This month, Ofcom slashed the cost of termination rates. Natasha Stokes, Editor of Mobile Choice tells us why this means cheaper rates for some, and more expensive calls for others:
Cheaper mobile calls. Who’s in? Us, you, your friend in Canada who has to call your godawfully expensive UK mobile… But not the local operators who provide us our networks. What gives?
Mobile termination rates have been the flavour of the week for the tech and mobile press, hot off the announcement that telecoms regulatory body Ofcom has decreed these rates – or MTRs – are to drop to just 1p. MTRs are the fees charged on outgoing calls by the operator receiving the call, to the operator making the call.
Right now, the charge by each operator is over 4p a minute, resulting in mobile calls that are at least 6p per minute. The new regulation places caps on what they can charge, with rates being reduced to 2.66p from April this year down to 69p by March 2015.
Theoretically, the result is cheaper mobile calls for you, because your network has to pay less to connect your outgoings. And that’s the tenet of the Terminate the Rate campaign that petitioned for this very thing.
Three and BT, who spearheaded the campaign, say that with reduced MTRs, networks are in a position to offer better value call packages.
Take Three’s The One Plan tariff. The network says that last year it took a gamble that Ofcom’s decision would go its way. The One Plan offers thousands of minutes and texts, plus data, at £25-£35 per month (depending on handset). In January, it took another leap to offer totally unlimited data with that plan. For me – and anyone else who uses a smartphone with internet-reliant apps like Spotify, Facebook and the ol’ web browser – it’s an incredibly good value deal.
If that’s the future with low MTRs, it’s a very bright one indeed. So why are all the other operators so down on MTRs being, uh, down?
Vodafone, O2, Orange and T-Mobile all say that the collateral is the PAYG customer, who they may have to charge higher call costs in order to make up the shortfall in MTR revenue. Some PAYG customers use their phones to receive rather than make them, which lowers the revenue gained from these ‘low users’. If this isn’t recouped in MTR costs, the operators say the PAYG model becomes uneconomical.
As a result, they hint direly at the possibility of incoming call charges, more expensive phone/tariff bundles and the removal of handset subsidies. But would that really happen when at least one other operator is offering quite the opposite?
By the way, it’s worth noting who likely gets the most revenue from MTRs. Three is the UK’s smallest operator by customer base; it logically pays for more outgoing calls than the others and receives fewer too. Its campaign partner BT pays MTRs and doesn’t receive any back.
Call rates aren’t the full picture anyway. Ofcom says that smartphone data traffic has doubled in the last year. I use my smartphone far more for email and social networking than calls and texts – and I’m not alone, 51% of us are nowlooking for maximum of 300 minutes compared to 600 minutes last year. Mobiles are no longer just for talking. Data revenue will only increase in the future, and the big four networks might not lose out as much as they think.
Lowered MTRs might force a hike in call charges and bundle prices – or it could force competitive pricing that is to everyone’s benefit.