Our concerns in presenting this document
arise from the enormous cost to users of international fixed-to-mobile call
termination. Costs we find to be unjustifiable and which are an abuse of
market power.
As one example, we found that for a large European business user, something
like 15% of calls by volume to other European countries were to mobile networks.
However, it was something like 45 to 65 per cent of the cost of calls to that
country. This sort of ratio of cost is unsupportable. We can get trans-Atlantic
traffic for a couple of cents, then have to pay seven to ten times that amount
to terminate on a mobile network.
When we try to negotiate a reduction in such prices, we simply cannot. The
prices are fixed.
A second concern is that some fixed network operators, those not subject
to regulation on call termination prices, are copying the mobile network
operators. They are under some financial pressure and see raising domestic
and international call termination rates as an easy means to increase revenue.
This sort of contamination from the mobile markets is deeply troubling and
something that must be contained and contained quickly.
We recognise the financial problems of the sector. It is described in different
ways, such as "fragile". France Telecom said that the "house was on fire",
though the state pompiers seem to be on hand.
These financial problems are aggravated by the abject failure of the operators
to find new revenues from mobile data, the operators are holding on like
grim death to old revenue, not least to fixed-to-mobile call termination.
It is understandable, but that does not make it acceptable.
The mobile network operators need to accept that they have lost this argument
and to abandon their campaign of delaying and obstruction.
The origin of the problem lies in the decisions to exercise forbearance in
the regulation of mobile network operators. It was an understandable approach
made in the hope of competition; a false hope. Gradually competition authorities
and regulators have been forced to recognise that mobile telecommunications
was not a single indivisible market nor was it competitive. Mobile termination
is separate and distinct, a market in its own right. Moreover, it was
recognised being a different market for each operator.
We welcome the consumer alert issued by the FCC earlier in the autumn. The
subsequent Notice of Proposed Rule Making (NPRM) allows the FCC to undertake
a thorough analysis of the problem of charging for termination on foreign
mobile networks. On behalf of US users we support this action. We also believe
it will help users in other countries.
A significant number of European regulators have examined or have already
made determinations to regulate prices for domestic prices. These will be
reinforced by the new regulatory package taking effect in July 2003. We would
like to see action on domestic prices extended to international calls. In
particular, to use European terminology, within the internal market. It is
going in the right direction, but too slowly.
The operators exploited the asymmetry of regulation of termination charges.
They took advantage of low regulated prices for fixed termination and offered
their customers competitive prices for call origination while ramping up inbound
calls from fixed networks.
Faced with high domestic termination rates to mobile networks, some fixed
operators resorted to refiling traffic with foreign operators, sometimes within
the same commercial group. This practice of "tromboning" did not last long.
We quickly saw the development of separate international termination rates
for fixed and mobile termination.
We need to be clear that are talking about voice termination. It is neutral
in terms of technology, encompassing 1G, 2G, 3G and GSM, CDMA, PDC and so
on. They are all the same.
If video telephony takes off, it will be a different sort of termination.
But otherwise, the introduction of new technogologies does not affect
the voice telephony termination.
The competition law analysis of fixed-to-mobile call termination is the
leveraging of market power from a call termination market into a foreign
call origination market. It is clearly an abuse of a dominant position.
As users we can negotiate international rates for fixed telephony. However,
we cannot do anything with the "surcharge" for mobile. Therefore we have had
to go down the regulatory route. It is slow, but ultimately effective. We
believe that we are winning our case and that it is increasingly obvious that
all the mobile network operators are doing is delaying, for the understandable
purchase of making all the money they can.
There are also some national abuses, by the addition of further surcharges.
INTUG is based in Belgium, where the incumbent operator charges an additional
EUR 0.30 per minute to call a mobile phone in many countries. This is perhaps
double the wholesale surcharge. Nonetheless, it is a domestic matter for my
colleagues in BELTUG, the Belgian telecommunications
users group.
The prices in the document
are indicative. We can get more precise data once the price differences are
cut and cut dramatically from 1000% and 1400%. We do not need absolute precision
for such blatant abuses.
These are not competitive markets and they will not be in the future. Therefore
we must have cost-orientation.
Additionally, many member states also have WTO Commitments. These include
the obligation to ensure interconnection to major suppliers at cost oriented
prices. This includes all mobile operators, that follows both from the definition
in the GATS.
While we wish to see the end to these abuses, we do not wish to aggravtate
the problems of the least developing countries in deploying mobile technologies.
