New EU deal to cut mobile rates by July 2012

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The European Commission will next week adopt a long-awaited recommendation on mobile termination rates, EURACTIV has learned. The text will set July 2012 as a compromise deadline to slash these wholesale charges, with an expected indirect benefit for consumers.

The recommendation is scheduled to be adopted on 7 May, EU sources close to the dossier told EURACTIV. The text is not legally binding, but will de facto oblige telecoms companies to adapt to the new legal landscape.

After fierce lobbying from major telecoms companies and some member states (mainly Germany and Spain), the Commission decided to review its original plan, which aimed to cut termination rates across Europe by the beginning of 2012 (EURACTIV 19/02/09). Industry has been given an extra six months to adopt the proposed changes, which are expected to impact upon the revenues of mobile services.

Indeed, the recommendation is aimed at bringing down mobile wholesale rates to the level of fixed charges. This means that the fees one mobile operator can charge another to carry a call will fall from the current EU average of €8.55 cents to between €1.5 cents and €3 cents per minute.

The three-year period (until July 2012) that EU national regulators will be given to apply the new recommendations will be extended by another two years for regulators which are “able to prove they do not have the technical abilities to implement the changes,” the source explained. 

However, the exemption exclusively concerns the application of the new methodology to calculate costs, but not its outcome. This means that by July 2012, all EU regulators will have to bring mobile termination rates down to a maximum of €3 cents, whatever methodology they apply. 

The Commission is pushing for a methodology which is based only on the costs of carrying a phone call. According to the EU executive, mobile operators currently include in their rates costs which have nothing to do with interconnection services, “such as headquarters bills”.

Critics of the new measures say that they could lead EU mobile operators to charge customers to receive calls and not just to make them, as a way of offseting the expected lost revenue.

On the other hand, Brussels considers that cutting mobile rates will bring “additional revenue for fixed operators of at least €2 billion over the next three years”. Since many EU telecoms operators are integrated, offering both mobile and fixed services, they will balance the losses, runs the Commission’s argument. The extra revenue might also be used to fund fibre connections, widely seen as the future of telecoms (EURACTIV 04/02/09).

Mobile termination rates are a wholesale connection charge that operators have to pay to transmit a phone call towards a competitor's network.

In the EU, every call made to a customer on a different network (i.e. from Base to Proximus in Belgium, or from T-Mobile to E-Plus in Germany) costs the caller's company an average of €8.55 cents. For international phone calls, the fees are higher. These charges are reflected in the final price charged to consumers.

In other developed countries such as the US, termination rates do not exist, but operators directly charge consumers to receive calls.

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