Today, Ofcom has published its statement Mobile call termination – Statement (the “Statement”) in which it has determined that the five Mobile Network Operators (the MNOs), Vodafone, T-Mobile, O2, Orange and Hutchison 3G UK each have Significant Market Power (SMP) in the market for termination of voice calls on their respective networks.
Ofcom has, as a result of these determinations, imposed relevant regulatory obligations on all five MNOs including a wholesale charge control. These charge controls only apply to traffic for which the MNO in question sets the termination charge (and thus currently exclude ported-in minutes – see below).
This consultation concerns a proposed modification to those charge controls on the five MNOs. As part of the responses to the consultation that led to the Statement, Ofcom received representations relating to the impact of indirect routing for mobile number portability on the effective termination charge (i.e. an MNO’s average termination charge, taking into account revenue from termination on ported-in numbers as well as from directly routed minutes). As Ofcom explained in the Statement, (at paragraphs 9.229 – 9.235) this consultation document responds to the concerns that have been raised.
Present mobile number portability (MNP) arrangements in the UK involve indirect routing of calls to ported-in numbers. When a call is terminated on a number ported-in from another MNO, the originating operator (fixed or mobile) pays for termination at the rate set by the donor MNO (where the donor operator is the MNO to whom the number was originally assigned). The recipient network therefore receives the donor’s termination charge rather than its own. However, the termination rate(s) that an MNO receives on ported-in minutes is not taken into account in assessing its compliance with the charge controls set out in the Statement. Direct routing of calls to ported-in numbers would mean this issue would not arise as each MNO would receive its own termination rate regardless of whether the number called has been ported-in.
The arrangements for number portability in the UK (both fixed and mobile) are the subject of a separate consultation “Review of general condition 18 – number portability” published in November 2006 (the “November Consultation”). That consultation also outlined proposals in relation to mobile port lead times.
The consultation document on number portability set out a number of different options for consideration including a proposal that the telecoms industry (fixed and mobile) could introduce direct routing arrangements using an All Call Query/Common Database (ACQ/CDB). Ofcom plans to publish its follow up to the November Consultation later this year. The financial impacts of the current charging arrangements for calls to ported-in numbers will continue unless and until direct routing (or other suitable) arrangements are put in place. Ofcom cannot determine yet when this might be, not least because this matter is still the subject of consideration following the now closed consultation.
The disadvantage of the existing charging mechanism for calls to ported-in numbers is that, for as long as the current charging and routing arrangements for calls to ported-in numbers apply, the MNOs will receive an average effective termination rate (i.e. taking into account both ported-in minutes and directly routed minutes) that differs from (i.e. could be higher or lower than) the ceiling for wholesale termination charges set by Ofcom in the Statement.
Further, because of these arrangements, and their interaction with the charge controls, there is the potential for distortions to: (i) the incentive to encourage subscribers to switch from one network to another; and (ii) the incentive to encourage subscribers that do switch to port/change their number.
Ofcom considers that it would be appropriate to propose modifying the charge controls to take account of these disadvantages, and therefore, in this consultation document, identifies four potential options it could consider. They are:
- Option 1: Do nothing;
- Option 2: Seek a self regulated inter-operator financial settlement system with respect to mobile termination revenues;
- Option 3: Change the level of the charge controls applicable to each of the five MNOs; or
- Option 4: Modify the mechanics of the charge control applicable to each of the five MNOs.
Ofcom’s preferred approach is Option 4; the amendment to the charge control, as in Ofcom’s view it is the most appropriate option to address the disadvantages of the existing charging arrangements (as outlined above) for ported-in numbers. In particular, by adjusting the charge control so that the average effective termination rate aligns with the levels of the charge control set out in the Statement, it improves the accuracy and effectiveness of the charge control in this respect. Ofcom considers in detail the advantages and disadvantages of each approach in Section 4 of this document.
This document sets out the rationale for the proposed modification to SMP services conditions MA3 and MA4 set by the Statement, the charge controls imposed on each of the five MNOs. This document includes a full regulatory impact assessment.
In March 2007, Ofcom published a consultation Amendment to Charge Control on Mobile Network Operators considering options to address payment of donor network termination rates for calls to mobile ported numbers. The options included amendments to the charge controls on mobile call termination (MCT). The consultation process was subsequently suspended pending the outcome of appeals of the MCT charge controls to the Competition Appeal Tribunal (CAT).
Now that the MCT appeal process has concluded, Ofcom has decided not to re-open the consultation primarily because so much time has passed since the issue was initially considered.
In March 2007, the MCT charge controls had a full four year term to run and so any change made soon after consultation at the time would have had a material impact on termination revenues across a large part of the life of the controls. Re-opening the issue now would require further consultation before resolution to reflect changed circumstances, including the impact on mobile termination rates of the Competition Commission and CAT conclusions. The time required to complete this process would mean that any amendment could only be effective for at most the final year of the current MCT charge controls (April 2010 March 2011), and possibly less. Any change for the final year would only have a relatively small impact on mobile termination revenues.
We have concluded that the most appropriate approach is to leave the current arrangements in place until the end of March 2011 and address the issue for the period after that through the current MCT market review. This will ensure that any appropriate measures identified will be effective from April 2011 and for the full duration of the framework for MCT on which we are currently consulting.