CAT reveals decision on MTR appeals

15 Feb 2012

Two of the UK’s mobile network operators may today be rueing their decision to appeal rulings made in April last year by regulator Ofcom regarding a reduction in mobile termination rates (MTRs). Having filed their respective appeals with the Competition Appeals Tribunal (CAT), the judicial body has not only confirmed that the reductions will stand, but has gone one further by calling for marginally steeper reductions in the earlier stages of the four-year glide path and indeed suggesting a slightly lower end-figure for termination rates.

As noted in TeleGeography’s GlobalComms Database, under Ofcom’s original ruling from 1 April 2011 the MTR for Everything Everywhere, O2 UK and Vodafone UK fell to GBP0.0266 (USD0.0418) per minute, down from GBP0.0418, with this set to fall further, to GBP0.0170 at 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 would apply going forward, although it saw a bigger cut initially, as its MTR cap at the time of the announcement was set at GBP0.0448. Under the revised reduction plan set out by the CAT, by April 2014 the termination rate for all of the country’s network operators will fall to GBP0.0065 but, with the tribunal noting that its ‘main focus is on the years 2012/13 and 2013/14, years in which different glide paths would produce different MTRs’, deeper reductions will now take place in that period. Under the revised schedule, from 1 April 2012 operators will see termination rates fall to GBP0.0123, while from 1 April 2013 MTRs will be reduced to GBP0.0067.

In its appeal against Ofcom’s April 2011 ruling, Vodafone UK had argued that under a worst-case scenario the charges should fall only to GBP0.0125 by 2014, while claiming that Ofcom had 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. Following the CAT’s findings, The Guardian cited a statement from the cellco as saying: ‘The fixed line operators have merely pocketed previous reductions in mobile termination rates, instead of reducing prices for customers. BT, meanwhile, has actually increased its line rental prices three times over the past year and a half.’ Ofcom, meanwhile, reportedly welcomed the tribunal’s ruling, claiming that the decision would ‘reduce significantly termination rates which will bring competition and consumer benefits’.

United Kingdom, EE, Hutchison 3G UK (Three UK), O2 UK, Ofcom, Vodafone UK