Cheaper cross-network calls on the way as Ofcom cracks down on operators

The costs of calling someone on their mobile phone are set to fall considerably over the next four years, thanks to a new ruling by the UK's telecoms regulator Ofcom on the amount operators can charge one another for incoming calls.

This is all to do with 'mobile termination rates', which are the key reason it remains expensive to call a mobile phone if you're not on the same network. Ofcom says these rates will fall by more than 80 per cent over the next four years, resulting in savings for mobile and landline users alike.

To put it another way: grans around the country will soon have no reason to grumble when their grandchildren inform them they can only be called on their mobile.

Ofcom says landline providers have already promised to lower the costs of calling mobiles, and says because people are using (and paying for) more mobile data on their smart phones, the mobile operators won't be hurt too much by the falling income from termination charges for voice calls.

As a guide, currently most UK operators are allowed to charge 4.18 pence per minute for calls terminating on their networks -- 3 charges 4.48p -- but that will fall for all of them to 2.66p in 2011/12, 1.7p in 2012/13, 1.08p in 2013/14, and 0.69p in 2014/15. Each year's rates kick off at the start of April, hence the dual-year details.

Note, these aren't the prices you'll be charged per minute to call mobile phones, just the maximum termination fees.

Consumer group uSwitch has welcomed the announcement, while also criticising the pace of the rates slide. "Consumers have been unwittingly lining the pockets of the mobile phone cartel with billions of pounds. These hidden charges have up until now cost as much as 4p for every minute of every call made," says uSwitch's Ernest Doku.

"It is still disappointing that Ofcom has not taken on board the European Commission's recommendation to reduce these rates in half the time, reaching 0.69p by the end of 2012 instead of 2014. Nevertheless, this is a clear victory against the bully boys."

Doku says BT is already planning a new all you can eat tariff for landline customers that will include calls to mobile phones, but warns mobile operators may find other ways to charge to make up the shortfall. "New charges for paper billing are just one way for the networks to cushion themselves from the blow," he says.

Update: A spokesperson for Everything Everywhere, the umbrella company for Orange and T-Mobile, issued a statement addressing Ofcom's decision. "We are disappointed with Ofcom's decision and are currently reviewing the detail and our position as to whether we will appeal.

"Our concerns focus on the impact of the decision to our vulnerable pay as you go customers. By applying pure LRIC methodology in setting call termination rates going forward, Ofcom has suggested we recover a larger share of our costs from retail charges.

"This may force us to change the pay as you go model as we know it as a large number of these customers will now become uneconomical -- making the way our consumers currently buy, use and enjoy their mobiles radically different going forward," the spokesperson said.

We think describing paying customers as "vulnerable" is a bit rich, and it seems like unnecessary and patronising sabre-rattling to suggest this threatens the pay as you go model. But certainly, they'll have to make their money elsewhere. What do you think? Would you pay more for a phone upfront to keep the flexibility of pay as you go?