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EDITIONS
 Working Lunch Wednesday, 22 January, 2003, 15:12 GMT
Mobile companies told to cut costs
Phone cost graphic
How costs should fall
The cost of some mobile phone calls should come down after a ruling by the industry watchdog, Oftel.

It announced the cuts after a year-long investigation by the Competition Commission.

The cost of some calls could fall by at least 30% over three years.

That could lead to total savings of 700m for phone users.

But mobile operators aren't happy.

They say the decision is flawed, and are talking about legal action over the commission's proposals.

Compensate

It's likely other charges will go up to compensate.

"The mobile user will end up paying disproportionately more than they would have done otherwise to the benefit of a very small group of fixed line users who will have some benefits when they call a mobile phone," says Vodafone UK's chief executive, Gavin Darby.

There's been concern for some time about the high cost of calls to mobiles - either from another mobile or from a landline.

Recruitment consultant Raj Patel
Raj Patel: "Costs going up"
It can cost more than 50p a minute.

That can hit both personal users and businesses - like recruitment consultant Raj Patel.

"Whether we call our clients on landlines or on their mobile phones, the changing tariffs constantly mean our mobile phone costs are on the rise all the time," he says.

This ruling centres on the termination charge - what companies charge for a call to be received by one of their phones.

Oftel had tried to reduce prices before, but the operators refused to accept its proposals.

That prompted the commission's investigation.

Inflation

The first price cuts should come in July, with a one-off 15% reduction.

Then there will be further trimming until 2006 using a formula linked to inflation.

A court battle following a whole year of the most detailed investigation just beggars belief

David Edmonds, Oftel director-general
But the issue has highlighted the bad feeling between the operators and the regulator.

The mobile companies weren't happy with the figures and formulas used to come up with the original proposals.

Oftel's director-general David Edmonds says the commission's report has vindicated his findings.

He says he hopes mobile companies won't try to pass on the lost revenue to customers through other charges.

"There's a lot of competition in the rest of the mobile phone marketplace - I hope that competitive pressure will continue to drive prices down," he says.

  WATCH/LISTEN
  ON THIS STORY
  David Edmonds, Oftel director-general
"The consumer needs protection"
  Vodafone chief executive Gavin Darby
"Prices will have to go up for tariffs and handsets"
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