U.K. orders reduction in cell phone charges

The government tells British Telecom, Vodafone, and Cellnet to lower prices on calls to mobile phones, concluding they are "against the public interest."

2 min read
The British government ordered three leading phone companies to lower the price of calls to mobile phones, after concluding they are "too high" in relation to costs and "against the public interest."

Acting on a Monopolies and Mergers Commission (MMC) investigation that it requested, the Office of Telecommunications (Oftel) said it will require British Telecom (BT) to cut the cost of calling Vodafone and Cellnet cellular phones by 25 percent.

Consumers should save about one billion pounds over three years, Oftel estimated, but the move seems to run counter to Britain's reputation for successful telecommunications deregulation.

Vodafone and Cellnet are Britain's leading cell phone companies. Almost all British fixed-line phones are connected to BT, successfully privatized about a decade ago and majority owner of Cellnet.

Two smaller cell phone companies, Orange and One 2 One, were not included in the today's order.

Daytime costs should fall to about 22 pence per minute (22p) from 30p per minute, Oftel estimated. Using a different metric that excludes taxes, BT said average costs will be reduced to 15p from about 20.5p.

Additionally, the companies will no longer be able to charge for unanswered calls to mobile phones, and will have to make further cuts of nine percent (seven in BT's case) in coming years.

"I am pleased that the MMC have accepted our arguments that Vodafone, Cellnet, and BT were overcharging telephone customers," David Edmonds, Britain's Director General of Telecommunications, said in a prepared statement. "Throughout the investigation we have argued that these charges were much too high."

A BT statement asserted the MMC's report, which will not be publicly available until January, "did not challenge the overall level of BT's costs, implicitly acknowledging that BT is an efficient operator and that its costs are justified."

Much of the charge is a fee BT pays to the cell phone companies for use of its mobile network. BT also collects a fee, and the British government collects a value-added tax, a transaction fee on goods and services that applies to most European commerce.

Oftel formally began looking into the cost of fixed-line-to-cellular calls in March 1997. At the time, users paid 37.5 pence per minute, according to Oftel, which claimed charges should be below 20p.

About 12 million of the United Kingdom's 58 million residents are cell phone customers, according to BT, which said the total has grown by about 50 percent in 1998.