The high cost of mobile calling is to fall – slowly

But even without the reduction in rates ordered by Ofcom, there are ways to cut your bills.
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The Independent Online

The cost of calling a mobile phone has long been a bone of contention among customers and consumer groups alike.

Now it seems that finally something is to be done about what are called mobile termination rates. Ofcom says that, gradually, over the next four and a bit years, industry regulator networks should be forced to cut excessive termination rates, making it cheaper for us to call mobiles from landlines.

These termination rates (MTRs) are the wholesale fees that operators charge each other to connect calls. At the current rate, calls between landlines and mobiles cost £860m in charges every year in Britain, but Ofcom's plans should see wholesale rates fall from around 4.3p to 0.5p per minute. Ofcom says this should leave landline and mobile operators free to design more competitive call packages.

Big operators such as O2 and Vodafone are likely to contest the decision and have said that they may be forced to increase prices to offset the cuts, but 3, as the smallest provider, stands to benefit from reduced costs for connecting its customers to its bigger rivals.

"MTRs cost consumers hundreds of millions of pounds each year and create an artificial price floor. This places limitations on how far we can lower our bills. When these costs drop we will pass the savings on to our customers," says Marc Allera, from 3.

It remains to be seen how Ofcom's plan will pan out, but, in the meantime, there are plenty of other ways to cut your mobile phone costs.

Assess your caller status

Calculating whether you're on the right deal for your specific needs is the first challenge, and assessing how many minutes and texts you use on average each month is the key to saving money.

In a new survey from comparison site Rightmobilephone.co.uk, 31 per cent of the people questioned said they regularly go over their minutes allowance, while 46 per cent said they never use all their allocated minutes.

If you're not making the most of your current allowances, there's a good chance you can save a substantial amount of money by moving to a different contract. If you're on a contract, check your bill to see if you regularly slip over the allocated allowances, which can increase your bill substantially. It may be more cost- effective to switch to a slightly more expensive package, which offers more inclusive minutes and texts.

Explore your options

Once you've determined what type of mobile-user you are, it's time to decide whether to switch to a new contract.

Traditionally this choice has been relatively simple – heavy callers could save money with a contract, and light mobile users could either opt for a pay-as-you-go (PAYG) deal, or get the very cheapest contract available.

Today, however, hunting for the perfect deal is much more difficult, with hundreds of tariffs to choose from, offering ever more complicated discounts and price structures. PAYG deals have also become much more competitive, with many networks offering incentives for those who top up by a minimum amount each month. For example, Virgin offers a month of unlimited texts and web access for customers topping up by £20, and 600 free texts for a £15 top-up.

"Those who just require an emergency handset, or who only make the occasional call, could find PAYG a more cost-effective option," says Ernest Doku of mobile phone comparison website, Omio.com.

In the past 18 months or so the networks have also been making a push for SIM-only contracts, which offer a more flexible contract for you and bridge that gap between the commitment of a long contract and the typically higher costs of PAYG.

The O2 Simplicity SIM-only tariffs, for example, start from £10 per month for 100 cross-network minutes and unlimited texts. Other options include 300 minutes, unlimited texts and unlimited calls to other O2 mobiles, all for £15, while the most expensive tariff is £45 for unlimited calls and texts.

These have the benefit of a 30-day rolling contract which can be broken with just one month's notice, but they can also offer competitive deals. This is because the networks aren't trying to recoup the cost of the latest mobile handsets, which are typically offered for free with long-term contracts.

Just as you can save time when comparing and switching your energy or broadband provider by looking at dedicated comparison sites, such sites can be used for mobile phones. Billmonitor.com, for example, is the first to be endorsed by Ofcom and claims to cut bills by up to £197 a year by analysing your monthly phone bill, summarising your usage and finding a more appropriate contract.

Once you've found the right deal, simply calling your provider and threatening to leave can reap rewards but as a word of caution, be wary of accepting any new deals which require you to sign up to a long contract.

"Their customer retention departments are often given the freedom to offer loyal customers a better contract packed with extra minutes and texts, or even a shiny new phone at a discount," says Mr Doku.

Check for add-ons

One feature that has come on by leaps and bounds is additional packages.

These come in various guises but many are designed to cut the cost of using your phone abroad, such as the International Traveller Service (ITS) add-on for £2.99 per month from O2, which reduces the cost of calling abroad from the UK by up to 80 per cent.

Mobile phone users today have developed into very different creatures. We are now just as likely to send an email or picture text as we are to make calls, and Ofcom figures show that the volume of data traffic over mobile networks has increased by 200 per cent over the past year.

Surfing the internet abroad is particularly expensive, with bills for downloading into the thousands of pounds not unheard of, so it's well worth checking prices before you go on holiday. Currently, 3 offers a competitive rate of £1.25 per MB, while Orange offers Travel Data Daily rates of £2 for MB.

Other add-ons will reduce calls to a select number of phone numbers. The Vodafone Family add-on, for example, costs £5 per month (for both PAYG and contract customers) and allows you to make unlimited free calls to three numbers of your choice.

"These add-ons all play their part, but you need to be aware that if you start adding on two or three, you could end up with an expensive package," says Mike Wilson, mobiles manager at comparison site Moneysupermarket. "Make sure it offers everything you need," he adds. "It may be better to get a more specific contract that suits your needs without the need for add-ons."

Expert View: Ernest Doku

"A surprising number of consumers are on the wrong tariff, wasting money on add-ons that they just don't need. If you're big on texting, then opt for a deal that offers plenty of free SMS messages. Chatterboxes, meanwhile, should look for an offer that is heavy on free minutes or landline calls" says Ernest Doku, from mobile phone comparison website, Omio.com.

"Simply calling your provider up and threatening to leave, albeit nicely, can often force its hand. Their customer retentions departments are often given the freedom to offer loyal customers a better contract."

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