Ofcom launches enquiry into mobile phone charges

29 August 2008 / by Rachel Mason
Ofcom has launched a full scale enquiry into the UK's £15bn a year mobile phone industry to in order to identify 'whether and how regulation needs to adapt to a changing market'.

There are now more than 70 million mobile phones in the UK. Eighty-five per cent of the adult population have a mobile, and it is now more likely for homes to have a mobile phone than a landline.

The UK also has the most competitive mobile phone industry in Europe – there are five operators and a number of virtual network operators competing to offer services – the industry is responsible for 51 per cent of overall retail revenue for telecoms in the UK.

“Mobile communication is now a central feature of modern life," said Ofcom’s chief executive, Ed Richards. "As our flourishing mobile sector evolves, we want to help maintain strong competition and innovation alongside consumer protection."

Ofcom says the aim of its enquiry is to insure consumers get the best choice and value for money whilst being protected from inappropriate practices like mis-selling. It also wants to see the industry driven by vibrant competition and to continue to thrive and innovate in order to reflect the "changing needs of citizens, consumers and the industry".

One of Ofcom's first ports of call is to extend coverage within the UK; "both to address so called “not spots” in 2G and to build coverage in 3G."

Ofcom says it is also concerned with the 10 per cent of mobile phone customers that are not happy with their service.

"Ofcom is concerned that complaints by consumers about mobile services appear to be rising," says the initial consultation document. "We are looking at how to ensure that rules to protect consumers are clear, effective and relevant, given the rapid changes in technology."

And, most controversially, Ofcom says it is looking into the charges levied by the operators. "In 2007, Ofcom set mobile termination rates, the charges that operators make to connect calls to each others’ networks, to come down year on year.

"Ofcom’s consultation asks whether this approach to regulation is appropriate for the future or whether there are more attractive alternatives."

Although Ofcom has not specified what these alternatives may be, it is thought the regulator could be looking at the 'all you can' type packages seen in the US and Germany.

If this system were to be employed, the networks would see a massive drop in profits; the prices mobile companies' charge to access each other's networks currently account for around 20 per cent of revenue.

"With significant market and technology developments underway, now is the right time to ask some tough questions about the future approach to regulation," said Mr Richards.

©Fair Investment Company Ltd