Oftel Back Vodafone Over Chapter II Infringement Claim

Oftel yesterday published the conclusion to an investigation examining whether Vodafone infringed the Chapter II prohibition of the Competition Act in relation to the disconnection of Floe Telecom’s services.

Floe alleged that Vodafone periodically suspended Floe Telecom’s GSM Gateway services on the grounds of unlawful activity, yet still permitted GSM Gateway services by others, including Vodafone’s own service providers.

Oftel does not consider that Vodafone’s disconnection of Floe’s services constitutes an infringement of the Competition Act.

Floe Telecom operates ‘public’ GSM gateways, technology which exploits low on-net mobile call charges and bypasses the high costs of fixed-to-mobile calls via the fixed-line network. They allow calls from corporate telephone systems to be routed directly to a GSM handset over a GSM link rather than the local loop. The GSM gateway acts like a ‘fixed’ mobile phone containing many GSM SIM cards.

When a company installs a GSM gateway in its telephone systems, calls to mobile numbers are detected by the internal exchange and routed through the appropriate SIM card within the GSM gateway. The mobile network detects that a mobile to mobile call is being made and the gateway SIM card is charged a mobile-to-mobile call rate.

The difference in calls costs is significant, and represents a big drop in profits for the networks - hence their determination to remove the threat.

Under current regulations, GSM gateways are technically illegal. This is because they not covered by the Wireless Telegraphy Act of 1949, which governs the use of telecoms equipment in the UK.

Floe Telecom appears to be in the hands of the receiver and looking for a buyer.