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Ofcom to Extend Price Regulation to 3G Networks

1:44 am on March 31, 2006 | Category: Cell Phones, Mobile Devices, Regulation, Telecom Services, Wireless

Third-generation wireless services in the UK may soon be subject to the same regulatory pricing controls as 2G services, for calls made to and from rival networks or landlines.

The countryâ€™s telecom regulator, Ofcom, revealed yesterday that it hopes to begin policing 3G call termination rates starting next year, in order to protect customers from price gouging.

“Ofcom also proposes … that price controls should be imposed on dominant operators connecting calls to 3G networks as well as 2G networks,” was the wording used in an official Ofcom statement.

Such consumer protection controls were originally put into place in 2004, but applied only to 2G networks, allowing carriers to charge more for 3G call termination. The downside of such regulation, however, is its potential to reduce the revenue earned by carriers, and ultimately hurt service quality.

“We are concerned that investors currently underestimate the potential size, timing and impact of these reductions,” said analyst, Bear Stearns in a research note.

Termination charges currently generate about 2 billion pounds (US$3.5 billion) in revenue for providers, and account for about half the cost of a fixed-line to mobile phone call.

Stearns also notes that the impact of increased regulation could extend far beyond the British market alone. “With the UK already having some of the lowest termination rates in Europe, the prospect of further reductions will increase pressure on other EU countries to follow,” he commented.

Ofcomâ€™s decision on this matter still isnâ€™t written in stone, with three consultations planned to discuss options. The level of control exercised by the regulator will depend largely on these consultations, but a decision is set to be made by the end of this year.

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