EU moves to cut mobile phone termination rates

The European Commission launched a new assault on what it considers to be rip-off costs in mobile telephony Thursday, this time setting its sights on mobile termination rates.

Unlike earlier moves against mobile roaming charges, which involved setting price caps, the latest initiative recommends that national telecom regulators in the 27 European Union member countries take action.

Termination rates are the wholesale fees phone operators charge each other for connecting a call to its network. The fees are then passed on to consumers but they are invisible.

"Unlike roaming rates, this ripoff is not obvious to consumers because it is built into charges that operators offer to consumers," said Competition Commissioner Neelie Kroes at a press conference to announce the initiative.

Mobile termination rates are up to 10 times higher than those charged between fixed line operators, the Commission said in a statement. They range between EUR0.02 (US$0.03) and EUR0.15 per minute, compared with EUR0.0057 to EUR0.013 per minute for calls from a fixed line.

The aim is to reduce mobile rates to between EUR0.015 and EUR0.03 per minute across the E.U. by the end of 2012. This will result in a saving of EUR2 billion per year for consumers, the Commission believes.

Unveiling the drive to reduce these costs, Kroes described the fees charged at present as a "cash cow" for the mobile operators, and said they should be based on the real cost that an operator incurs to establish the connection with another operator.

"Bringing down termination rates to an efficient level will increase competition to the benefit of European consumers," she said at the press conference.

Telecom Commissioner Viviane Reding said the difference between fixed and mobile termination rates "is not in line with the increasing convergence between fixed and mobile telephony and can lead to serious distortions of competition between Member States and operators."

The artificially high mobile termination rates, which are set by operators but approved by their local telecom regulator, are effectively a subsidy that gives the greatest benefit to the largest mobile operators, Kroes said.

ETNO, the European telecommunications network operators association, described the planned cuts in rates as "drastic" and warned that they would hinder the telecom industry's ability to invest and develop innovative packages for customers, said its director Michael Bartholomew.

ETNO said there is no need for the Commission to intervene. Mobile termination rates have already been reduced by 40 percent over the past three years throughout the E.U., it said, and will drop by a further 40 percent over the next three years, according to gradual reduction plans established by national regulators.

But Kroes insisted that leaving it up to national regulators wouldn't bring the variety of rates in different countries into line. While mobile termination rates in Cyprus stood at EUR0.02 per minute, Bulgaria has a rate of EUR0.15. Germany, the largest country in the E.U., is not far behind Bulgaria, she said.

"Only a rigorous and harmonized approach to regulation will ensure that the existing distortions of competition are removed in the whole E.U. and that innovative new products combining fixed and mobile calls will emerge," Kroes said.

In the future, the Body of European Regulators for Electronic Communications (BEREC), will handle this sort of action. The BEREC is a pan-European body with members from the 27 national telecom regulators that will work in conjunction with the Commission to forge a level playing field for operators as well as users.

The BEREC's creation is part of the so-called telecom package of reforms that is currently held up by a dispute over a separate part of the package.

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