By: Russ
Competition Appeal Tribunal slams Ofcom over mobile termination rates…
The CAT’s decision is here.
I have not followed this case closely. Well, I have not followed it at all, other than to maintain my firm conviction that mobile termination rates are like hospital super-bugs — they are nasty, bad for us and seemingly immune from eradication by the powers that be.
My uninformed reading of the CAT’s decision is that Ofcom made several errors in framing and deciding the issues in the dispute between BT and the mobile operators. Here is a pretty typical passage from the decision:
‘In other words OFCOM approached the dispute by asking itself whether, looking at the existing regulatory constraints imposed on the parties, there was any reason why BT (or H3G) should not pay the charges proposed by the MNOs. Any other considerations arising from OFCOM’s statutory duties were therefore relegated to the consideration of whether there were “overriding policy objectives†which should be taken into account. This approach represented, in the Tribunal’s judgment, a fundamental error as to the task facing OFCOM in determining these disputes. OFCOM failed to recognise that dispute resolution is itself a third potential regulatory restraint that operates in addition to other ex ante obligations and ex post competition law.’
I wonder what the resulting impact will be on the cost of calls to mobiles? Currently, using Skype it is 12 times more expensive to call a UK mobile than to call a UK landline (in the US and Canada - they are the same low price):
Convergence? Not where it counts…
May 21st 2008
Another example of how uncomfortable regulators are in settling disputes. Do they need more powers, redefined powers, or perhaps we should not kid ourselves in thinking regulators could ever be effective enforcers/dispute settlers …?
May 21st 2008
Sadly, I have followed this quite closely. This was quite a slap down for Ofcom.
The CAT also found that: Ofcom was wrong to dismiss the relationship between prices and costs; it mistakenly relied on conclusions to its 2004 market review without weighing arguments from the Mobile Network Operators that demonstrated that the 2004 statement conclusions were no longer valid; it failed to take account of significant changes in the market; it used a seriously flawed ‘gains from trade test’ in its methodology; its reasoning was further flawed because its argument on why blended rather than separate termination rates made sense were irrelevant to the issues in dispute between the parties; and it erred in judgement in its refusal to consider cost information gathered during the SMP market review other than for limited purpose.
The CAT will now accept further information from the parties to determine what the appropriate price for call termination should be, at which point it will remit the matter back to Ofcom specifying which rates Ofcom should fix.
Additionally, and this is worth reading, the CAT also included some guidance in its judgement for how Ofcom should have dealt with the disputes / should exercise its dispute resolution function in general (begins on page 73 of judgment).
If that wasn’t enough excitement, the CAT also handed done a judgment in a related case where 3 were trying (not for the first time) to say Ofcom was wrong to designate it as an operator with significant market power (SMP), and also wrong in imposing price controls on it. The CAT dismissed the appeal concluded that none of the arguments raised by 3 established that the imposition of a price control was a disproportionate measure. The CAT has referred the price control matters to the Competition Commission, who will determine whether any of the points raised by H3G in the case justify an adjustment to the level of the price control actually imposed.
May 22nd 2008
Aren’t incoming calls to mobiles in the US and Canada charged to the mobile account? If so, comparing US to UK is invalid. Incoming calls to roaming mobiles in Europe is the crime!
May 22nd 2008
Hi Dominic,
Incoming U.S. mobile calls are charged to both the caller and the called party, really. The point in the U.S. (and Canada, I believe) is that you have only one billing relationship — between you and your fixed or mobile carrier of choice. Wherever you terminate your calls (within these jurisdictions) should be irrelevant.
So, if I am a U.S. mobile customer, I select the tariff that best meets my needs and I know I can terminate a call on any U.S. or Canadian ‘normal’ (non-800 / non-900) number and pay the same charge whether it is a mobile or a landline.
In the UK, it is a bit of a lottery — there is no way knowing in advance (unless you know the called party really well) of knowing you are making an off-net mobile call and will pay the higher rate.
The whole issue confuses me, but it seems very odd to let each mobile carrier charge a high rate to terminate traffic on their networks when they are in the business of interconnecting people to the public network.
Jun 22nd 2008
Dear Russ,
Not only does this appeal highlight the thinking at the regulator it also shows why the problems with the Sky EPG costs are also missed. Ofcom is meant to look out for the consumer but as can be seen in both the mobile termination fees and the Sky EPG fees, Ofcom is in fact looking out for the established network owners.
Ofcom has claimed in the Rapture appeal documents that one of its core responsibilities is to protect Sky’s investment incentives in the Sky platform. There is no mention of anyone else’s investment incentives.
The problem is Ofcom either doesn’t understand what and how benefits filter to the UK consumer or there is another reason that Ofcom is happy for the UK consumer to be paying too much for calls and or for their TV services. Never mind the fact that such high charges will deter any real innovation in the market place.
Rapture received on Friday the decision from the CAT on permission to appeal. Rapture was refused but there was a clear statement that asks Rapture to submit another complaint this time with all the evidence that Rapture’s representitives had failed to submit.
Both the Sky EPG and mobile network charges all come down to the same issue. Network access charges. The rules are many and all start from the EU Directives. Ofcom seems quite happy to ignore the EU Directives and let the UK consumer have there benefits restricted.
While being no fan of the Babe type stations, they do have a point that without clear direction from the regulator how can they continue in business. Verdict, Ofcom are a waste of public money and not accountable to anyone.