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Special report: Oftel unpacks the big stick

Mobile telcos to face monopoly watchdog

Telco watchdog Oftel yesterday announced it would refer mobile phone operators Orange, One2One, BT Cellnet and Vodafone to the Competition Commission over their refusal to cut the cost of mobile calls to rival networks.

In September Oftel published its planned price caps, 12 percent on the RPI (retail price index) of mobile-to-mobile calls over four years, which could save customers as much as £800m.

Oftel's research found the cost of a call from a fixed landline to a mobile is 24 pence for three minutes, while the same length call between mobile networks worked out to 60 pence. Around 60 percent (39p) of this cost was made up of the termination charge.

The report found termination charges were far in excess of the actual cost, but said there was little incentive for operators to cut these profitable charges.

Oftel's director general David Edmonds said customers still needed "protection from excessive pricing" and added that customers had "no choice" which network they used to make mobile-to-mobile calls.

But all four mobile operators argue that there was no evidence of consumers adapting their behaviour (that is, using an alternative to their mobile) "in response to the price of calling mobile phones sufficiently to place competitive pressure on call termination".

BT Cellnet also added consumers were aware of these charges and continued to use their phones anyway.

But the fact consumers still chose to use their phones did not, Oftel decided, mean the mobile market was competitive. One2One disagrees.

"One2One competes vigorously against the other operators and faces constant ownership pressure to operate effectively. Applying charge controls, in this situation, can only weaken One2One in its long-term ability to continue to invest in the network and compete," said the company.

Orange and BT Cellnet simply said they had "not consented to the proposed modifications".

"I regret that operators have rejected our measures, as our proposals are proportionate and fair for consumers and industry alike," said Edmonds. "Oftel will now ask the Competition Commission to consider whether it is in the public interest for termination charges to be regulated."

The Competition Commission will have six months to be debate the pricing policies, with an option to extend discussion for a further six months. Operators could then face legal action if they refuse to comply with the Commission's decision.

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