BPN 1141 Tough talk for telcos by two EU ladies

Lower charges, greater consistency, more competition; that is the matra of the two tough female commissioners of the European Commission, Viviane Reding (photograph left) and the iron lady Neelie Kroes (photograph right). They have asked the Commission to have a round of consultations on bringing down mobile phone tariffs in Europe. In the past years the telcos were forced to bring down costs of telephone calls from abroad. Recently the telcos were asked to bring down the costs of SMS originating from abroad.

Now the Commission, after assessing over 770 regulatory proposals by national regulators over the past 5 years, warned that price regulation of termination markets across Europe lacks consistency. It said that gaps between fixed and mobile termination rates and between mobile termination rates imposed by national regulators cannot be altogether justified by differences in the underlying costs, networks or national characteristics. This could have the following negative effects:
- Legal uncertainty and increased regulatory burden for operators providing cross-border services.
- National regulators bringing down mobile termination rates in their country risk punishing their own mobile industry if a neighbouring regulator still allows higher rates.
- Investment in new networks and services hampered if operators face different regulation in every country.

At present, fixed operators and their customers are indirectly subsidising mobile operators by paying higher termination rates for calls made from fixed lines to mobiles. This cross-subsidisation is estimated at €10 billion in Germany for 1998-2006 (WIK Consult) and €19 billion in the UK, Germany and France for 1998-2002 (CERNA-Warwick-WIK).

The Commission yesterday presented a draft Recommendation for convergence of termination rates in Europe, including clear principles on which cost elements should be taken into account when national telecoms regulators determine termination rates, an efficient costing methodology, and symmetric regulation (where the same price caps apply, within a country, to mobile and fixed operators, respectively). This will help foster an effective regulatory environment and avoid distortions such as cross-subsidies from fixed to mobile consumers. The advice of the European Regulators Group (ERG), which has made several attempts towards more consistent regulation of termination rates since 2006, was taken into account by the Commission in the draft Recommendation and the Explanatory note.

The Commission will issue the final text of the Recommendation on the regulatory treatment of fixed and mobile termination rates in October under article 19 of the Framework Directive of the EU Telecom rules, which allows the Commission to further harmonise the application of EU Telecoms rules in the single market to promote competition and consumer benefits. Member States have to ensure that national regulators take "the utmost account" of Commission Recommendations.

Blog Posting Number: 1141

Tags: telecommunications, mobile termination costs