Mobile phones could face price controls

OFTEL is planning to launch a review of competition in the mobile phone market which could see the telecommunications watchdog impose price controls on mobile operators for the first time.

David Edmonds, Oftel's new director-general, is preparing a consultation paper on the subject which is likely to be published in the next few months. In it, he is likely to question whether the UK mobile phone market is truly competitive.

If Mr Edmonds finds evidence that mobile phone companies are keeping call prices artificially high, he has the powers to introduce price regulations that would force them to cut their charges.

"The regulator is looking at the structure of competition in the mobile market and asking whether we need to strengthen the current rules," Alan Harper, commercial director of Vodafone, said yesterday. "But we would find it surprising if he came to that conclusion."

Mr Harper said the director-general was also examining whether Vodafone and Cellnet, the two largest and longest-established mobile phone operators, should still be forced to sell their services through independent providers. One2One and Orange, the two newer companies, are allowed to sell directly to customers.

The consultation paper will be the first opportunity for Mr Edmonds, who took over the post from Don Cruickshank in April, to demonstrate his credentials as the consumer's champion.

The initial indications are that he will take a hard-hitting line. In a speech last month, he threatened telephone operators with regulatory action if they did not start reporting their prices in a way that allowed consumers to make comparisons.

Although Oftel has devoted a great deal of attention to competition in the fixed telephony market in recent years, it is now turning its attention to mobile phones.

The mobile operators and British Telecom are already embroiled in a Monopolies and Mergers Commission inquiry over the cost of calling mobiles from fixed telephone lines.

However, Mr Edmonds is prepared to take Oftel's investigation one step further by challenging the operators to demonstrate that they are charging competitive prices.

They argue that competition for customers has caused prices to fall sharply in recent years. They have also launched a spate of new services such as pre-paid services, which do not require customers to sign a contract. Last week, Cellnet unveiled a service which calculates whether users are paying the right tariff and refunds the difference every three months.

And Vodafone said yesterday that it might cut its prices again before the end of the year, depending on whether it was successful at winning new customers and retaining its existing ones.

Oftel was not available for comment. However, industry observers suggested there were few grounds for direct regulation.

"David Edmonds is obviously keen to make sure that consumers are protected," said Chris Godsmark, telecoms analyst at stockbroker Henderson Crosthwaite. "But the move is surprising given that the four mobile operators are currently engaged in what amounts to a price war, even if none of them will admit it."