Vodafone slams EU's termination rate plans

Vodafone has claimed that 40 million Europeans could be forced to give up their mobile phones in its submission to EU commissioner Viviane Reding concerning her plans to cut mobile termination rates, the Financial Times says.

The termination rates - what one operator charges another for connecting a call to its network - account for up to 20% of European mobile carriers' revenues. Until now, they have largely been left to determine the level between themselves, operating in a lightly regulated environment, unlike their fixed line counterparts.

Vodafone insists that if Reding's plans to slash termination rates is pushed through, mobile operators will be obliged to raise retail charges to make up lost revenue or face bankruptcy.

According to the FT, Reding is interested in the US model because carriers keep the revenue from calls made by their customers, which covers the cost of connecting calls to its network. This means termination rates are very small or non-existent, but consumers usually have to pay to receive as well as make calls.

Vodafone acknowledges that there is scope to reduce termination rates, but baulks at Reding's target of between 1 and two euro cents per minute by 2012, down from the current average of 8 euro cents per minute. The operator insists that if this is enforced, the least well off customers with pay as you go deals will be those who suffer most.

These customers receive more calls than they make, hence operators make their money on termination rates from incoming calls to them. The lost income from termination rates would have to be made up on direct charges to them, meaning that some 40 million Europeans could not afford to have a mobile, based on research carried out by Taylor Nelson Sofres, commissioned by Vodafone.

Reding is keenly exploring the US approach because calls charges are lower and consumers use their mobiles more.

However, she also needs to be aware that operators have far greater control of their customers' behaviour - for example, fighting a tooth and nail rearguard action to keep consumers in a walled garden rather than offering untrammelled access to the internet and tying far more Americans in long, inflexible contracts.

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