Mobile operators argue with Ofcom over termination rates The UK's bigger operators are taking Ofcom to the Competition Appeals Tribunal, arguing for higher termination rates - except Three, which wants the opposite. Vodafone and Everything Everywhere are challenging Ofcom's position on termination rates, with an appeal to the CAT that's supported by O2. The three operators reckon …
... but while the mobile companies use the high termination rates as an excuse for high charges to the customer for cross-network (especially international) calls, they don't mention the income they get from those same termination rates for calls coming into their own networks.
So when a customer at network A makes a call to network B, network A pays a termination charge to network B and passes the charge to customer A (while network B keeps quiet). Later, when a customer at network B makes a call to network A, network B pays a termination charge to network A and passes the charge to customer B (while network A keeps quiet).
The net effect is that both network A and network B have passed on extra charges to their customers, while the actual termination charges have effectively cancelled out.
Heads they win ....
Well Orange have charged for Delivery Reports for a long time, so 3 aren't exactly starting this, but instead following the lead from Orange.
The whole idea of charging me to confirm the message was delivered is interesting (and possibly a bit unreasonable). Still for me it is a non issue because other than prefixing every message I send on O2, they don't do delivery reports...
I really hope this doesn't become the norm on all networks. I found out about Orange charging for delivery reports about 12-18 months, some three years after I had moved my contract from them, so it wasn't something I was ever affected by.
It was confirmed by a sales-droid in one of their stores after scouring the small print of the T&Cs. He didn't seem bothered that it was unfair, but I suppose they're not being paid to give a toss. Its a big reason he didn't get a sale though, so perhaps he should have.
I'm with Vodafone (yeah yeah I know! for me their USP was "Not Orange"), and I seriously hope they don't cotton on to this idea. I might just have to start making long calls to my landline to use up all of my monthly minutes to return the gesture.
As for termination rates - I forsee that if termination rates are cut the operators will simply lift the money from elsewhere (eg delivery reports as the article suggests). If they're cut to zero I can see some kind of charge for incoming calls which is a shame as Calling Party Pays is credited with the faster growth in mobile use in Europe compared to our cousins over the pond...
"He didn't seem bothered that it was unfair, but I suppose they're not being paid to give a toss."
No, but if he tells you it's unfair, or admits to any deviation from the "these are fair and reasonable" party line, then he can be disciplined and maybe fired for a little something called "Denigrating the Company." Extension of the same rules that stop people slagging off their employers online. Most companies extend this to "Imply or inform a customer that something we do is wrong, unfair, or just plain not very good." Any time someone blames the length of time they're taking to get your details on the system being slow, then you can bet some observer is going to write "Denigrating the Company" on the report, because you're implying that your companys computers have problems.
Vodafone charged me £5.30 per minute when I was travelling in Russia and Turkey. When I complained, they blamed the other network. When I started using local SIM cards for call back home, they blamed Vodafone for the high charges.
WTF ? And to rub it in, when I came to end of my contract, I had to dial their premium rate 0870 numbers and got to speak to stonewalling idiots in Newbury for 45 minutes.
Surely, they are keeping VERY quiet about this. Scratching each others back and screwing the customers no end.
Paris, cos she should know something more about getting screwed.
Last time I spoke to Voda retentions at the end of a contract I used 191 free from my handset.
There is an option along the lines of "Press ?? if you're thinking of leaving us".
You shouldn't have to pay to speak to a sales droid, and if they want you to they don't want your business so get your PAC and find an operator that does.
Pirates - all of them
They all have them.
When I left the UK a couple of years ago, I called O2 to cancel the contract the day before I was to leave ( I was out of contract at the time). The muppet insisted that I had to give 30 days notice..
" I'm leaving the UK permanently tomorrow and I wish to cancel"
"Must give 30 days"
" I can't. I'm going tomorrow"
"Well you'll have to pay for the 30 days then"
"I won't be here, and the account you have the Direct Debit with has been closed, so cancel it now"
"You still have to pay"
" Where will you send your bill to?"
"Your address"
"You don't have it - I'm emigrating"
"We still have to collect the 30 days payment"
"Good luck with that <click> "
As per Richard P's first post, none of the media - inc the normally well informed Reg - pick up that having high termination charges which effectively cancel out as the networks cross-charge each other means that they get to charge customers more for calls while locking out competition, like 3, because a new entrant is more likely to make calls to other networks than terminate calls from them - at least until the business develops. Then they become part oft the cartel and voila!
Even stranger is the '10% of turnover' claim. My understanding is they don't even pay each other the termination charges, only the accumulated difference between in/out charges between each pair of networks. If any network got that difference at 10% of turnover they don't really have a business, unless that business is pissing away money.
The mobile-mobile calls do cancel out overall - where they make the fortune is on screwing landline customers who make calls to mobiles. The fee mobile networks pay the landline operators is trivial - a tiny fraction of the rates mobile networks charge for calls in the other direction.
What really slams it home that the mobile companies are ripping people off with this is having two telcos (T-mobile, I think, and Giffgaff) actually paying customers on certain tariffs to receive calls (1p per minute and 1 minute of outgoing calls per minute incoming, respectively); shaving some of that 10% bonus sideline over the course of the next few years is hardly the end of the world for them.
There are essentially three reasons for a large mobile operator to like high mobile termination rates (MTRs).
First, they restrain (from the operators' point of view) negative sum price competition. It's not that all operators price at or even remotely near MTRs, but the risk of going below is very high. So if MTRs >> cost (and on my reading of the Ofcom numbers, MTRs are >5x cost), total industry profit is going to include a foundation of every minute carried X (excess cost). And from a consumer point of view, that guarantees that even intense competition will NOT yield prices down near cost levels.
You can come to your own view about the rule-of-thumb pricing norms. If an operator tends to price to the broad market as MTR + M pence, a 4p reduction in MTRs will tend to lead to a 4p per minute off everyone's bill. Or if they tend to price as MTR x F, an 80% reduction in MTR could lead over time to an 80% reduction in call bills. No-one's quite this simplistic, but you get the idea.
Second, they provide an embedded cross-subsidy from fixed lines to mobiles. All those calls are further bunce for the industry.
And third, they represent a barrier to entry for new players. It's pretty expensive starting a new mobile network, and it often tends to be the case
(i) that new entrants sweep up the worst customers
(ii) that new operators tend not to be anywhere near the balance point where calls in match calls out)
(iii) that new entrants are more likely to innovate in ways that hurt profits
There are other ways.
The most radical alternative is Sender Keep All (SKA). SKA is, as the name suggests, an arrangement that avoids MTRs altogether. It's intellectually respectable - a large part of the cost imputed to a mobile call minute is in fact the score-keeping cost. It's not a free-for-all - operators pay one another to for interconnection facilities, simply not on the basis of call minutes.
In a world where voice is just a low bit-rate, high priority data stream, it seems to me that SKA or something like it is required if we want true service innovation. MNOs rail against being turned into economy bit pipes.
High MTRs are the crutch of the mobile industry. They keep it firmly upright. And they keep it moving v-e-e-e-e-r-y slowly.
The Register 
Biting the hand that feeds IT
Copyright. All rights reserved © 1998–2024
