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Competition Commission to speed up proposed cuts to costs of calls from landlines to mobiles - 20/02

Competition Commission to speed up proposed cuts to costs of calls from landlines to mobiles The Competition Commission has responded to a ruling from Ofcom in 2011 which required that mobile operators in the UK should lower the standard charges for calls from landlines to mobiles by up to 80%.

In March 2011, Ofcom reduced the relevant charge from an average of 4.18p to 2.66p, with the intention that the lower fees would benefit consumers. The reductions would be applied to mobile termination rates ("MTR") which are the wholesale charges that mobile operators make to other operators to connect calls to their networks.

In an announcement on its official website, Ofcom tabulated a list of its proposed MTR caps, in which it ruled that the charges levied by providers O2, Everything Everywhere (Orange and T-Mobile), Vodafone and 3-UK would have to be reduced on a sliding scale throughout the period beginning 1 April 2011 and ending 31 March 2015.

Ofcom's intentions were to provide dual benefits for both landline and mobile customers by reducing the costs to landline companies for passing calls to mobiles, which would in turn promote competition in the mobile market.

This process has been subjected to various delays as a result of appeals lodged by Vodafone, Everything Everywhere and O2 who claim that the cuts, in their current form, were too aggressive. It is estimated that the likely cost of these reductions to mobile companies would be in the region of £800m per year.

However, on 15 February 2012, the Competition Appeals Tribunal ("CAT") held that the minimum cap for landline-to-mobile charges should be set at 0.65p, whereas Ofcom's original plans had set the cap at 0.69p. The CAT also held that the rates should come down at a faster rate than that specified in Ofcom's original plans.

In response, Vodafone released a statement which claimed that the cuts would adversely affect consumers. It stated that the cuts were "making it unsustainable for the mobile companies to continue subsidising the high cost of mobile handsets for pay-as-you-go users" and that the cuts would "disenfranchise many consumers who rely on their phones to keep in touch with friends and family."

BT and 3-UK both support the cuts and are currently overseeing the "Terminate the Rate" campaign, which was set up to see faster and more drastic rate reductions.