German Regulator Lowers Mobile Termination Rates by 10%
Germany's Federal Network Agency has approved the new termination rates of the German mobile network operators - which lowers the cost of termination rates by about 10%. The termination rates, which are paid to mobile operators by other network operators for terminating calls in their mobile networks, have now been set at 7.92 cents/minute for the two D networks and 8.8 cents/minute for the two E-networks. The new rates are hence just under 10 per cent and more than 11 per cent lower those hitherto payable to T-Mobile and Vodafone D2 and for E-Plus and O2 respectively, viz. 8.78 and 9.94 cents/minute.
Whereas during the first approval procedure for these fees last year the Federal Network Agency had to rely solely on the outcome of an international tariff comparison because none of the four operators had presented meaningful cost statements, it was now possible to derive the newly approved rates from the cost statements submitted or to use these statements to calculate the rates.
"We are pleased that at least one network operator has taken our criticisms regarding the cost statements presented to us last year to heart and has improved his cost documentation for this year's approval procedure to such an extent that we have been able to use it to derive the efficient cost of a terminating minute for the first time. This in turn permitted us to derive by means of a national comparison and subsequently approve the rates of the other three mobile operators whose cost documentation was again not deemed a sound basis for decision. In particular, we were now in a better position to map the specific costs of the German mobile operators as regards, for example, network, staff and licensing costs, frequency facilities, network topology, geographical conditions and usage behaviour, than would have been the case with an international tariff comparison. Indeed, the four mobile operators had repeatedly stressed the comparability of foreign tariffs and those applicable under German conditions which calls for a differentiated evaluation and had consequently to some extent criticised last year's rates approval as having been based on an international tariff comparison. Such objections cannot be made about the new rates. With this important step we have also achieved greater legal and planning security for all concerned. The new determinations confirm that former rate decreases were justified and can be underpinned by sound calculations. I would therefore like to ask the companies to check our decisions and underlying methodology thoroughly and then to withdraw pending legal disputes and lawsuits", said Matthias Kurth, President of the Federal Network Agency.
Apart from the network costs, the calculation of the termination fees also took the costs of the UMTS licence into account on the basis of a present-day valuation. Even in European countries where originally high auction prices had been achieved, such as in Great Britain, the UMTS licence costs have been taken into account in the determination of the mobile termination rates. Furthermore, the Federal Network Agency had commissioned an expertise for determining the main rate of return on the capital employed in the mobile sector.
The differential between fees for termination in the D networks and in the E networks has been somewhat reduced compared with that of last year's determinations. As such, the Federal Network Agency acknowledges the fact that the scale effects of the E-network operators due to their first-time provision with frequencies in the 1800-MHz range and their late market entry and lower market shares compared with those of the two D-network operators are less favourable,yet at the same time the Agency takes into account that these disadvantages disappear over time. The European Commission has also repeatedly stated in recent times that it expects the termination rates of network operators with different frequency facilities to be levelled in the coming years. Mr Kurth said: "We have already taken up the European discussion about the harmonisation of calculation principles in connection with termination fees and have thereby again shown that we take European cooperation very seriously."
Mr Kurth concluded by saying that the period of validity of the rate approval which expires after 31 March 2009 provided all market players with reliable planning security. He assumed that the lower intermediate input rates would be passed on to consumers and that they would profit from lower end customer rates.
Posted to the site on 3rd December 2007
