Mobile operators profiting from secret tax

The biggest mobile phone operators are profiting from a “secret” tax by forcing landline customers to pay high charges for connecting calls to their network.

Mobile termination rates (MTRs) – charged when a call is connected to an operator’s network – have been criticised for stifling competition and increasing landline and mobile call costs.

MTRs currently account for 4.7 pence or more of every minute of a call to a mobile. This is more than 10 times the termination rate charged to call a fixed-line phone. Last year, UK mobile operators charged £750 million in MTRs for allowing fixed-line customers to call mobiles.

A new campaign by the mobile operator Three and others aims to add pressure to end the practice. Three says it is unfairly disadvantaged by MTRs because it has a smaller network. It means it has to pay out more to connect its customers to rival networks.

Three says MTRs are effectively a tax which far outstrips rates on other goods. Tax on beer accounts for about 15.6 per cent of the cost, for example, and up to 52.2 per cent of fuel costs. However, MTRs account for as much as 80 per cent of the price per minute of a call from a home phone line to a mobile.

Hugh Davies, of Three, said: “Hidden taxes on things like petrol and beer can be annoying, but MTRs far exceed these taxes in percentage terms and the vast majority of the British Public are unaware that they even exist.

"It’s time to bring these rates down to a level that’s fair for all phone users.”

The Terminate the Rate Campaign also has support from BT – Britain’s largest landline operator. It is calling for a reduction in MTR to about 1p or less

The European Commission says high MTRs penalise consumers and stifle competition. In May, it recommended that national regulators like Ofcom consider ways to bring down the costs.

Ofcom says it has already set out plans for a reduction in MTRs. It says by 2011, they should be down by a quarter of where they were in 2007. It is now considering plans for further reductions by 2015. It published a consultation document on the subject earlier this year.

Ed Richards, Chief Executive of Ofcom, said: "The role of termination rates in mobile services has attracted enormous controversy. That is why we are determined to examine them from first principles. This consultation gives consumers and industry an opportunity to debate the fundamental questions."

Source: Times Online, 14th July, 2009

Back to News »