In 2011, the rules governing mobile termination rates in the UK expired. These are the rates that different telecoms providers charge one another for routing calls through their systems. Regulator Ofcom (https://www.ofcom.org.uk/consultations-and-statements/category-1/mobile-call-termination-14) had already conducted an extensive review into various ways in which the system could be reformed, including some consideration of a solution that it deemed “radical” at the time: reducing the rates for mobile voice termination to zero across the board.
In the end, Ofcom decided against such a move and opted to cap mobile termination rates instead. Subsequent reviews have amended the limits, but haven’t taken the step of significantly reducing mobile call termination, or reducing it to zero. But is this the right choice, and what benefits might significantly cutting termination costs bring?
Cutting Wholesale Voice Termination Rates to Zero
CEO of Cell C, Jose Dos Santos is adamant that mobile termination rates should be cut to zero, arguing that it would increase competition and encourage new companies to provide voice services. Speaking with TechCentral (https://techcentral.co.za/interview-cell-c-ceo-jose-dos-santos/72891/) in a podcast interview he asserts that there is no real reason to keep the fees as they currently stand and that there is no real cost to terminating a call on a given network.
While this may not be entirely true for all marketplaces, the argument is a common one, with many predicting that removing rates will lead to an increase in competition and an invigorated marketplace. It is also commonly argued that a reduction in termination rates would lead to the development of new technology and an overall increase in business.
Customers, too, would undoubtedly benefit from a reduction in voice termination rates. A report published by Ofcom (https://www.ofcom.org.uk/__data/assets/pdf_file/0028/74764/vodafone_annex_b_frontier_p1.pdf) showed that when termination rates were lowered, users tended to talk for longer and benefit more from the services available. However, the same report also noted that there was an optimal level for mobile termination rates that usually stood some way above zero.
Reducing Voice Termination Rates
Extensive research has been conducted into the effects of reducing voice termination rates. In most cases, this has been carried out by examining systems in other countries in which termination rates are lower; a methodology that has as many flaws as it does advantages. Results, in most cases, are largely inconclusive. While the arguments that zeroing rates might increase competition and result in a better deal for customers still stand, there are counter-arguments which revolve around the actual cost of terminating calls across networks, and a potential reduction in revenue per minute should rates be lowered past their optimal point.
Ultimately, however, most studies and reports can only provide a general idea as to the potential result of lowering voice termination rates. The actual costs and benefits of doing so remain largely unknown and there are strong arguments on both sides. With many countries capping and reducing termination rates, the question remains: is it time to cut costs and find out once and for all what the results might be?