Page last updated at 16:38 GMT, Monday, 22 September 2008 17:38 UK

UK criticises phone fee shake-up

A woman on a mobile phone
Reducing mobile phone fees may not mean cheaper costs for customers

A shake-up in mobile phone charges by the European Commission (EC) may have unintended consequences for consumers, according to the UK telecoms regulator.

European plans to cut phone bills could hurt those on low incomes, particularly people on pay-as-you go tariffs, Ofcom and the UK Government said.

Brussels wants the fees that mobile phone operators charge for handling each other's calls to be cut by 70%.

But regulators said phone firms may recoup lost income from customers.

Ofcom and the Department for Business, Enterprise and Regulatory Reform (BERR) published the joint statement in response to the EC's proposals.

They said the aim of cutting the price of calls for consumers should be applauded.

However, it warned that plans to change the tariff structure could result in lower bills for the caller, but higher costs for the person receiving the call.

"The Commission has been unduly optimistic in assuming that the fundamental changes it has proposed should take effect by 2011"
Joint statement, Ofcom and BERR

This could disadvantage lower spending customers, it argued, particularly those on pay-as-you-go tariffs.

In June, EU telecoms commissioner Viviane Reding said the current disparity in call termination rates between different countries meant that consumers were being ripped off.

'Regulatory plumber'

She said call termination markets in the EU needed a "regulatory plumber" to increase competition.

The UK regulator also said that it has already agreed mobile phone termination rates in the UK until March 2011, and it is reluctant to alter those rates now.

"It therefore appears that the Commission has been unduly optimistic in assuming that the fundamental changes it has proposed should take effect by 2011," it said.

Mobile firms, for whom termination fees account for up to 20% of annual revenues, are lobbying for more gradual reductions.

Earlier this month, Vodafone said it accepted the cost of termination rates would continue to fall, but took issue with the speed at which Brussels was seeking the cuts.

On Tuesday, the EC is expected to announce further measures to cut the cost of using a mobile phone abroad.

The proposals are thought to include a reduction in the cost of text messaging and a price cap on downloading data such as TV shows.

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