On 27 June 2017 Ofcom issued a consultation on its review of the wholesale mobile call termination markets for the period 1 April 2018 to 31 March 2021. The last mobile call termination review was published on 17 March 2015 and set out Ofcom's conclusion for the period 1 April 2015 to March 2018.
Mobile call termination ("MCT") is a wholesale service provided by a mobile communications provider ("MCP") to connect a call to a customer on its network. When MCPs allow their customers to make calls to UK mobile numbers, the MCP incurs a wholesale charge (called a mobile termination rate ("MTR")) for each call that must be paid to the terminating MCP. MTRs are on a per-minute basis and are currently subject to regulation. This aim of this review is to assess competition in the provision of MTR and to review current regulation to determine appropriate regulation for the current market.
Ofcom propose a continuation of the previous definition of the markets, on this basis there are currently 80 markets and each market corresponds to an MCP able to set a market termination charge for any call to the UK numbers allocated to it by Ofcom. Each MCP has significant market power ("SMP") with respect to the wholesale market for terminating calls to the numbers it controls, this is because for the number range that each MCP controls they can price the termination for calls to those numbers or refuse to allow other providers to connect calls to these numbers. The fact that each MCP has SMP underpins Ofcom's approach to regulation in the area.
Ofcom's concern is that in the absence of regulation MCPs will have the ability to refuse to supply MCT or fail to do so on fair and reasonable terms and could also charge excessively high MTRs. Ofcom's suggested regulation provisions now impose only two of the four remedies that are currently imposed in this market, these are:
An access obligation: An obligation to provide network access on fair and reasonable terms and conditions
A charge control: A single maximum cap on MTRs based on the long-run incremental cost ("LRIC") of MCT, LRIC was used in the previous period.
Ofcom considers a charge control based on a hypothetical efficient mobile provider to be the most efficient method for preventing excessive MTRs, this will apply to all calls to UK mobile numbers regardless of origin. The proposed charge control would mean that the current cap of 0.5p per minute would fall by around a tenth in real terms by April 2021.
Ofcom proposes to implement the charge control and assess compliance by:
- Indexing the MCT charge control using a CPI-X formulation;
- Setting a three year charge control between 1 April 2018 and 31 March 2021;
- Setting a single MTR cap for all MCPs with SMP;
- Setting a maximum cap charge control; and
- Aligning the cap to the forecast LRIC for each year of the charge control.
Ofcom invites comments on removing two of the four current provisions by 5 September 2017. Ofcom plans to publish a statement by March 2018.
To access the full consultation click here.
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