Review of the charge control on calls to mobiles

Main milestones

• February 2001 - Consultation Document

• 26 September 2001 - Statement and proposed licence modifications

• 7 January 2002 - reference to the Competition Commission

Current Controls

• 1998 MMC Recommendations

• Charges reduced by 25% for 1999/2000

• RPI-9% for 2000/01 and 2001/02

• Controls saved consumers £1 billion

Breakdown of price of calling a mobile

BT’s ppm daytime price to call Vodafone

Price VAT BT’s keep Vodafone

20p = 3p + 3.5p + 13.5p

Conclusions in Statement

• weak competitive pressures on termination charges– calling party pays: no choice but to pay the

charge of the terminating operator– incoming call costs not a significant factor to

consumers– some evidence of substitutes and closed user

groups but insufficient– little evidence of operators competing

• termination charges excessive in relation to cost, which means high retail prices

Market definition

• Separate market for call termination on each operator

• all 4 operators with market power

Proposed licence modifications

• RPI - 12% control on termination charges

• mobile to mobile charges as well as fixed to mobile

• runs for 4 years with a review after 2

• applies to all 2 G voice calls

Regulatory proposal

• Proportionate and appropriate regulation

• Consumers will save c.£800m over 4 years.

• Peak retail price should fall from 20ppm to 14ppm by 2006

• All four operators rejected proposed licence modifications

Competition Commission Reference

• CC has six months to make inquiry in the public interest

• seeking evidence from any interested party

Contact at CC

The Reference Secretary

(Mobile Phones)

Competition Commission

New Court

48 Carey Street

London WC2A 2JT

email: mobilephones@competition-commission.gsi.gov.uk