Terminate the Rate campaign is calling for termination rates to UK mobiles to be lowered. It is operated by 3 and supported by various organisations including BT, Post Office, GMB, National Union of Students and Age Concern.

A quick look shows this to be a commercial battle between BT and 3, with support from various other bodies, and an alleged position held by other mobile operators.

To achieve popular support it relies on the assumption, endorsed by 3, that competition with ensure the revenue lost will be made up through greater efficiency or lower profits for the mobile providers rather than higher costs for those receiving calls on mobile phones. It is for those who understand the economics of the business to assess how true this may be.

As BT has pulled out of the mobile business it is natural for it to be in support of a campaign that would lower its costs and thereby enable it to expand its business. The reason for 3 standing against the position of its competitors may perhaps need to be understood more clearly. It would appear that the other supporters accept the assumption, as they would perhaps be unlikely to be campaigning for higher costs for mobile phone users.

I am personally inclined to the view that the costs of mobile telephony should be carried by those who use it, rather than being passed on to others, as is the case at present. I am however reluctant to adopt or support the suggestion that the latter can be removed ("terminated"), or significantly reduced (as actually proposed), with no effect on the former. It is very easy to conclude that something which is unpopular is unnecessary, whereas a popular move may be readily achieved with no ill effects. Consumer readiness to accept such a proposal is commonly exploited by marketeers.

There is undoubtedly lots of profiteering in the mobile industry, however there are also lots of inexplicable consumer benefits. I hope that those who campaign for a more direct and honest approach recognise that there may be two sides to the issue.

---

As a postscript - Am I correct in believing that the termination rates paid by BT (and the other landline, and even mobile, providers) to 3 could be lowered and reflected in call costs without any other action being required? If competition is so powerful and effective, would this not be a way of 3 and BT achieving their objectives?

SilentCallsVictim wrote on Aug 10^th, 2009 at 8:19am:

Am I correct in believing that the termination rates paid by BT (and the other landline, and even mobile, providers) to 3 could be lowered and reflected in call costs without any other action being required? If competition is so powerful and effective, would this not be a way of 3 and BT achieving their objectives?

No because the termination charges made by 3 to BT and other landline and mobile providers would only be able to be reflected in lower retail costs on these providers' tariffs. Whether they would wish to pass on such a saving is another matter, but for the purpose of this discussion, let us assume that they do.

The end result would be that retail charges to 3 mobiles from other networks would be reduced, but 3's retail charges to other landline and mobile networks would not. So 3 would be conceding to a drop in revenue for the benefit of its competitors!

The basis of free and fair competition in telecommunications services is difficult, because what at first appears to be a simple solution actually works arse about face to the laws of economics.

Dave wrote on Aug 10^th, 2009 at 8:35am:

No because the termination charges made by 3 to BT and other landline and mobile providers would only be able to be reflected in lower retail costs on these providers' tariffs. Whether they would wish to pass on such a saving is another matter.

Yes, that is preceisely my point. BT has clearly indicated that it supports this campaign because it wants to pass on the savings.

The TTR campaign relies entirely on the effect of competition preventing mobile users from suffering as a result of the lowering of the MTR.

Price competition only works to the benefit of consumers when one provider is prepared to risk standing out from the rest by lowering its prices to secure more business, thereby perhaps forcing others to follow. 3 would undoubtedly secure more business if it could claim that it was cheaper to call (even if only from BT) than its competitors.

If 3 could not absorb the loss of income under these circumstances, how can it claim that it would be able to do so if that did not provide a competitive advantage, because all the others had become equally cheap to call?

I seek only to suggest that the simplistic assurance of the power and effect of competition providing protection for the costs incurred by mobile users in the event of success for this campaign is highly questionable. This assurance is vital to this campaign as it is presented.

SilentCallsVictim wrote on Aug 10^th, 2009 at 9:02am:

Price competition only works to the benefit of consumers when one provider is prepared to risk standing out from the rest by lowering its prices to secure more business, thereby perhaps forcing others to follow. 3 would undoubtedly secure more business if it could claim that it was cheaper to call (even if only from BT) than its competitors.

There is surely a limit to how much it could lower its termination prices. For those networks that don't pass on the saving to their customers (callers), such a move from 3 will just end up as handing those competitors an increase in revenue.

3 will then have a tendancy to raise it prices to its customers whilst others' will be driven down, albeit a tiny amount. That's bad for 3!

Any blanket reduction in termination charges will force all retailers to adjust their prices. Indeed, if termination charges to all mobile networks were lowered, then the amount of revenue they generate directly would have to go up. So a simple shift in where revenue is coming from will mean that one cancels the other out. Now, if we introduce the laws of competition into the equation, there will now be a greater tendancy for retail prices to be forced down because networks will have far less outgoings to pay for termination charges.



SilentCallsVictim wrote on Aug 10^th, 2009 at 9:02am:

If 3 could not absorb the loss of income under these circumstances, how can it claim that it would be able to do so if that did not provide a competitive advantage, because all the others had become equally cheap to call?

Because if it cannot absorb the loss of income, then it would have to increase price to subscribers of its service. In all practical sense, the change that the TTR campaign is hoping for will be a shift in that callers pay less and receivers pay more.

But, if none of the other networks wish to participate in reducing their termination charges, then 3 will be left to increase the retail cost of its devices and calls and texts on its network whilst others maintain theirs about the same. Thus, consumers, who generally act in their own best interests, will go for the cheaper services (cheaper with respect to themselves, that is) from the other networks.



SilentCallsVictim wrote on Aug 10^th, 2009 at 9:02am:

I seek only to suggest that the simplistic assurance of the power and effect of competition providing protection for the costs incurred by mobile users in the event of success for this campaign is highly questionable. This assurance is vital to this campaign as it is presented.

But with termination charges there is no assurance of the power and effect of competition because cannot be competition in termination charges. Call retailers will can only drive down their charges so far, they have still to cover the termination charges. As I have already covered, individual networks are loathed to reduce their termination charges because there is no competitive advantage to do so.


Take the supermarket example again. If customers found that some third party were paying for or part of their shopping bill, the supermarket would have far less pressure to run promotions like buy one get one free. Why does it need to drive down prices when the consumers doing choosing the products aren't the ones paying?

Free market competition works best when the person doing the choosing is the one paying. Simple.

Thus, the TTR campaign is more one of principle that termination rates must come down for a fairer deal for consumers overall. 3 cannot be alone in this which is why all must do it.

Dave wrote on Aug 10^th, 2009 at 4:47pm:

... if termination charges to all mobile networks were lowered, then the amount of revenue they generate directly would have to go up.

I agree, whereas TTR does not. The primary point that I address is the strongly advanced argument from the TTR campaign stating that competition would prevent this from happening. We seem to be in agreement in finding this assertion questionable.

My theoretical suggestion in relation to 3 was to test its guarantee that if the termination fees that it receives (perhaps only from BT) were reduced, then it could absorb this loss of revenue without passing it on in increased costs to its customers. If, as it suggests, BT was willing to pass on this saving then this would give 3 a modest advantage over its competitors by being cheaper to call, if only from BT. If 3 could not absorb the cost in this situation, where it would hold a competitive advantage, then one must question how this could happen when there was no such advantage. Essentially, my challenge was to "call the bluff" of BT and 3, by inviting them to prove the point that they are seeking to make.

(I did not suggest that this has to include any change in relation to calls from 3 to other networks.)


Dave wrote on Aug 10^th, 2009 at 4:47pm:

... if termination charges to all mobile networks were lowered, then the amount of revenue they generate directly would have to go up.

I would be ready to become involved in campaigning for such a change, on the basis that this is indeed what would happen. I would however first need to understand the likely nature and extent of the impact on the industry. Whilst such a move is right in principle, ones fears that the burden of the necessary increase in revenue would be reflecting in the costs incurred by the weakest consumers, as must be the case in any free market. I support a reduction in the rates for termination in principle, but given the way in which the use of mobiles has been allowed to develop I am reluctant to actively campaign for it, because of the undesirable effects that this move would be likely to cause. I note that some have been persuaded that these effects would not occur, but I must retain my doubts.

SilentCallsVictim wrote on Aug 10^th, 2009 at 6:31pm:

Dave wrote on Aug 10th, 2009 at 4:47pm: ... if termination charges to all mobile networks were lowered, then the amount of revenue they generate directly would have to go up. I agree, whereas TTR does not. The primary point that I address is the strongly advanced argument from the TTR campaign stating that competition would prevent this from happening. We seem to be in agreement in finding this assertion questionable.

I disagree and would like to re-emphasise and elaborate on my previous message:



Dave wrote on Aug 10^th, 2009 at 4:47pm:

Any blanket reduction in termination charges will force all retailers to adjust their prices. Indeed, if termination charges to all mobile networks were lowered, then the amount of revenue they generate directly would have to go up. So a simple shift in where revenue is coming from will mean that one cancels the other out. Now, if we introduce the laws of competition into the equation, there will now be a greater tendancy for retail prices to be forced down because networks will have far less outgoings to pay for termination charges.

I think of these things in steps. The sentences before the bit I've put in bold (part of which you quote) put asside the principle of free market competition driving down prices. So for a monent, forget competition theory and consider that lower termination rates will simply result in higher retail charges.

Now introduce the retail competition theory. In simple terms, the lower termination charges will give more leeway for competition to drive down retail prices.



SilentCallsVictim wrote on Aug 10^th, 2009 at 6:31pm:

My theoretical suggestion in relation to 3 was to test its guarantee that if the termination fees that it receives (perhaps only from BT) were reduced, then it could absorb this loss of revenue without passing it on in increased costs to its customers. If, as it suggests, BT was willing to pass on this saving then this would give 3 a modest advantage over its competitors by being cheaper to call, if only from BT. …

Such a move would require BT subscribers to understand that calls to 3 mobile numbers are cheaper than other networks. We are already engaged in a campaign which is largely as a result of misinformation and lack of clear pricing by all telephone users.

At one time, calls from BT lines to different mobile networks cost different rates. The rates to the four main GSM networks were aligned leaving 3 costing more. The current rates on BT Calling Plans are all aligned. So any variations in termination charges are no longer reflected in the retail charges made.


If BT and 3 were to do this, then there is likely to be the possibility that other providers will go running to Ofcom. Let us consider the implications of such an action: BT will have an inherent advantage over other landline providers like Virgin Media and Talk Talk. They won't be able to reduce their retail prices to compete with BT. I'm quite sure that some competition law will come into play here. It's likely that mobile networks will object on a similar basis.



SilentCallsVictim wrote on Aug 10^th, 2009 at 6:31pm:

I would be ready to become involved in campaigning for such a change, on the basis that this is indeed what would happen. I would however first need to understand the likely nature and extent of the impact on the industry. Whilst such a move is right in principle, ones fears that the burden of the necessary increase in revenue would be reflecting in the costs incurred by the weakest consumers, as must be the case in any free market. I support a reduction in the rates for termination in principle, but given the way in which the use of mobiles has been allowed to develop I am reluctant to actively campaign for it, because of the undesirable effects that this move would be likely to cause. I note that some have been persuaded that these effects would not occur, but I must retain my doubts.

The whole principle of high mobile termination charges, no standing charge in a traditional sense to mobile users and increase in barriers to landlines has lead to a shift to mobile (and mobile only) usage. This is bad in principle and one I have grave concerns over. This means us paying more for telecommunications services as a whole.

There is no such thing as a free lunch and the way in which mobile providers hand out SIM cards like boiled sweets has lead to this situation.

This behaviour can be likened to the banks that entered into risky mortgage lending. The difference being that the economy is now in a downturn whereas with telecommunications the cost of services overall is being driven up.

New Zealand mobile provider 2 Degrees has started a similar campaign called Drop the rate, mate!.

Dave wrote on Aug 12^th, 2009 at 11:13pm:

New Zealand mobile provider 2 Degrees has started a similar campaign called Drop the rate, mate!.

That may be even more equivocated than 3's position

It was rumoured that 2degrees and Vodafone made a secret deal on termination fees

Then the NZ regulator Com Com's office threatened legal action and took an article about the details offline

http://www.nbr.co.nz/article/com-com-orders-vodafone2degrees-pricing-story-offline-107049

and the story is still evolving:

http://www.nbr.co.nz/opinion/chris-keall/2degrees-challenges-commerce-commission-release-telecom-data

The Terminate the Rate campaign was mentioned in the Rip-off Britain programme, discussed elsewhere on the forum, which was aired on the BBC on Monday.

It's gathering support, including an Early Day Motion signed by 262 MPs.

Dave wrote on Dec 4^th, 2009 at 6:41pm:

It's gathering support, including an Early Day Motion signed by 262 MPs.

After gathering myself to write an angry message to the very large number of MPs which it is claimed had joined this campaign in the short time that the current session of parliament has been running, I find that there is no such EDM.

The link given is to an EDM tabled on 19 May 2009, in the previous session. It has now fallen. It has not been renewed. A quick glance fails to identify any current EDMs on topics of interest to this forum.

It is worth noting that informed independent contributors to the piece in "Rip Off Britain" about TTR endorsed my fear that the implicit and vital assumption that the lost revenue would not be replaced is most likely false. A representative of 3 made a noble, but unconvincing, attempt to sustain the argument that competition was a panacea for any unintended consequences of regulatory intervention. He failed however to offer any explanation of why the effect of competition could not be used to achieve the desired result - by BT and 3 agreeing to a lower (or zero) rate so that the threat of 3 capturing business from its competitors, by being cheaper to call from BT, would compel others to follow. He claimed that 3 could survive the loss of revenue if others did the same (i.e. without it gaining a competitive advantage), but seemed unable to explain why it would not be able to do so if this did provide it with a competitive advantage.

A senior representative of the FSB posing as "the consumer's friend", leading a consumer campaign, made an entertaining spectacle. I will say no more.

More convincing evidence of how "terminating the rate" will not lead to what most of us would see as the inevitable (and perhaps desireable) effect of increasing the cost of using a mobile, whilst reducing the cost of calling it, is required before I could see the campaign as having any merit.

A proper debate about shifting the burdon of cost onto those who use mobiles, rather than those who call them, would be a most worthwhile exercise. This pretence that it is just a one-way street does little to help.

SilentCallsVictim wrote on Dec 5^th, 2009 at 10:21am:

A proper debate about shifting the burdon of cost onto those who use mobiles, rather than those who call them, would be a most worthwhile exercise. This pretence that it is just a one-way street does little to help.

How could it happen without lowering the termination rates? Surely "Terminating the Rate" is the way forward.  :-?


Consider the mobile providers and competition in the market. Where mobile providers are near equilibrium with their volumes of incoming and outgoing call minutes, then termination charges and payments largely cancel one another out (i.e. one serves to offset most of the other).

Under these conditions, mobile providers on their own, make nothing from termination charges. So the absolute value of those charges are of little importance. The retail charges they impose are therefore purely paying for customers' own service and not that of (or subsidy towards) the person they are calling.

It is suggested that there are two aspects to this. The first is inter-operator mobile-mobile calls. In this case intra-, rather than inter- network calls are cheaper for operators and therefore favoured in pricing. This makes it difficult for new players to enter the market and must therefore be seen as anti-competitive. One assumes that this is the basis for 3's objection.

I would be interested to review the history of the efforts that have been made to get action taken on this, including Ofcom's response to competition disputes and the determinations of the Tribunals that have ruled against 3. Whatever grounds were given for maintaining the status quo need to be understood before they can be attacked. Taken at face value 3 appears to have a good case, which one assumes would have been upheld under competition law. One would need to confirm that the reasons for its failure were unjust or improper in some way.

I agree that if there is an equivalence of incoming and outgoing inter-network traffic then the net effect is zero and termination of the rate need have no effect on the cost of using a mobile. That would also mean that the cost of calling would not be able to reduce, as it is suggested that each operator would simply keep the money for themselves, rather than them all passing it around between them.

The whole TTR argument however is that call charges would be reduced, with no compensating increase elsewhere. As the FSB representative said on TV, revenue would be taken out of the mobile industry to be spent elsewhere in the economy. We then get the fantastical explanation that this will have no effect on the mobile industry in terms of jobs, profitability, providers, agents or anything else. The money will all come out of this imaginary back hole called inefficiency, where banknotes are allegedly simply burnt rather than being spent to the advantage of someone. I am always amazed that this element of any organisation only appears to exist when others are asking it to suffer a loss of income. When money is actually being saved, efficiency always seems to be seen in job cuts, reduced profits and tighter terms for suppliers and agents (N.B. this list is not meant to be exclusive).

Those who understand the market and the big four better may be able to confirm that they will be content to see the industry contract or that there is sufficient unmet demand for them to fill the gap in their earnings by expansion. Until this has been properly explained to me, I cannot dismiss the threat that efforts will be made to simply recoup the loss of income in other charges.


The second (and perhaps clearer) aspect is the termination rate applied to calls originated from landlines. I understand that there is not the same reciprocity here. Termination of this rate would be a clear loss to each of the mobile operators with a corresponding benefit to the landline operators. The situation with 0870 has shown how quick the operators are to pass on savings in termination charges to their customers. Ofcom is now in a stronger position than previously to enforce price reductions on those who do not have SMP, although its "light touch" approach towards intervention will doubtless remain in force. This could change if our next government is strongly committed to regulatory intervention and legislates to make Ofcom bigger and stronger, or alternatively abolishes Ofcom and regulates directly from an ever bigger Department for Business.

Let us simply assume that landline callers do enjoy some (perhaps modest) reduction in the cost of making calls to mobiles in the event of TTR being successful.

For the mobile operators there would be a simple reduction in revenue. There is no compensating benefit, indeed there is the distinct possibility of having to increase network capacity in order to carry additional traffic generated by the assumption (or reality) that calling a mobile is no longer charged at a premium rate from a landline. Without the lengthy discourse given above, I would simply invite anyone who tells me that the mobile operators will not attempt to recover the missing money in some way to "pull the other one".

http://edmi.parliament.uk/EDMi/EDMDetails.aspx?EDMID=40306&SESSION=903

EDM 715

MOBILE TERMINATION RATES
26.01.2010

Clark, Katy

That this House notes the hidden charges which arise when calling a mobile on a different network or when calling a mobile from a landline; further notes that this helps stifle competition, prevents the development of flat-rate unlimited tariffs, and holds back innovation in the telecommunications sector; welcomes the 114,259 signatures gathered by the Terminate the Rate campaign and the 60 organisations supporting the lowering of the rate; and calls on Ofcom to take action immediately to reduce the Mobile Termination Rate charge and deliver better value for money.

---

As now there are 65 signatures on this EDM.

Terminate the Rate has today proclaimed BT delivers on Terminate the Rate promise.

It says that the evening rate is down 24% and the daytime rate is down 13%. However, this does not take into account the 12.5 pence Call Set-up Fee, whole minute rounding and rounding each call up to the next whole penny.

In actual fact, the price of a 1 minute evening call has dropped by 10 percent and a 3 minute call at the same time will cost 14.7 percent less. These are hardly anywhere near the 24 percent headline figure now are they?

See my blog for more on this: BT reduces cost of ringing mobiles; Terminate the Rate gets hopes up on savings

Dave wrote on Jun 1^st, 2011 at 5:37pm:

Terminate the Rate has today proclaimed BT delivers on Terminate the Rate promise.

More on this story:

BT to cut cost of calls to mobiles from next weekend - Daily Mail: 21st May 2011

BT cuts mobile call charges from landlines - Which? 24th May 2011

Quote:

Cost of making an evening mobile call drops by 24% BT has announced it is to cut the cost of landline to mobile calls. Prices will be reduced by 13% during the day and by 24% for evening calls.

Which? appears to have fallen into the trap of thinking that these percentages are reductions in the prices of calls which they are not. They are reductions in the per minute rates; calls attract a 12.5 pence call set-up fee, are rounded up to the next whole minute and rounded up to the next whole penny.

Imagine if shops quoted without taxes, or hey, if petrol stations didn't have to include all the duty on their signs outside. Telecoms companies have engineered these smoke and mirrors and it is all above board.

Gremlins in the system???

The posting BT delivers on Terminate the Rate promise has disappeared (error 404), yet it's still linked to from the TTR homepage.

Taking this one step further, calculating the actual savings as an average decrease per minute shows that all calls of 1 minute or more benefit by 2 pence per minute or less.

• Daytime
  

  Duration (min:sec)	Old cost	New cost	Pc decrease	Average decrease per min
  0:30	26p	24p	7.69%	4.00p
  1:00	26p	24p	7.69%	2.00p
  1:30	39p	36p	7.69%	2.00p
  2:00	39p	36p	7.69%	1.50p
  2:30	52p	47p	9.62%	2.00p
  3:00	52p	47p	9.62%	1.67p
  3:30	65p	58p	10.77%	2.00p
  4:00	65p	58p	10.77%	1.75p
  4:30	78p	69p	11.54%	2.00p
  5:00	78p	69p	11.54%	1.80p
  5:30	91p	81p	10.99%	1.82p
  6:00	91p	81p	10.99%	1.67p
  6:30	104p	92p	11.54%	1.85p
  7:00	104p	92p	11.54%	1.71p
  7:30	117p	103p	11.97%	1.87p
  8:00	117p	103p	11.97%	1.75p
  8:30	130p	115p	11.54%	1.76p
  9:00	130p	115p	11.54%	1.67p
  9:30	143p	126p	11.89%	1.79p
  10:00	143p	126p	11.89%	1.70p

  
  
• Evening
  

  Duration (min:sec)	Old cost	New cost	Pc decrease	Average decrease per min
  0:30	20p	18p	10.00%	4.00p
  1:00	20p	18p	10.00%	2.00p
  1:30	27p	24p	11.11%	2.00p
  2:00	27p	24p	11.11%	1.50p
  2:30	34p	29p	14.71%	2.00p
  3:00	34p	29p	14.71%	1.67p
  3:30	41p	34p	17.07%	2.00p
  4:00	41p	34p	17.07%	1.75p
  4:30	48p	39p	18.75%	2.00p
  5:00	48p	39p	18.75%	1.80p
  5:30	55p	45p	18.18%	1.82p
  6:00	55p	45p	18.18%	1.67p
  6:30	62p	50p	19.35%	1.85p
  7:00	62p	50p	19.35%	1.71p
  7:30	69p	55p	20.29%	1.87p
  8:00	69p	55p	20.29%	1.75p
  8:30	76p	61p	19.74%	1.76p
  9:00	76p	61p	19.74%	1.67p
  9:30	83p	66p	20.48%	1.79p
  10:00	83p	66p	20.48%	1.70p

Daytime and evening rates apply seven days a week. There as no separate weekend rate.

Dave wrote on Jun 1^st, 2011 at 11:05pm:

Gremlins in the system??? The posting BT delivers on Terminate the Rate promise has disappeared (error 404), yet it's still linked to from the TTR homepage.

The posting is now not mentioned on the TTR homepage now either. There is now no announcement on TTR's website about BT's price changes, which is rather surprising considering that they are a key milestone in the campaign.

Google has cached the page in question:

http://webcache.googleusercontent.com/search?q=cache:9vvqERB96asJ:www.terminatetherateblog.org/2011/06/bt-delivers-on-terminate-the-rate-promise/&cd=1&hl=en&ct=clnk&gl=uk&source=www.google.co.uk


Quote:

BT delivers on Terminate the Rate promise June 1st, 2011 In response to Ofcom’s final decision to lower MTRs over the next three years, BT made significant cuts to the cost of landline to mobile phone calls from 28 May 2011. In the evening, the cost of calling a mobile on all major networks from a BT landline fell from 7p per minute to 5.3p, a 24 per cent cut. During the day, the cost fell from 13p per minute to 11.3p, a 13 per cent cut. This adds extra pressure on companies such as Sky, TalkTalk and Virgin Media who have yet to pass on the savings achieved through the Terminate the Rate (TTR) campaign. Virgin in particular currently charges 31.61p per minute for daytime calls to customers on 3’s network and 19.35p per minute for daytime calls to other mobile operators. The Terminate the Rate campaign led to Ofcom cutting MTRs and, as promised, BT is now passing on the first of those savings to its customers. BT is also planning to launch the UK’s first ever all-you-can-eat calls package that includes calls to mobiles. John Petter, managing director, Consumer, at BT said: “Having campaigned for two years to get Ofcom to lower mobile termination rates, I am delighted to pass on the news that calls to mobile phones from a BT landline are to cost a great deal less. We are passing on Ofcom’s reduction and what’s more we’ll soon be telling customers how they can stop worrying about call charges from landlines to mobiles with a new, inclusive consumer calling package. Watch this space.

The "cost of calling" implies the cost of calls as a whole, which includes the Call Set-up fee, but this is not mentioned on this release. Thus, the 24% cut is not a 24% cut in the "cost of calling" mobiles, but just the 'per minute' element of the charge.

I understand that BT publishes its termination rates, so that one can see the actual margin that it makes on placing calls to cover its own local costs and overheads.

A version of the table shown above could therefore be used to address the key issue - IS BT PASSING ON THE SAVING?

In time we should be able to see how the mobile companies deal with this loss of income. TTR has long operated on the assumption that this will all be a net sum gain for consumers. Withdrawn media releases are one thing - showing that this has simply increased BT margins and loaded greater costs onto mobile users is a more significant dent to this rather dodgy enterprise.

I personally believe that the cost of mobile telephony should be met by those with mobile phones, without subsidy from their callers, however they are consumers too!

SilentCallsVictim wrote on Jun 3^rd, 2011 at 2:01pm:

I understand that BT publishes its termination rates, so that one can see the actual margin that it makes on placing calls to cover its own local costs and overheads.

Termination payments BT makes to the mobile companies are in the BT Wholesale Carrier Price List, Section B1, Part 1.02.1.

• 3
  

  Effective date	Until date	Daytime (ppm)	Evening (ppm)	Weekend (ppm)
  01/04/07	31/03/08	9.1	9.1	9.1
  01/04/08	31/03/09	7.29	7.29	7.29
  01/04/09	30/04/09	11.84	5	2
  01/05/09	31/05/09	4.4666	4.4666	15
  01/06/09	30/06/09	9	9	2
  01/07/09	31/07/09	9.7523	4.8	2
  01/08/09	31/08/09	4.6116	3	10.5
  01/09/09	30/09/09	9.776	3	2
  01/10/09	31/10/09	5	3	10.5
  01/11/09	30/11/09	5.7564	5.7564	2
  01/12/09	05/01/10	8.3	3	2
  06/01/10	31/01/10	3	3	10.5
  01/02/10	28/02/10	4.7	4.7	2
  01/03/10	31/03/10	8.2493	8.2493	2
  01/04/10	30/06/10	13.6511	1.5	1.5
  01/07/10	31/07/10	1.5	1.5	16
  01/08/10	31/08/10	11.6494	8	0.5
  01/09/10	30/09/10	4.93	4.93	0.5
  01/10/10	31/10/10	1	1	19
  01/11/10	31/12/10	5.1	5.1	0.5
  01/01/11	31/01/11	8.2507	0.25	0.25
  01/02/11	31/03/11	5	0.5	0.5
  01/04/11		2.984	2.984	2.984

  
  
• O2
  

  Effective date	Until date	Daytime (ppm)	Evening (ppm)	Weekend (ppm)
  01/04/07	31/03/08	5.4	5.4	5.4
  01/04/08	31/03/09	5.09	5.09	5.09
  01/04/09	31/07/09	5.6537	5.6537	5.6537
  01/08/09	31/03/10	4.2359	4.2359	4.2359
  01/04/10	31/03/11	4.4276	4.4276	4.4276
  01/04/11		2.984	2.984	2.984

  
  
• Orange
  

  Effective date	Until date	Daytime (ppm)	Evening (ppm)	Weekend (ppm)
  01/04/07	31/03/08	5.9	5.9	5.9
  01/04/08	31/03/09	5.39	5.39	5.39
  01/04/09	31/05/09	3.9999	4.01	12.4596
  01/06/09	30/06/09	5.9	6.2894	5.82
  01/07/09	31/07/09	6	3	2.4849
  01/08/09	31/08/09	6.1	2.9	2.9552
  01/09/09	30/09/09	6.421	2.498	2.2755
  01/10/09	31/10/09	2.868	2.498	11.2116
  01/11/09	30/11/09	7.35	2.498	1.2079
  01/12/09	31/12/09	6.35	3.498	1.1886
  01/01/10	31/01/10	3.268	3.098	8.6143
  01/02/10	28/02/10	7.8879	1.0001	1
  01/03/10	31/03/10	8.0009	1	1
  01/04/10	30/06/10	7.837	1	1
  01/07/10	31/07/10	2	2	14.29
  01/08/10	31/08/10	7.9942	1	1
  01/09/10	30/09/10	4.43	4.43	4.43
  01/10/10	31/10/10	1	1	17.3724
  01/11/10	30/11/10	8.0606	1	1
  01/12/10	28/02/11	4.43	4.43	4.43
  01/03/11	31/03/11	4.431	4.431	4.431
  01/04/11		2.984	2.984	2.984

• T-Mobile
  

  Effective date	Until date	Daytime (ppm)	Evening (ppm)	Weekend (ppm)
  01/04/07	31/03/08	5.9	5.9	5.9
  01/04/08	31/03/09	5.39	5.39	5.39
  01/04/09	31/07/09	5.863	5.863	5.863
  01/08/09	30/09/09	4.323	4.323	4.323
  01/10/09	31/10/09	2.0182	2.0182	12.67
  01/11/09	30/11/09	5.1462	5.1462	2.2
  01/12/09	31/12/09	4.3232	4.3232	4.3232
  01/01/10	31/01/10	2.013	2.013	11.47
  01/02/10	28/02/10	4.3232	4.3232	4.3232
  01/03/10	31/03/10	5.3283	5.3283	1.1879
  01/04/10	30/06/10	4.4213	4.4213	4.4213
  01/07/10	31/07/10	1	1	17.335
  01/08/10	30/09/10	10.652	1	1
  01/10/10	31/10/10	1	1	17.335
  01/11/10	30/11/10	7.2293	1	1
  01/12/10	31/12/10	4.4213	4.4213	4.4213
  01/01/11	31/01/11	3.916	3.916	3.916
  01/02/11	28/02/11	4.4451	4.4451	1
  01/03/11	31/03/11	4.4474	4.4473	1
  01/04/11		2.984	2.984	2.984

  
  
  
• Vodafone
  

  Effective date	Until date	Daytime (ppm)	Evening (ppm)	Weekend (ppm)
  01/04/07	31/03/08	5.4	5.4	5.4
  01/04/08	31/03/09	5.09	5.09	5.09
  01/04/09	30/06/09	5.745	5.745	5.745
  01/07/09	31/12/09	4.372	4.372	4.372
  01/01/10	31/01/10	1.25	1.25	16.472
  01/02/10	28/02/10	4.372	4.372	4.372
  01/03/10	31/03/10	7.248	1.25	1.25
  01/04/10	30/04/10	4.4276	4.4276	4.4276
  01/05/10	31/05/10	7.7026	1.25	1.25
  01/06/10	30/06/10	7.2819	1.25	1.25
  01/07/10	31/07/10	1.05	1.05	19.8262
  01/08/10	31/08/10	7.9721	1	1
  01/09/10	30/09/10	4.4276	4.4276	4.4276
  01/10/10	31/10/10	0.5	0.5	19.7546
  01/11/10	30/11/10	4.6694	7	0.5
  01/12/10	30/04/11	4.4276	4.4276	4.4276
  01/04/11		2.984	2.984	2.984

Thanks for the copied table Dave.

Here is my attempt at analysis - anyone is free to approach it differently.


Is it fair to ignoring the call connection fee, which we may assume to deliver a constant margin, and the vagaries of some of the evening and weekend termination fees?

If so, then we can take an average on cost of 4.470 vs. 2.984 - a 33% reduction, against price reductions of 24% and 13%,


Again ignoring the reduced evening and weekend termination fees, we can look at the BT margin.

On daytime calls this fell from 8.530 to 8.316, but increased as a percentage from 66% to 74%.

Likewise for evening and weekend calls, a reduction from 2.530 to 2.316, but an increased percentage from 36% to 44%.

This is allowing for BT's own call origination costs to be covered by the call setup fee. I have not allowed for the fact that many BT calls to mobiles would have been made under its discount scheme, where the previous margin would have been lower. I am told that this scheme is now being withdrawn, rather than adjusted to reflect the new rates. The actual increase in BT's margins on calls to mobiles will be greater than that given above. There is no reason to suspect that call volumes will reduce, if anything they would be expected to increase, boosting BT's earnings yet further.


It is fair to say that callers are paying less and the other telcos who have not passed on any of the saving are obviously more guilty of profiteering. It would however appear that BT's net earnings have been increased as a result of its efforts in the TTR campaign.

We now must wait to see how the mobile companies react to their income being reduced whilst that of the landline companies has increased.

It appears that the warfare between BT and all of its competitors, landline and mobile, is hotting up. This does not augur well for achievement of agreement on any of the measures to increase visibility of non-geographic call charges.

SilentCallsVictim wrote on Jun 7^th, 2011 at 12:30am:

Is it fair to ignoring the call connection fee, which we may assume to deliver a constant margin, and the vagaries of some of the evening and weekend termination fees?

The Call Set-up fee, whole minute and whole penny billing are all just techniques these companies use to inflate the cost of calling and must therefore be taken into account in any calculations, as tables do in Reply #17 above.

If call set-up fees are so important (for a "constant margin"), then we would expect inclusive calls to attract them, particularly as there are more and more of them these days, what with the high penalty charges for making calls outside outside of inclusivity.

Also bear in mind that the mobile operators don't charge a 'per call' fee for connecting calls.



SilentCallsVictim wrote on Jun 7^th, 2011 at 12:30am:

If so, then we can take an average on cost of 4.470 vs. 2.984 - a 33% reduction, against price reductions of 24% and 13%,

I think this is a bit too high. Remember that fewer calls are passed to 3, so the weighting of its 5 pence per minute during the daytime should be far less than the other four who were all around 4.43.



SilentCallsVictim wrote on Jun 7^th, 2011 at 12:30am:

On daytime calls this fell from 8.530 to 8.316, but increased as a percentage from 66% to 74%. Likewise for evening and weekend calls, a reduction from 2.530 to 2.316, but an increased percentage from 36% to 44%.

I've revised my table above. There is no weekend mobile call rate; only daytime and evening rates. This raises another question. Do we think that the abolition of separate low weekend rate for calls to mobiles was done as mitigation to Terminate the Rate?

Even if the Call Set-up fee were to be left out, I believe that the effect of whole minute billing is quite significant and (to a lesser extent) rounding up to the next whole penny.

Dave wrote on Jun 7^th, 2011 at 10:08am:

Also bear in mind that the mobile operators don't charge a 'per call' fee for connecting calls.

Don't give them ideas.

.

Thanks for your comments, Dave; all are valid.

I was seeking to address the question:
"Has BT passed on the effect of the reduction in the termination rates to its customers?".

The points you make all challenge my provisional conclusion that it has not.
I would be very interested to see the conclusion reached by an alternative analysis.

Whilst the posting on TtR blog might have disappeared, the press release from BT is still there and it is now clear that the blogging was copied from it:

http://www.btplc.com/News/Articles/ShowArticle.cfm?ArticleID=2A59CB1B-97F1-461A-A1FA-8D64AD8C8D7B


Quote:

DC11-120                                                                                                                                       24th May 2010 BT cuts the cost of calling mobiles from landlines by up to 24 per cent Virgin to charge around 78 per cent more than BT for landline calls to mobiles BT today announced that from 28 May it will make significant cuts to the cost of landline to mobile phone calls. This announcement follows BT’s leading role in the Terminate the Rate campaign, which helped persuade Ofcom to lower mobile termination rates. In the evening, the cost of calling a mobile on all major networks from a BT landline will fall from 7p per minute to 5.3p, a 24 per cent cut. During the day, the cost will fall from 13p per minute to 11.3p, a 13 per cent cut. This announcement adds extra pressure on companies such as Sky, TalkTalk and Virgin Media who have yet to pass on the savings achieved through the Terminate the Rate (TTR) campaign. …

The headline couldn't be any more misleading. The cost of no call is being cut by 24% because the Call Set-up fee applies to all calls to mobiles.

The TtR posting which disappeared has re-appeared:

BT delivers on Terminate the Rate promise


Quote:

In the evening, the cost of calling a mobile on all major networks from a BT landline fell from 7p per minute to 5.3p, a 24 per cent cut. During the day, the cost fell from 13p per minute to 11.3p, a 13 per cent cut. …

This is not true as the "cost of calling" a mobile incurrs a 12.5 pence Call Set-up fee and it is only the 'per minute' element which has been cut, which means that the percentages quoted are not representative of the amount the entire cost of a call has gone down by.

For example:

• a 1 minute daytime call has come down from 26p to 24p, a cut of 7.7%.
  
• a 3 minute daytime call was 52p and is now 47p, a reduction of 9.6%.
  
• a 10 minute call during the daytime was £1.43 and is now £1.26, a cut of 11.9%.
  
• a 1 minute evening call has come down from 20p to 18p, a cut of 10%.
  
• a 3 minute evening call was 34p and is now 29p, a reduction of 14.7%.
  
• a 10 minute call during the evening was 83p and is now 66p, a cut of 20.5%.