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Consumers to benefit from mobile termination rate cap, says Ofcom

Tuesday, March 15th 2011 by Cable.co.uk

The move will increase competition and flexibility in the mobile market, according to the regulator.

Consumers are in line to benefit from a reduction in the mobile termination rates (MTRs) charged by the UK's carriers, Ofcom has said.

The UK's telecoms watchdog revealed that from April 1st 2011, 3 Mobile, O2, Everything Everywhere and Vodafone will be subject to a cap on the wholesale prices they demand for connecting calls on their networks.

According to Ofcom, the move will result in around an 80 per cent drop in MTRs over the next four years.

The regulator insisted this measure will help to promote competition in the mobile market by offering greater choice to subscribers. It will give carriers more flexibility, allowing them to increase the range of packages available to consumers.

Fears that the cap on MTRs will have a substantial negative impact on the networks' finances have been rejected by Ofcom. The body pointed out mobile data traffic has risen 104 per cent over the past year, thanks largely to the growing popularity of internet usage on smartphones.

Between the fourth quarter of 2007 and the corresponding period in 2009, data earnings rose 90 per cent, with the organisation predicting this growth will continue in the future.

"As mobile termination rates only apply to calls rather than data over the four-year charge control period, they are likely to become a less significant element of mobile companies' revenue," it explained.

O2, Vodafone and Everything Everywhere - which controls Orange and T-Mobile - currently charge 4.18p per minute for MTRs, while 3 Mobile's rate is higher at 4.48p per minute.

These fees will be reduced to 2.66p per minute in 2011-12, before dropping incrementally to 0.69p per minute in 2014-15.

Although Ofcom stated the development will be positive for consumers, it has not been greeted quite so warmly by network operators.

Guy Laurence, chief executive of Vodafone UK, warned the move could actually hit subscribers in the wallet. He said the company is "really disappointed that Ofcom has ignored the evidence that termination rate cuts will mean higher costs for prepay customers".

His comments were echoed by an O2 spokesperson, who stated the new MTRs are too low and accused the watchdog of regulating other companies - such as BT - on "more generous cost standards".

The source added there is "scant evidence" that landline providers will pass on the savings to their customers. 

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