Oftel's powers of persuasion haven't worked on the mobile industry, so it has resorted to the big stick approach.
The British telecommunications regulator announced on Monday that it has formally asked the United Kingdom's Competition Commission to investigate whether Vodafone, MmO2, One2One and Orange are charging too much for mobile phone calls between their networks.
Oftel warned last month that it was prepared to refer the matter to the Competition Commission, after failing to persuade the mobile companies to voluntarily cut their charges. The Commission will now have up to 12 months to make its ruling.
Oftel believes that mobile phone users are being overcharged when they call a phone connected to a rival network. In September 2001, it instructed mobile companies to cut these charges--known as termination costs--by retail price inflation minus 12 percentage points per year for four years. This, the regulator claimed, would save U.K. customers more than $1 billion (?800m) over four years.
The mobile industry refused to accept this proposal, with One2One slamming Oftel's investigation as "flawed, inconsistent and incomplete." It is now up to the Competition Commission to decide whether Oftel's proposed savings are in the public interest.
Because of termination charges, it costs significantly more to call a mobile on a rival network. However, some analysts believe Oftel's proposed cuts would make little difference--pointing out that many mobile tariffs include free calls to phones on the same network, which encourages friends and families to all sign up to the same operator.
Staff writer Graeme Wearden reported from London.>