Ofcom move threatens pay-as-you-go model

Telecoms regulator Ofcom has imposed an 80% reduction in mobile phone call termination rates, the charges one operator levies on another for handling calls from the rival's network. The new rates will be phased in over four years starting next month.From 1 April, Ofcom will place a cap on the rates charged by all four national mobile network operators - 3UK, O2, Everything Everywhere and Vodafone.The termination charge will fall from over 4p per minute currently, to 2.66p in 2011-12, 1.7p in 20102-13, 1.08p in 2013-14 and 0.69p in 2014-15.The regulator said it expects the lower termination rates reduce the cost to landline companies of passing calls to mobiles and to promote competition in the mobile market, providing customers with more choice. It added that as the volume of data traffic has increased, termination charges have become a less significant element of mobile companies' revenue.A spokesman for Everything Everywhere, the organisation behind the joint network of Orange and T-Mobile, expressed disappointment at Ofcom's decision. "Our concerns focus on the impact of the decision to our vulnerable pay-as-you-go customers," the spokesman claimed, adding that mobile phone companies are being encouraged to recover a greater proportion of their costs from retail charges."This may force us to change the pay-as-you-go model as we know it, as a large number of these customers will now become uneconomical - making the way our consumers currently buy, use and enjoy their mobiles radically different," he was reported as saying. Ofcom also said it is changing the way charges are set. For the four national mobile operators, only account costs that are incurred directly from terminating calls from other networks will be considered, while for other providers rates will need to be set "on a fair and reasonable basis".