Ofcom
says that it must still regulate the wholesale prices of mobile
minutes because no buyer, not even BT, has enough power to
counterbalance the market power of mobile operators. The target
price of 5.3p must be reached by 2011 under guidelines just issued
for consultation by Ofcom.
Wholesale prices determine the cost at which one network buys
time on another network. Without that process callers would only be
able to telephone subscribers to their own network. Ofcom regulates
the prices because it believes that the market is not developed
enough for market forces to keep prices low.
"Charge controls should be imposed on the supply of [calls] by
each of the five [networks], and those controls should apply
without distinction to voice call termination whether on 2G or 3G
networks," said the proposal.
Telecoms companies are controlled by Ofcom when they are deemed
to have significant market power (SMP). This means that they
control so much of their own market that normal competition cannot
apply.
Ofcom has ruled that each of the mobile networks is the sole
supplier of its services and can have no competition, and therefore
that each network has SMP. That makes each network subject to Ofcom
price controls.
"There are separate markets for wholesale mobile voice call
termination in the UK by each of Vodafone, O2, Orange, T-Mobile and
H3G," said Ofcom. "BT and other purchasers are unable to exercise
CBP [countervailing buying power] to the extent needed to constrain
charges to the competitive level."
Ofcom also announced that it will conduct a similar review into
the wholesale market for text messaging. Ofcom said that the market
for text messages in 2005 was worth £2.1 billion in the UK. It said
that the average price of a text message is 6.3p. It said that its
move was in part prompted by the French regulator's decision to cap
the price of text messages.
Ofcom will conduct a review over the next 12 to 18 months, it
said, but said that price regulation was not a certainty.
"Reviewing a market is not the same as deciding to impose
regulatory rules," it said. "In keeping with any market review,
Ofcom would only impose regulation on any operator if and to the
extent there is significant market power and that it was
proportionate and appropriate to do so. The decision by the French
regulator does not itself mean that Ofcom will come to a similar
conclusion. The nature of markets varies across Europe. The outcome
in the UK will depend on what Ofcom concludes as part of its
review."
