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Tuesday, 2 April, 2002, 08:38 GMT 09:38 UK
Watchdog probes mobile phone firms
Children using mobile phones
Are mobile phone firms charging too much?
The UK's competition watchdog has warned UK mobile phone operators of a wide-ranging probe into their finances, following concerns of overcharging.

The Competition Commission has said it is seeking evidence of "excessive profits" reaped by the big four operators - One2One, MMO2, Vodafone and Orange.

The investigation follows concerns lodged by telecoms watchdog Oftel over levels of termination rates - the fees an operator charges rivals for connecting calls to its network.

But the Competition Commission has warned that any of the companies' operations could be open to investigation.

"We shall want to pursue... whether excessive profits are being earned by any of the operators either overall or in respect of any part of their business," the commission wrote in a letter to the companies.

Price concerns

The investigation will cover levels of competition in the text messaging market, one of the most lucrative areas for mobile phone firms, the commission confirmed.

And the commission will investigate whether the mobile phone firms are competing "unfairly" against providers of fixed line services.

In December, when Oftel lodged its complaint with the commission, a peak rate national call over British Telecom's network cost 24p.

The same call to a different network cost 60p, of which 39p represented the termination charge.

Phone packages offered by operators will also be investigated, to see if fees gained from termination charges are being used to subsidise handset prices, leading to "distorted" pricing structures.

Failures in the termination fee market are to be probed for "effects adverse to the public interest in the form of higher charges for consumers" or an "inappropriate price structure across mobile phone services".

Bitter dispute

Oftel's warning in December of a Competition Commission investigation prompted a bitter response from operators, which warned that any attempt to cut charges would threaten investment in the UK mobile market.

"The UK telecommunications market is definitely the most competitive in Europe and probably the world," One2One said in December.

Oftel proposed forcing operators to "increase" charges by a rate of no more than inflation minus 12% for four years.

So if inflation was at, say, 2.0%, operators would be forced to cut charges by 10.0% a year.

The commission is due to finish its investigation in June, although a six-month extension can be granted.

See also:

12 Dec 01 | Business
Oftel slams mobile firms
12 Dec 01 | Business
Hoping for lower mobile bills?
19 Nov 01 | Business
Mobile phone demand declines
15 Nov 01 | Business
Mobile phone firm to employ children
26 Sep 01 | Business
Picking the right mobile phone
19 Aug 01 | Business
'Oftel to order mobile price cuts'
26 Sep 01 | Business
Mobile call costs set to fall
07 Nov 01 | Business
UK mobile users 'exploited'
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