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3G/HSPA

UK Rate Shakeup

1:00 PM -- All five U.K. mobile operators and BT Group plc (NYSE: BT; London: BTA) met today behind closed doors at the U.K. Competition Commission to discuss radical changes to the current mobile interconnection regime, and more specifically, mobile termination rates.

They're all there because of Three UK . The 3G operator doesn't like the mobile termination rate system in place today, and it especially doesn't like an Ofcom decision from last year to cut its mobile termination rate (what it charges other operators to complete a call on its network) by 45 percent. (See Ofcom Cuts Mobile Rates and UK Mobile Rate Cut Includes 3G Costs.)

Because 3 doesn't have a GSM network, the operator sends out more calls than it receives. So, it pays more in mobile termination fees to other operators than what it charges, which means it always ends up being out of pocket. A 3 spokesman reckons the operator "subsidizes" the other four operators to the tune of £100 million ($197 million) per year.

The operator wants to change all that and wants mobile termination rates to be brought down to the level of fixed termination rates, which are about .5 pence per minute, according to the 3 spokesman. Compared to the mobile termination rates that are more than 5 pence per minute, that would be a deep cut indeed. We're talking about fees that account for around 15 percent of mobile operators' revenues.

3 has its own commercial interests at heart in this debate, of course, but it isn't alone in thinking that mobile termination rates need to change in Europe. European Commissioner Viviane Reding told the Mobile World Congress in Barcelona in February that she wants deeper cuts to these termination rates. (See Reding Guns for Data Roaming Cuts and Reding's At It Again.)

Reding implied that the high and inconsistent termination rates across Europe were holding back the mobile Internet and that eventually the industry would move to a "bill and keep" model where operators agree to interconnect without charging each other.

Europe is a long way away from that model, but the debate has begun — kicked off in a small room at the U.K. Competition Commission.

— Michelle Donegan, European Editor, Unstrung

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