal claiming that the regulator should look to reduce the rates at a swifter pace, with the operator noting: ‘While we support many aspects of Ofcom’s decision to reduce mobile termination rates, we are disputing the length of time Ofcom has allowed for the benefit to find its way to paying customers.’ BT is understood to want to see an 80% reduction some two years earlier than envisaged by Ofcom.