EU moves to reduce mobile termination rates

7 May 2009

The European Commission has adopted a recommendation on fixing the termination rates set by national telecoms operators, an area that is considered a major competition bottleneck in most countries.

“The recommendation adopted by the Commission today will help eliminate price distortions between big and small mobile phone operators across the EU, and also distortions between fixed and mobile operators,” said the EU Commissioner Information Society and the Media, Viviane Reding.

“The Commission recommendation will also lower consumer prices for voice calls – remember that termination rates are ultimately included in everyone’s phone bill.

“Finally, the recommendation will help the creation of a level-playing field and more consistent regulation on the European telecoms market, thereby triggering investment and innovation in the entire telecoms sector.

Reding said that national regulators in Sweden, Finland, France, Italy, Austria and Romania have been pushing to reduce termination rates to reflect the real costs incurred by operators.

For example, the real cost of a call termination is 2 cents, but operators can charge 8 cents per minute. Rates charged by operators have been exorbitant, with the national operator in Greece charging over 10 cents per minute, while calls have come in at 16 cents in Bulgaria.

“There is also an important distortion of competition between mobile and fixed operators,” Reding said.

“Currently, mobile termination rates are also typically 10 times higher than fixed termination, with fixed termination rates ranging on average less than 1 cents per minute and mobile termination rates ranging to 8.55 cents per minute.

“High mobile termination rates are thus an indirect subsidy for the larger mobile operators – a subsidy that has to be paid by all fixed operators, by smaller mobile operators and by all consumers.

“While there may have been a greater tolerance of high mobile termination rates when mobile networks were first being rolled out across Europe, they can no longer be justified today, at this advanced stage of mobile market development,” Reding added.

By John Kennedy

Pictured: the EU Commissioner Information Society and the Media, Viviane Reding