UK regulator Ofcom today announced that mobile termination rates (MTRs) are to be cut by more than 80 percent from next month. The regulator hailed the move as a victory for consumers, which could end up paying lower prices – but there are fears that the cuts could also eat into profits at the UK’s large operators. Over the next four years, MTRs – the fees charged by operators for terminating each others’ calls - are set to fall from 4.18p per minute to 0.69p per minute for the country’s three largest operators: Everything Everywhere, O2 and Vodafone. For 3 UK, the rate will fall from 4.48p to 0.69p. Unlike its much larger rivals, the move is likely to be welcomed by 3 UK, which – as the country’s smallest player - pays out considerably more in fees than it receives. The rate cuts only apply to the four national mobile operators; for 28 other mobile communications providers identified by Ofcom (such as smaller or new entrant operators), rates will need to be set on “a fair and reasonable” basis.
UK MTRs 2004-2014 (Source: Ofcom)
In a statement, Ofcom justified the large cuts by claiming that operators are now concerned more with data than voice. “As mobile termination rates only apply to calls rather than data, over the four year charge control period, they are likely to become a less significant element of mobile companies’ revenue,” it said. According to Ofcom research, the volume of data traffic over mobile networks has increased by 104 percent over the last year with data revenue rising 90 percent between Q4 2007 and Q4 2009. In 2007 Ofcom instructed that MTRs fall annually until March 2011. This resulted in termination rates falling by around 35 percent (in real terms) over this four year period.