European Commission Consults on Lower Termination Rates

The European Commission has started a public consultation on the future regulation of "voice call termination rates" in the EU based on a draft Commission Recommendation on termination rates. At the moment the decisions of the national telecoms regulators result in very divergent rates across the EU. Mobile termination rates range from €0.02/min (in Cyprus) to over €0.18/min (in Bulgaria) and are 9 times higher than fixed line termination rates (on average €0.0057/min for local call termination).

The Commission says that this distorts competition between operators from different countries and between fixed line and mobile phone operators.

"Disparate termination rates across the EU and large gaps between fixed and mobile termination rates are serious barriers to achieving a Single European Telecoms market that benefits competition and consumers. The consumer pays the price for these gaps between national regulatory policies," said Viviane Reding, EU Telecoms Commissioner. "Call termination markets in the EU need a regulatory plumber. Over the next 3 years, I expect greater consistency and coordination to bring the costs for mobile phone calls down by around 70 per cent from the current level."

The Commission, after assessing over 770 regulatory proposals by national regulators over the past 5 years, warned today that price regulation of termination markets across Europe lacks consistency. It said that gaps between fixed and mobile termination rates and between mobile termination rates imposed by national regulators cannot be altogether justified by differences in the underlying costs, networks or national characteristics.

At present, fixed operators and their customers are indirectly subsidising mobile operators by paying higher termination rates for calls made from fixed lines to mobiles. This cross-subsidisation is estimated at €10 billion in Germany for 1998-2006 (WIK Consult) and €19 billion in the UK, Germany and France for 1998-2002 (CERNA-Warwick-WIK).

The Commission today presented a draft Recommendation for convergence of termination rates in Europe, including clear principles on which cost elements should be taken into account when national telecoms regulators determine termination rates, an efficient costing methodology, and symmetric regulation (where the same price caps apply, within a country, to mobile and fixed operators, respectively).

The public consultation on this proposal will be open until 3 September 2008.

Posted to the site on 26th June 2008