Operators will put up a fierce fight against Ofcom’s plans to reduce mobile termination rates, such is the threat to their revenues, according to a report by Ovum.
The mobile termination rates (MTRs) are currently higher than fixed line charges and vary across different operators. Ofcom is responding to pressure from the European Commission, which wants standardisation across the continent.
The report says that if the Commission succeeds in its aim MTRs would fall by 90% over the next five years.
Ovum said that under EU telecommunications rules, Ofcom must take 'utmost account' of the EC's recommendation and will have to bring termination rates down and ensure standardisation by 31 December 2012.
Matthew Howett, an Ovum lead analyst and co-author of the report, said: ‘There is currently a revolution underway in Europe for how MTRs are calculated and we expect rates to fall considerably as a result. However, Ofcom’s intervention in the matter will be hotly contested by operators who will oppose a reduction in their rates due to the negative impact it will have on their revenues.
‘Operators will definitely not accept any reduction in termination rates without a fight and Ofcom should be prepared for a fierce battle with operators, keen to protect their own interests. As a result, consumers may be waiting longer for the cheaper calls that lower termination rates could encourage.
‘Currently the termination rate represents a price floor in terms of the retail price paid by consumers. Regulators will also be vigilant of operators increasing call prices for some consumers as a way to make up for lost revenues.’
Termination rates were reduced by 52% on average between 2005 and 2010, with France leading the way with a cut of 76%. However, Ireland saw the smallest cut with a reduction of just 24%.
Howett added: ‘According to the existing EU telecoms rules, Ofcom must take ‘utmost account’ of the EC’s recommendation and will have to bring termination rates down and ensure standardisation by 31 December 2012. However, given the opposition that mobile operators will put forward, this could be a tall order.’