The European Commissioner, Viviane Reding has announced steps to cut mobile operators’ termination rates by up to 70%.
Reding wants to end the differences in the levels of termination costs operators charge each other across Europe.
Larger operators are reluctant to reduce their termination rates as they are net recipients of calls, while smaller operators send out more calls then they receive, making termination rates a large cost. Around 20% of some operators’ revenue is made up of termination fees.
3’s CEO, Kevin Russell said: 'Prices must come down. The current level of wholesale mobile termination rates mean inflated costs for calls to mobiles, this unnecessarily causes £2.5 billion a year to be exchanged between operators and comes at a high cost to the British consumer.
We believe the rates have to come down further and faster to remove the distortions of competition they create. Change is long overdue.’
However, some larger operator groups are warning the EU that cutting termination rates could mean the end of free phones for consumers and increase the cost of owning a phone.
Vodafone reportedly said that termination fees represent between 15 and 20 million euros to the mobile industry and some operators would not be able to absorb the reduction in this revenue stream.
The company said that cutting termination rates could result in US style business model, where both the receiving and sending mobile users pay for the call.
No numerical cap is planned for mobile or fixed-line termination rates, but guidelines that spell out which charges can and cannot be included will be adopted this autumn. They will be slowly phased in by 2011.
The Commission hopes the guidelines will result in termination costs converging around 1.2 - 2 pence.
The EU also wants to regulate the termination fees between fixed-line and mobile operators. The EU Competition Commissioner, Neele Kroes believes this would increase competition and reduce retail prices.