Terminate the Rate campaign is calling for termination rates to UK mobiles to be lowered. It is operated by 3 and supported by various organisations including BT, Post Office, GMB, National Union of Students and Age Concern.

SilentCallsVictim wrote on Aug 10^th, 2009 at 9:19am:

No because the termination charges made by 3 to BT and other landline and mobile providers would only be able to be reflected in lower retail costs on these providers' tariffs. Whether they would wish to pass on such a saving is another matter, but for the purpose of this discussion, let us assume that they do.

The end result would be that retail charges to 3 mobiles from other networks would be reduced, but 3's retail charges to other landline and mobile networks would not. So 3 would be conceding to a drop in revenue for the benefit of its competitors!

The basis of free and fair competition in telecommunications services is difficult, because what at first appears to be a simple solution actually works arse about face to the laws of economics.

SilentCallsVictim wrote on Aug 10^th, 2009 at 10:02am:

There is surely a limit to how much it could lower its termination prices. For those networks that don't pass on the saving to their customers (callers), such a move from 3 will just end up as handing those competitors an increase in revenue.

3 will then have a tendancy to raise it prices to its customers whilst others' will be driven down, albeit a tiny amount. That's bad for 3!

Any blanket reduction in termination charges will force all retailers to adjust their prices. Indeed, if termination charges to all mobile networks were lowered, then the amount of revenue they generate directly would have to go up. So a simple shift in where revenue is coming from will mean that one cancels the other out. Now, if we introduce the laws of competition into the equation, there will now be a greater tendancy for retail prices to be forced down because networks will have far less outgoings to pay for termination charges.


SilentCallsVictim wrote on Aug 10^th, 2009 at 10:02am:

Because if it cannot absorb the loss of income, then it would have to increase price to subscribers of its service. In all practical sense, the change that the TTR campaign is hoping for will be a shift in that callers pay less and receivers pay more.

But, if none of the other networks wish to participate in reducing their termination charges, then 3 will be left to increase the retail cost of its devices and calls and texts on its network whilst others maintain theirs about the same. Thus, consumers, who generally act in their own best interests, will go for the cheaper services (cheaper with respect to themselves, that is) from the other networks.


SilentCallsVictim wrote on Aug 10^th, 2009 at 10:02am:

But with termination charges there is no assurance of the power and effect of competition because cannot be competition in termination charges. Call retailers will can only drive down their charges so far, they have still to cover the termination charges. As I have already covered, individual networks are loathed to reduce their termination charges because there is no competitive advantage to do so.


Take the supermarket example again. If customers found that some third party were paying for or part of their shopping bill, the supermarket would have far less pressure to run promotions like buy one get one free. Why does it need to drive down prices when the consumers doing choosing the products aren't the ones paying?

Free market competition works best when the person doing the choosing is the one paying. Simple.

Thus, the TTR campaign is more one of principle that termination rates must come down for a fairer deal for consumers overall. 3 cannot be alone in this which is why all must do it.

SilentCallsVictim wrote on Aug 10^th, 2009 at 7:31pm:

I disagree and would like to re-emphasise and elaborate on my previous message:


Dave wrote on Aug 10^th, 2009 at 5:47pm:

I think of these things in steps. The sentences before the bit I've put in bold (part of which you quote) put asside the principle of free market competition driving down prices. So for a monent, forget competition theory and consider that lower termination rates will simply result in higher retail charges.

Now introduce the retail competition theory. In simple terms, the lower termination charges will give more leeway for competition to drive down retail prices.


SilentCallsVictim wrote on Aug 10^th, 2009 at 7:31pm:

Such a move would require BT subscribers to understand that calls to 3 mobile numbers are cheaper than other networks. We are already engaged in a campaign which is largely as a result of misinformation and lack of clear pricing by all telephone users.

At one time, calls from BT lines to different mobile networks cost different rates. The rates to the four main GSM networks were aligned leaving 3 costing more. The current rates on BT Calling Plans are all aligned. So any variations in termination charges are no longer reflected in the retail charges made.


If BT and 3 were to do this, then there is likely to be the possibility that other providers will go running to Ofcom. Let us consider the implications of such an action: BT will have an inherent advantage over other landline providers like Virgin Media and Talk Talk. They won't be able to reduce their retail prices to compete with BT. I'm quite sure that some competition law will come into play here. It's likely that mobile networks will object on a similar basis.


SilentCallsVictim wrote on Aug 10^th, 2009 at 7:31pm:

The whole principle of high mobile termination charges, no standing charge in a traditional sense to mobile users and increase in barriers to landlines has lead to a shift to mobile (and mobile only) usage. This is bad in principle and one I have grave concerns over. This means us paying more for telecommunications services as a whole.

There is no such thing as a free lunch and the way in which mobile providers hand out SIM cards like boiled sweets has lead to this situation.

This behaviour can be likened to the banks that entered into risky mortgage lending. The difference being that the economy is now in a downturn whereas with telecommunications the cost of services overall is being driven up.

Dave wrote on Aug 13^th, 2009 at 12:13am:


That may be even more equivocated than 3's position

It was rumoured that 2degrees and Vodafone made a secret deal on termination fees

Then the NZ regulator Com Com's office threatened legal action and took an article about the details offline

http://www.nbr.co.nz/article/com-com-orders-vodafone2degrees-pricing-story-offli...

and the story is still evolving:

http://www.nbr.co.nz/opinion/chris-keall/2degrees-challenges-commerce-commission...

Dave wrote on Dec 4^th, 2009 at 6:41pm:

After gathering myself to write an angry message to the very large number of MPs which it is claimed had joined this campaign in the short time that the current session of parliament has been running, I find that there is no such EDM.

The link given is to an EDM tabled on 19 May 2009, in the previous session. It has now fallen. It has not been renewed. A quick glance fails to identify any current EDMs on topics of interest to this forum.

It is worth noting that informed independent contributors to the piece in "Rip Off Britain" about TTR endorsed my fear that the implicit and vital assumption that the lost revenue would not be replaced is most likely false. A representative of 3 made a noble, but unconvincing, attempt to sustain the argument that competition was a panacea for any unintended consequences of regulatory intervention. He failed however to offer any explanation of why the effect of competition could not be used to achieve the desired result - by BT and 3 agreeing to a lower (or zero) rate so that the threat of 3 capturing business from its competitors, by being cheaper to call from BT, would compel others to follow. He claimed that 3 could survive the loss of revenue if others did the same (i.e. without it gaining a competitive advantage), but seemed unable to explain why it would not be able to do so if this did provide it with a competitive advantage.

A senior representative of the FSB posing as "the consumer's friend", leading a consumer campaign, made an entertaining spectacle. I will say no more.

More convincing evidence of how "terminating the rate" will not lead to what most of us would see as the inevitable (and perhaps desireable) effect of increasing the cost of using a mobile, whilst reducing the cost of calling it, is required before I could see the campaign as having any merit.

A proper debate about shifting the burdon of cost onto those who use mobiles, rather than those who call them, would be a most worthwhile exercise. This pretence that it is just a one-way street does little to help.

It is suggested that there are two aspects to this. The first is inter-operator mobile-mobile calls. In this case intra-, rather than inter- network calls are cheaper for operators and therefore favoured in pricing. This makes it difficult for new players to enter the market and must therefore be seen as anti-competitive. One assumes that this is the basis for 3's objection.

I would be interested to review the history of the efforts that have been made to get action taken on this, including Ofcom's response to competition disputes and the determinations of the Tribunals that have ruled against 3. Whatever grounds were given for maintaining the status quo need to be understood before they can be attacked. Taken at face value 3 appears to have a good case, which one assumes would have been upheld under competition law. One would need to confirm that the reasons for its failure were unjust or improper in some way.

I agree that if there is an equivalence of incoming and outgoing inter-network traffic then the net effect is zero and termination of the rate need have no effect on the cost of using a mobile. That would also mean that the cost of calling would not be able to reduce, as it is suggested that each operator would simply keep the money for themselves, rather than them all passing it around between them.

The whole TTR argument however is that call charges would be reduced, with no compensating increase elsewhere. As the FSB representative said on TV, revenue would be taken out of the mobile industry to be spent elsewhere in the economy. We then get the fantastical explanation that this will have no effect on the mobile industry in terms of jobs, profitability, providers, agents or anything else. The money will all come out of this imaginary back hole called inefficiency, where banknotes are allegedly simply burnt rather than being spent to the advantage of someone. I am always amazed that this element of any organisation only appears to exist when others are asking it to suffer a loss of income. When money is actually being saved, efficiency always seems to be seen in job cuts, reduced profits and tighter terms for suppliers and agents (N.B. this list is not meant to be exclusive).

Those who understand the market and the big four better may be able to confirm that they will be content to see the industry contract or that there is sufficient unmet demand for them to fill the gap in their earnings by expansion. Until this has been properly explained to me, I cannot dismiss the threat that efforts will be made to simply recoup the loss of income in other charges.


The second (and perhaps clearer) aspect is the termination rate applied to calls originated from landlines. I understand that there is not the same reciprocity here. Termination of this rate would be a clear loss to each of the mobile operators with a corresponding benefit to the landline operators. The situation with 0870 has shown how quick the operators are to pass on savings in termination charges to their customers. Ofcom is now in a stronger position than previously to enforce price reductions on those who do not have SMP, although its "light touch" approach towards intervention will doubtless remain in force. This could change if our next government is strongly committed to regulatory intervention and legislates to make Ofcom bigger and stronger, or alternatively abolishes Ofcom and regulates directly from an ever bigger Department for Business.

Let us simply assume that landline callers do enjoy some (perhaps modest) reduction in the cost of making calls to mobiles in the event of TTR being successful.

For the mobile operators there would be a simple reduction in revenue. There is no compensating benefit, indeed there is the distinct possibility of having to increase network capacity in order to carry additional traffic generated by the assumption (or reality) that calling a mobile is no longer charged at a premium rate from a landline. Without the lengthy discourse given above, I would simply invite anyone who tells me that the mobile operators will not attempt to recover the missing money in some way to "pull the other one".

Terminate the Rate has today proclaimed BT delivers on Terminate the Rate promise.

It says that the evening rate is down 24% and the daytime rate is down 13%. However, this does not take into account the 12.5 pence Call Set-up Fee, whole minute rounding and rounding each call up to the next whole penny.

In actual fact, the price of a 1 minute evening call has dropped by 10 percent and a 3 minute call at the same time will cost 14.7 percent less. These are hardly anywhere near the 24 percent headline figure now are they?

See my blog for more on this: BT reduces cost of ringing mobiles; Terminate the Rate gets hopes up on savings