Wholesale mobile phone minutes should change hands between network operators for 5.3 pence per minute (ppm), telecoms regulator Ofcom has proposed. They are currently priced at 5.6 ppm.
Ofcom says that it must still regulate the wholesale prices of mobile minutes because no buyer, not even BT, has enough power to counterbalance the market power of mobile operators. The target price of 5.3p must be reached by 2011 under guidelines just issued for consultation by Ofcom.
Wholesale prices determine the cost at which one network buys time on another network. Without that process callers would only be able to telephone subscribers to their own network. Ofcom regulates the prices because it believes that the market is not developed enough for market forces to keep prices low.
"Charge controls should be imposed on the supply of [calls] by each of the five [networks], and those controls should apply without distinction to voice call termination whether on 2G or 3G networks," said the proposal.
Telecoms companies are controlled by Ofcom when they are deemed to have significant market power (SMP). This means that they control so much of their own market that normal competition cannot apply.
Ofcom has ruled that each of the mobile networks is the sole supplier of its services and can have no competition, and therefore that each network has SMP. That makes each network subject to Ofcom price controls.
"There are separate markets for wholesale mobile voice call termination in the UK by each of Vodafone, O2, Orange, T-Mobile and H3G," said Ofcom. "BT and other purchasers are unable to exercise CBP [countervailing buying power] to the extent needed to constrain charges to the competitive level."
Ofcom also announced that it will conduct a similar review into the wholesale market for text messaging. Ofcom said that the market for text messages in 2005 was worth £2.1 billion in the UK. It said that the average price of a text message is 6.3p. It said that its move was in part prompted by the French regulator's decision to cap the price of text messages.
Ofcom will conduct a review over the next 12 to 18 months, it said, but said that price regulation was not a certainty. "Reviewing a market is not the same as deciding to impose regulatory rules," it said. "In keeping with any market review, Ofcom would only impose regulation on any operator if and to the extent there is significant market power and that it was proportionate and appropriate to do so. The decision by the French regulator does not itself mean that Ofcom will come to a similar conclusion. The nature of markets varies across Europe. The outcome in the UK will depend on what Ofcom concludes as part of its review."
