Ofcom has announced that starting from next month, it will place a cap on the rates charged by all four national network operators.
This price cap will mean an immediate reduction from next month in the termination charges from the current rate of over 4p a minute to 2.66p a minute. Termination rates are the charges mobile phone companies bill their rivals for handling calls from their networks and as far back as 2009 BT and Three have been looking to change things. However the reductions will continue until April 2014 when charges will be reduced to 0.69p per minute, which will be equivalent to an 80 percent reduction. Currently O2, Vodafone and Everything Everywhere (T-Mobile and Orange) charge customers 4.18p a minute while Three UK charges 4.48p a minute.
Ofcom also expects that the reduced charges will promote competition in the mobile sector as operators will have more pricing flexibility and will be able to increase the range of packages available to consumers. It will not be only mobile customers who will benefit however as Ofcom expects these savings to be passed on to consumers in the competitive UK landline market as lower termination rates will also reduce the cost to landline companies. Some operators have already promised to lower their charges.
The regulator said that while mobile phone companies will lose money from the reduction in charges, they are gaining from a growing trend towards customers using data services, such as text messaging and accessing the internet from their mobile phones. So while they may be losing money on calls, for mobile operators traditional calls are becoming less and less important in terms of revenue and this is likely to continue in the coming years - so don't feel too sorry for them.