Issue Brief No. 01/2008

Mobile Charges (termination rates)

The News

During a meeting of the Communication Committee (COCOM) of the EU-Commission on February 18th, the represented EU-member states declined a too significant reduction of the so called termination rates. Therefore, the corresponding proposals of EU Commissioner for telecommunications issues, Viviane Reding, have increasingly been critisized. Ms Reding plans to reduce the termination rates in Europa to 1,5 – 3 cents per minute until 2012. An official proposal by the Commissioner is expected to be announced in April. The dismissive vote in the COCOM does not have a binding character – however, it is unlikely that Ms Reding will ignore the political will of the EU-member states.

The Background

Termination fees are charges levied by a network operator on a third-party network when their customers receive calls from that third-party network. In Germany, these fees are set by the Federal Network Agency (Bundesnetzagentur) and range from 6.59 to 7.14 eurocents a minute. The termination fees on Cyrus are 2 eurocents, while in Bulgaria they are 18 eurocents.

Already in March 2009, the EU pushed through considerable rate cuts on roaming fees for international mobile phone calls. By 2011, roaming fees will be capped at 35 eurocents/minute for calls out and 11 eurocents/minute for calls received. According to the Commission's figures, the charges previously began from a base rate of at least 58 eurocents and were in some cases far higher.

The EU Commission's intervention in price formation in infrastructure markets reflects the efforts of European institutions to establish a stronger profile as championing the interests of the citizens and consumers. Similar tendencies can also be observed in the Commission's consumer protection policy and are likely to continue – especially with regard to the upcoming European Parliament elections in June 2009.

A public consultation process debating the Commission's draft recommendations was held until 10.9.2008. The German Federal Ministry of Economics and Technology (BMWi) criticized that the recommendations of the Commission would be too "dramatic". Furthermore, the cost calculation used by the Commission in order to call for lower termination rates would not be adequate since the apportionment of indirect costs "are not considered in a sufficient degree". According to the ministry, the underfunding of costs might be a realistic threat. The BMWi is concerned that especially small network providers could be affected in a negative manner.

The Milestones

On the 31st of March, the Federal Network Agency presented the new termination rates for the German market, effective from 1st of April 2009. According to these latest figures, telephone companies are allowed to charge between 6,59 cent (T-Mobile and Vodafone) and 7,14 cent (E-Plus and o2), resulting in an overall reduction of 16 and 19 percent, respectively.

In the meantime, the EU-commission is still not satisfied with the cooperation of the Bundesnetzagentur in the field of transparency. Brussels claims that the German agency is not sharing its data, on which it bases the termination rate calculations, profoundly enough and therefore takes jurisdictional measures into consideration.

The Commission wishes to have finished the work on the draft before the EU election in Summer 2009. According to sources from Brussels, implementation at the national level is scheduled to be completed by 2011.

Last update: 1 April 2009