Sabre-rattling and scaremongering in equal parts this morning with O2 in the UK telling the British regulator, Ofcom, that any further imposed reductions in mobile termination rates will be to the detriment of consumers and could well mean that the poor could find themselves disenfranchised from the digital economy as inevitable price rises elsewhere would mean many would be unable to afford mobile phones at all. Martyn Warwick reports.
Ofcom is examining the levels of termination rates in the UK and is already on record as saying that they remain far too high - and now O2 is getting it's retaliation in early by saying that at one extreme "free" handset offers might disappear whilst, at the other end of the consumer spectrum, tariffs for smartphone services (such as the immensely popular iPhone, to which O2 still retains exclusive rights) "will have to rise".
The fact remains however that "free" handsets are no more free than the proverbial "free lunch". Their costs are factored-in either to post-pay tariffs or pay-as-you-go rates. Meanwhile any operator can try to hike its smartphone tariffs but when contracts come up for renewal (and remember that many of them are now for a minimum period of 18 months at least and consumers hate being locked-in to such one-sided agreements that are hedged around with punitive monetary penalties for those that decide to go elsewhere) angry subscribers who feel exploited will churn away to other networks. As we all know there is no brand loyalty in mobile telephony.
In the end though it will be competition, red in tooth and claw, that will sort the wheat from the chaff and all the exclusive deals and long contracts on the planet come to an end sometime - and when that happens operators judged by the public as being rapacious had best beware.
Ofcom's current price-cap regime expires in 2011. The regulator wants connection charges "drastically reduced" thereafter and is entering negotiations with telcos to come up with an agreed timetable and formula for change.
Meanwhile the UK's big and still powerful incumbent fixed line operator, BT, together with 3, the country's original 3G network, say they want connection charges scrapped altogether.
Further pressure for Ofcom to act comes from Parliament where some 200 MPs have signed-up to an "Early Day Motion" demanding that the charges be completely removed. Now that is potentially very serious indeed for the big mobile operators.
A period of "consultation" is now in train and, unsurprisingly, O2 is saying that both BT and 3UK are "driven by self-interest" (whereas, presumably, it is not) and warns that if Ofcom gets its way "retail markets would be affected in a way that could harm, and not benefit, consumers."
O2 contends that if termination charges are further reduced or even banned altogether, all other costs would have to rise: from monthly post-pay tariffs through to the cost of handsets and of calls themselves. The company adds that pre-pay subscribers would be particularly badly affected because, under a new regulatory regime, operators would have no choice other than to impose "use by" dates on top-up credits - thus forcing consumers to make and take more calls within a unilaterally-imposed and arbitrarily-defined period or face losing the money they have already paid to the operators. That'll go down well and bring the punters flocking in.
It also warns that MVNOs and their customers will also be affected.
O2 also raises the spectre of dragging Ofcom slowly through the courts on the grounds that the proposals are "inconsistent with Europan and domestic law." On a previous occasion that cuts in mobile termination rates were mooted the proposals eventually went before the Competition Appeals Tribunal. Ofcom won the day, but the process was glacial, victory was slow and the mobile operators made a lot hay while the sun shone.
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