Sue Gyford: Bid to lower mobile termination rates can save us cash

Published on Wednesday 27 May 2009 09:37

IT may be many years since mobile phones were purely the preserve of the rich, but it has always been an expensive business calling mobile phones – at least compared with landlines.

But that could soon change.

Every time you use your mobile to call someone on a different network, or phone a mobile from a landline, their network charges yours 4.7p for every minute of the call – a charge called the Mobile Termination Rate (MTR).

The charge is regulated by industry watchdog Ofcom, which has just announced it is thinking of cutting or even scrapping it. Ofcom has commissioned a report on the current system and has launched a consultation on the move, which could mean great savings for thousands of users.

The announcement has energised BT and the country's smallest mobile operator, 3, to join together and campaign to get rid of MTRs, saying they penalise landline users and small mobile companies disproportionately.

Launching the campaign, which is called Terminate The Rate, BT's retail managing director John Petter explained: "These charges are particularly unfair on elderly people, many of whom do not own a mobile and think a Blackberry is something edible. They make all their calls from a landline.

"The effect of termination rates is that they impose an unfair tax on British households."

It is not a matter of pure altruism on BT's part, however – last year mobile phone companies earned about 750 million from termination charges on landline operators.

Not surprisingly, then, the larger mobile networks, such as Vodafone and Orange, are keen to keep them. They say the charges help fund investment in their services, including the provision of free handsets to users. They say they would simply have to introduce charges elsewhere – perhaps charging people to receive calls, as happens in the US.

But Ofcom's proposal to cut or scrap MTRs is not new. The watchdog set a schedule in 2007 for the charges to drop by about 25 per cent by 2011. The new consultation, announced on 20 May, looks at what will happen between 2011 and 2015. Six options have been laid out, which include the current system of reducing rates year-on-year, deregulating MTRs, or cutting them so much that they are effectively set at zero.

Ofcom has pledged that the purpose of the review is to benefit consumers and says most of the options would result in a fall in MTRs. It says this would give operators greater flexibility to set their prices, which would result in a wider variety of tariff packages – which should be good news for consumers. It does warn that some "low-usage" customers might be worse off, but says there may be other ways of protecting these groups.

Consumer organisations are keeping quiet on the issue. Consumer Focus, which campaigns for consumers' rights, is doing its own, wider consultation on mobile phone tariffs, and says its position will depend on the outcome of that.

The Communications Consumer Panel has also decided not to comment on the issue on the grounds that it is more of a research and policy-based organisation than one that deals directly with consumers. And Which says it has not examined the issue at all.

However, Terminate The Rate has certainly done its homework when it comes to rallying consumer support. It has campaign pages on Facebook, Twitter, YouTube and Flickr, and the campaign launched with pledges of support from Carers UK, the National Union of Students, the GMB union, and the Federation of Small Businesses.

The Director of Policy and Public Affairs at Carers UK, Emily Holzhausen, said: "Carers often have to make many calls, keeping in touch with the person for whom they care, making sure they are OK, arranging care and other help because they cannot leave the house. We are delighted to back this campaign and hope Ofcom will make changes to its policies to help improve carers' lives."

Stephen Alambritis, spokesperson for the Federation of Small Businesses, said the change would be a boost for his members. He said: "Lower termination rates are good for business, good for consumers and good for the economy.

"Consumers will have more money in their pockets because their phone bills will be lower. This extra disposable income will invariably be made available to the high street. Lower termination rates would boost the economy at this crucial time."

Ofcom's consultation lasts until 29 July. Time will tell who will be the biggest winners.