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Vodafone is “scaremongering”, says 3
3 has branded Vodafone’s submission to the European Commission rejecting significant cuts to mobile termination rates as “scaremongering”.
But other networks have supported Vodafone’s stance and even suggested handset subsidies could disappear if termination rates are cut too low.
Vodafone said it wasn’t against reducing termination rates – the fees networks charge each other to connect calls across their networks – but it disputes a call from EU telecoms commissioner Viviane Reding for reductions of up to 70 per cent.
Termination rates across the EU are around €0.08 per minute (around £0.06), but Reding wants to see them drop to between €0.01 and €0.02 per minute by 2012. Vodafone has instead suggested between €0.05 and €0.06 per minute.
The network also said the reduction envisaged by the EU would make it difficult for networks to recover their costs and could lead to the adoption of a US-style mobile market model of ‘bill and keep’, where customers pay to make and receive calls.
It claimed there were around 40 million mobile users in Europe who would then be prompted to cull their mobile usage. According to the bill and keep model, users spend an average of €15 per month, but according to Vodafone, these 40 million European users currently spend less than €10 per month.
Alternatively, networks would have to raise their retail charges to recover costs.
“We are not against prices coming down, but if the EC brings these cuts in the time frame they are suggesting, operators will have to recoup these costs somehow,” a Vodafone spokesman said.
But 3 UK chief executive Kevin Russell labelled Vodafone’s reaction as scaremongering that had been seen before.
He said: “In 2002, Vodafone and the other incumbents claimed UK customers would give up their mobiles in droves in the face of price rises they anticipated if the Competition Commission reduced mobile termination rates.
“Thankfully the Competition Commission ignored them and the exact opposite happened, with more mobile users than ever using more minutes at lower prices.
“As they stand, the European Commission’s proposals will allow operators to recover the costs they incur in terminating calls from other operators’ networks. There’s no need to charge consumers for receiving calls and we believe effective competition could lead to a halving of consumer prices.”
However, T-Mobile and Orange have voiced their support for Vodafone’s stance, with T-Mobile saying a reduction in termination rates would reduce, or even remove, the networks’ ability to significantly subsidise handsets.
A T-Mobile spokesman said: “You can’t escape the fact operators have to recoup the cost of handing off calls to other networks. If regulation forces down termination rates, operators will have to look at other means to recover this cost, which would not be economically efficient and to the detriment of customers.
“The US model, where the recipient bears the cost of receiving a call from another network, inhibits use and imposes a bias on prepay customers, who typically receive more calls than they make. This segment can least afford to absorb additional cost.”
An Orange spokesperson added: “We share Vodafone’s concerns that the EC’s proposals could adversely affect customers and will be looking to make a formal response to regulators about this in the coming weeks.”