Ofcom orders cut in mobile call charges

Ofcom's decision to cut termination rates - the charges operators make to connect calls to other networks - follows a review launched last May.

The lower charges proposed for the four years to 2015 - cutting from an average 4.3p a minute to 0.5p over the period - should be passed on to consumers and encourage competition, the watchdog said.

Ofcom said termination rates had fallen from more than 23p a minute in 1995 to less than 5p today, with further "steady and sustained" reductions to come.

The watchdog said cheaper termination costs would mean lower call charges to mobiles for the 32.7 million UK homes and businesses with a landline, as well as lower mobile-to-mobile costs as operators pass on reductions.

"As rates fall and operators adapt, consumers will benefit from cheaper calls and competition in both the UK fixed telecoms and mobile markets," the regulator said.

Ofcom said the mobile phone market had "changed significantly" since it last set rates in 2007, with many smaller operators alongside major players such as Vodafone, O2 and the newly-merged Orange and T-Mobile.

The cuts decided by the regulator follow European Commission guidance which said rates at a national level should be based only on the real costs an efficient operator incurs to establish the connection, rather than taking into account factors such as overheads.

Ofcom said smaller firms were likely to set their own rates in line with the national operators, increasing regulatory certainty and helping new mobile providers enter the market with products and services.

The watchdog will consult on the changes until the end of June before concluding its market review later this year.