This week Ofcom announced a new framework for mobile phone pricing that will force operators to radically reduce the cost of calls between networks. Here are the details and why they matter to digital marketers…
The UK regulator is showing its teeth after their long-anticipated review of mobile call pricing. The area of focus is the termination rate; the amount carriers charge in a handover from one network to another. With the centre of gravity for voice traffic now firmly with mobile operators, the inexplicably high costs of terminations have been used as the excuse to keep the price consumers pay per call so high. These wholesale charges between mobile operators as they connect calls between networks have been long criticised as inflated and unjustified.
What’s interesting is the scale to which Ofcom has weighed-in, and the implications for network charges across Europe as a result. European regulators have been waiting to see the verdict and the shape of the charge reduction plan. Given the similarities of consumer concerns about mobile call charges across Europe it seems likely that this will become widely followed – or at least considered – by other governments.
The timing for changes is gradual, with stepped changes starting on the 1st of April and placing a cap on the rates charged by our four heavyweight national operators (O2, Vodafone, 3UK, Everything Everywhere). Rates are currently 4.3p and from April 1st will be slashed to 2.66p. They will fall in a stepped way during the next four years to 0.69p by 2014. Eurosceptics might want to note that this was triggered by the European Commission advice to move to 0.5p by next year.
For digital marketers the news is warmly welcomed because falling call charges remove further barriers to the deeper use of mobile. However, while the principles will be welcomed by consumers, device manufacturers and mobile marketers, it is still unclear if the savings made by mobile network operators will be fully passed onto consumers.
Ofcom are likely to turn their attention next to data traffic. Their recent research tracked a doubling (104 percent increase year on year) in data use among UK mobile phone users. The new changes in pricing only cover voice calls and not data charges. The use of mobiles for browsing, apps download, message applications and music downloads has massively increased the data volumes already. Today the fusion with social media is embedding a new type of data traffic that will see data volumes rise in line with social media use as Facebook apps and similar become embedded on smartphone home pages.
While consumer groups may have won the battle on voice traffic, Ofcom’s decision doesn’t mean they have won the war on pricing.