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Mobile phone groups step up fight against cut in fees

Some of Europe's largest mobile network operators have stepped up resistance to the European Commission's plans to reduce wholesale charges by suggesting mobile penetration rates could drop by 9 per cent if the measures are implemented.

A study by Frontier Economics, a consultancy firm, commissioned by Deutsche Telekom, Orange, Telecom Italia and Vodafone, is the latest step by Europe's largest mobile network operators to fight the measures, which could reduce an important revenue stream.

Viviane Reding, the EU telecoms commissioner, is provoking a bitter fight with the mobile operators over her plans for deep cuts from the average of the 9 cents charge mobile networks impose on each other for connecting calls to each others' wireless networks by 2012. These charges are known as termination rates.

"In scenarios where incoming mobile calls continue not to be charged to the called party, as is the case at present in Europe, a reduction of mobile termination rates to 2c per minute could lead to mobile penetration being 9 per cent lower throughout the region," said George Houpis of Frontier Economics, who conducted the study. Mobile ownership numbers in Europe stand at an average 1.2 phones per person, giving a penetration rate of 120 per cent.

Mr Houpis based his study on economic literature on termination charges and the US mobile market, where mobile termination rates are very low and customers usually pay for receiving calls as well as making them.

"We are a little surprised at the lack of intellectual strength of the report," a spokesperson for Ms Reding said. "There are fundamental flaws in the analysis.

"It paints a very dark picture for the future and cannot be taken seriously.

"It is a one-sided perspective, very much from the incumbent perspective."

Ms Reding has said that mobile users pay unnecessarily "high" bills because of the "high" charges that operators impose on each other, together with fixed-line phone companies, for connecting calls to their wireless networks.

Mobile termination rates, represent between 15 and 20 per cent of operators' revenues, and have been an important means of recovering the cost of building operators' networks.

While the fees have fallen in recent years, the charges remain far higher than those for fixed-line calls. Ms Reding is keen to address what is seen to be a cross-subsidy between the two.

"Economic theory indicates that it is wrong to assume that lowering termination rates will translate automatically into lower overall retail prices, since operators will need to recover their costs," said Mr Houpis.

Last month Vodafone warned that a move to lower termination rates could prompt 40m of Europe's mobile phone users to abandon their mobiles. Others have suggested it could lead to US-style pricing, in which the receiver pays for a call.

Источник: Financial Times

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