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Ofcom Levels Playing Field By Slashing MTRs

Gordon Kelly


Ofcom Levels Playing Field By Slashing MTRs

Yes, we've heard about the ferrets powering Virgin Media, the literal wave notifications for Google Wave, circle line planned for the LHC II, YouTube TEXTp compression system, Google Translate for animals, Toshiba 4D TV with 'ScentVision' and - my personal favourite - Apple admitting the "iPad is a massive joke" (via 39029450 49305388 00.htm?s_cid=82 CNet). On the other hand, this ruling by Ofcom must have had the UK's biggest networks wishing it was an April Fools...

Ofcom has finally bowed to pressure (notably BT and 3's Terminate the Rate campaign) to slash mobile termination rates (MTRs) from 4.5p to 0.5p by 2015. This will be done in stages, with a reduction to 2.5p by the 2011/12 fiscal year, 1.5p by 2012/13, 0.9p by 2013/14 and ultimately 0.5p by 2014/15.

For those in need of a backgrounder, MTRs have been the industry's dirty little secret for some time. Quite literally, it is a charge levied by one network to another for accessing its network and then disconnecting from it. For example, every call Orange makes to Vodafone, Vodafone to Orange, T-Mobile to Vodafone, etc etc leads to a charge to the connecting network of up to 4.7p. MTRs earned operators over £750m last year (over £2m per day).

Naturally enough, this cost is swallowed by consumers and is seen as one of the major barriers to truly affordable calling. It is also the reason you will get virtually unlimited minutes when you make calls staying on the same network (such as O2 to O2, 3 to 3): no MTRs.

Of course the counter argument is these costs all equal out, but it still hurts competition since the smaller the network, the greater the likelihood its customers will be calling rival networks and not the other way round. In particular this has stung 3 - hence the campaign - while BT suffered even more since MTRs are over 10x higher than termination rates to fixed phone lines (hence why you rarely call a mobile phone from a home phone).

Ultimately this is a hugely positive step forward for the industry and should lead to even greater competition along with a proliferation of unlimited minutes tariffs - of which we can then all start complaining about what 'unlimited' means again...

In related April Fools news this isn't one and let me put on record the great pleasure it has been working with Riyad all these years. I wish him the very best of luck with the (no doubt innumerable) projects he will have planned and can safely say: I'll miss you matey.


Ofcom Official Statement

Over and Out


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