The Terminator

30 Jun 2008

European mobile roaming prices capped video

EU telecoms commissioner Viviane Reding calls time on high call charges

Last week, the European Commission launched a public consultation to reduce voice call termination rates in the EU.

However, major telecoms operators have voiced disquiet about the move and expressed fear that it could harm a sector that is performing well and being competitive.

For example, speaking in Madrid last week O2 Europe chief executive Matthew Key said the announcement by EU telecoms commissioner Vivian Reding to slash call connection costs by 70pc needs to be carefully considered given the effect it may have on Europe’s telecoms industry.

Voice call termination rates are the wholesale tariffs charged by the operator of a customer receiving a phone call to the operator of the caller’s network. Included in everyone’s phone bill, and therefore eventually paid by the consumer, these tariffs are determined by the intervention of national telecoms regulators.

The rates charged by national telecoms regulators varies across the EU, ranging from €0.02 per minute in Cyprus to over €0.18 per minute in Bulgaria, and are on average nine times higher than fixed-line termination rates.

“Disparate termination rates across the EU and large gaps between fixed and mobile termination rates are serious barriers to achieving a single European telecoms market that benefits competition and consumers,” said Viviane Reding (pictured), EU Telecoms Commissioner.

“The consumer pays the price for these gaps between national regulatory policies. Over the next three years, I expect greater consistency and coordination to bring the costs for mobile phone calls down by around 70pc from the current level.”

The Commission, after assessing over 770 regulatory proposals by national regulators over the past five years, said gaps between fixed and mobile termination rates and between mobile termination rates imposed by national regulators cannot be altogether justified by differences in the underlying costs, networks or national characteristics.

The Commission has presented a draft recommendation for convergence of termination rates in Europe, including clear principles on which cost elements should be taken into account when national telecoms regulators determine termination rates, an efficient costing methodology and symmetric regulation (where the same price caps apply, within a country, to mobile and fixed operators, respectively).

“Truly cost-oriented termination rates will increase competition to the benefit of consumers. Consumers should expect to pay lower retail prices as a result,” said EU Competition Commissioner, Neelie Kroes. “This recommendation will also benefit large parts of the telecoms industry as it is likely to eliminate distortions of competition between fixed and mobile operators.

“It will also reduce the large sums for call termination which smaller mobile operators have to pay to large operators when they try to compete with the latter with the very popular flat rate offers. In view of these benefits, a timely implementation of this recommendation is essential.”

But operators like O2’s Matthew Key are uneasy. “The decision this week was not based on sound economic grounds. Ofcom’s (the UK telecoms regulator) response to this is: if you have to regulate, make sure it’s done on sound economic grounds.

“Let’s recognise we have a successful and healthy telecoms industry in Europe. The industry needs certainty into the future and if we’ve got that we will continue to invest and bring out great products for customers,” Key said.

By John Kennedy

European mobile roaming prices capped video

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years