One consequence of UK regulator Ofcom's determination further to cut mobile termination rates could be the re-introduction by operators of controversial "expiry dates" on pre-paid mobile top-ups. Martyn Warwick reports.
Over the past three months, Ofcom has been running a "consultation exercise" on its proposals to once more reduce termination rates in accordance with EU guidelines and requirements. The hefty document (it runs to 389 dense pages) says mobile operators should be able only to recoup from subscribers the "actual cost" of terminating calls from other networks and not charge a profitable premium on top.
Ofcom then goes so far as to suggest that to "cover other costs" mobile telcos might "impose minimum monthly spending commitments" on pre-pay customers. In other words we're could see a return to the bad old days when pre-pay customers had to use their minutes by a certain date or lose them - and the money they had paid for the top-up in the first place.
As a commercial proposition this stinks. Most mobile pre-pay subscribers are either young or poor or both and thus do not meet the criteria laid down to qualify for monthly post-paid contracts.
Thus they will be an easy mark for mobile operators determined to squeeze what they can out of one set of subscribers because they can't charge more to post-pay consumers without running the serious risk that many will churn away to rivals.
No doubt some mobile service providers would be very happy to see the reintroduction of a system whereby they are allowed to penalise their most vulnerable customers by imposing totally arbitrary time limits on the validity of top-up vouchers that punters pay hard-earned money to buy but do not use quickly enough to suit the money-grubbing proclivities of their cellular operator. In other words, they get to keep the money without having to go to all that fuss and bother of actually providing service when a consumer wants to use it. It's tanatamount to theft.
Thankfully though there are some principled operators out there. For example, O2 (with over 11 million pre-pay customers) has already told Ofcom that it's suggestion is "irresponsible" and that if implemented could result in millions of low-income subscribers having to give up using mobiles altogether. Orange too describes the notion as a "backward step" - which it certainly is. Everyone thought that the "use it or lose it" trick had, rightly, been consigned to the dustbin of history. Ironic, therefore, isn't it that the suggestion it might be revived come from the regulator whose job it is to see that subscribers get a fair crack if the whip?
Meanwhile, coming in from another tack, Vodafone says that if Ofcom's suggested solution is imposed, it could well signal the end of mobile handset subsidies. Thus subscribers would be forced to buy a new handset whenever they renew their contracts.
To meet EU the demands of directives, Ofcom is obliged to compel the UK's mobile operators to reduce the current termination fee of 4.3 pence per minute to just 0.5 pence per minute by 2015. The next tranche of cuts leading towards that 2015 figure will be imposed in early 2011.
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