Outlook: A redundant MMC reference? Certainly not

On why cruickshank is right to refer, how to resolve the Engergy Group stalemate, and the Bank's problem with interest rates
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The Independent Online
DON CRUICKSHANK, the telecommunications watchdog, is going out with a bang by referring Cellnet, Vodafone and BT to the Monopolies and Mergers Commission over mobile phone charges.

Vodafone, the largest mobile phone company in the UK, claims the charges levied for phoning a mobile phone were coming down to the level Mr Cruickshank wants anyway, and that the reference is therefore little more than publicity seeking bravado from the director general in his last month in the job.

Mr Cruickshank says there is no sign of the mobile phone companies moving sufficiently far with their prices to make agreement possible - that there's an obvious abuse which in the public interest needs to be investigated.

Is this, then, an unnecessary investigation and a waste of public money, or has Mr Cruickshank got a point?

Since there are only eight million people that own mobile phones but 40 million people who phone into them, there is obvious potential for milking the latter both to subsidise the former and inflate the profits of the mobile phone companies. This is even more the case given that many people when they make a call won't know they are telephoning a mobile or what it costs.

As most of us know, it costs a lot. BT will charge you significantly more than its usual tariffs for transporting your call to the mobile network and the network will then charge heavily for connecting you to the mobile.

In Mr Cruickshank's view, neither of these tariffs is justified by the extra costs and investment of mobile networks. Since the regulator first raised the issue a year ago, charges for incoming calls have been cut, but not significantly. More are planned by Vodafone, which presumably the others would follow, but even so there is still a gap between what Mr Cruickshank proposes and what the mobile phone companies think justified.

In such circumstances, there would seem little option but to go to the MMC. Moreover, in arriving at these different figures the two sides apply fundamentally different approaches. According to the mobile phone operators, it is wrong to use Vodafone, the biggest and therefore most efficient of the networks, as a benchmark, since the others don't share the same economies of scale and therefore might find themselves connecting calls for below cost. Mr Cruickshank doesn't accept this as a valid argument in a competitive environment.

Given that the level of incoming traffic to mobile phones is growing at the rate of 40 per cent a year, the case for for an MMC inquiry is overwhelming. The fact that it also enables Mr Cruickshank to go out with a bang is by the by.

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