Phone Firms are forced to cut cost of calling Mobiles

THE cost of calling a mobile phone from a landline or other mobile networks is to fall by more than 3p a minute by 2014.

Critics have long accused major networks such as O2, Vodafone, Orange and T-Mobile of overcharging. They say the firms have made billions in profits from unfair charges.

Now telecoms regulator Ofcom has ordered an 80 per cent cut in the so-called termination rate which is the fee a mobile network charges when their customer receives a call.

The actual cost of handling an incoming call is a fraction of a penny. But networks charge up to 4.48p a minute.

Ofcom said the rate should fall to 2.66p a minute from April with further staggered cuts to 0.69p by 2014.

Although the reductions will be welcomed by consumers, they will not come as quickly as hoped.

And yesterday, the networks made it clear that they will hit back at any attack on their profits by changing pay-as-you-go deals. This is likely to mean a rise in the cost of mobile handsets and new fees.

Some raised charges in January or introduced fees for services such as calling voicemail or receiving paper bills. BT, which pressed for price cuts under the banner of the Terminate the Rate campaign along with 65 other organisations including the Three network, welcomed Ofcom's decision.

John Petter, of BT, said: 'Ofcom has made some worthwhile reductions in mobile termination rates, which will benefit customers.'

Ernest Doku, at price comparison website uSwitch, said: 'Today's ruling will affect anyone who dials up a mobile phone number, be it from a mobile or landline. Consumers have been unwittingly lining the pockets of the mobile phone 'cartel' with billions of pounds.

'It is still disappointing that Ofcom has not taken on board the European Commission's recommendation to reduce these rates in half the time. Nevertheless, this is a clear victory against the bully boys.

'Network rates are going to be virtually halved almost immediately, making it in theory much cheaper to call a mobile.

'But in reality, the networks may look to introduce charges elsewhere to make up for the loss in income.'

Vodafone said it would be necessary to put up charges for pay-as-you-go customers. It said: 'We are really disappointed that Ofcom has ignored the evidence that termination rate cuts will mean higher costs for pre-pay customers.'

Call charges are made up of two elements: the price charged by a network or landline firm to send an outgoing call plus the termination charge, which is imposed by the receiving network to connect the call.

From The Daily Mail, 16 March, 2011