Jeremy Warner's Outlook: Mobile charges invite crackdown

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The Independent Online

Fired up by her apparent success in bringing roaming charges to heel, Viviane Reding, the EU Telecoms Commissioner, is turning her sword on the "termination rates" – or the price that mobile telephone operators charge each other for calling their customers. An industry-wide consultation has been ordered, though, judging by her comments yesterday, the exercise is largely academic: she's already made up her mind. As things stand, termination charges are a chaotic mess, with widely different rates across Europe, some of them regulated, others effectively unregulated. According to Ms Reding, many of these rates are extortionate: on average, they are nine times higher than the cost of terminating a call on a fixed-line network. They also disadvantage new entrants such as 3, as smaller players are likely to have to pay larger ones more than they receive in return.

The charges are something of a zero-sum game among the big boys, as the amounts each operator pays the other tend to net out. But with smaller operators, it is likely to be more of a one-way flow.

Even so, you have to wonder whether termination rates are really such a scandal that they justify heavy-handed regulatory intervention. Mobile telephony is one of the most fiercely competitive industries in the world. Over its 25-year lifespan, it has consistently delivered both lower prices and higher quality. It seems to be doing just fine by consumers without interference from Brussels.

Sometimes it seems that Ms Reding is more intent on grabbing headlines than thinking through the consequences of her diktats. Press down on one set of charges, and it is highly likely that they will just rise up somewhere else as operators seek to recoup margin and return. If they don't, then ultimately it will be investment and innovation that will suffer.

All the same, mobile phone operators are sometimes their own worst enemies. Mobile tariffs are still a deliberately opaque affair, and that's particularly the case with termination charges, where the customer will have no idea what he's being charged for calling someone on a different network. This lack of transparency has given meddlesome regulators all the excuse they need to enter the fray.

Letting the markets decide is nearly always preferable to having the politicians dictate. By maintaining an opaque charging structure, mobile phone companies have opened the door and let the regulators in. Ms Reding considers herself a consumer champion, but has she yet thought about the law of unintended consequences?

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