How will phone companies recoup lost revenues?
Those busy busy Ofcom people are at it again. And this morning they are proposing quite a shakeup of the mobile phone industry.
On this occasion they can be seen as interpreting the will of the European Commission that the termination rate for a call - that's what your mobile phone provider pays the mobile service you ring when you telephone another mobile phone - should not be greater than the direct cost of "terminating" the call.
Ofcom is proposing a very steep fall in that termination charge, by almost 88% or 4p a minute in phases from 2011 to 2015.
So for example if you are calling O2, Vodafone or the merged Orange/T-Mobile, the termination charge paid by your mobile phone provider will drop from 4.3p a minute to 0.5p a minute over those four years (and from 4.6p to 0.5p if you are calling 3).
So does that mean that that you'll be better off to the tune of almost 4p per minute of calls for every call you place to one of the big mobile phone services?
Well there should be a big benefit if are ringing a mobile from a landline. The provider of your fixed line should pass the saving on to you, given that there's pretty intense competition in that market.
So that slight trepidation that some of us still have when calling a mobile from the home phone should be ameliorated a bit.
But what about the big mobile phone companies? How will they react?
Some 16% of their UK revenue comes from these charges. That's quite a lot of revenue to be at risk.
So they'll try and recoup it - perhaps by putting up the cost of so-called data traffic, or what they receive when you send texts or access the internet on your mobile, or possibly by reducing the subsidy they pay on handsets.
The important point about the proposed change is that it penalises the incumbents and levels the playing field to the benefit of younger mobile phone companies.
The logic works like this: the market leaders, Orange/T-Mobile and O2, are currently in effect guaranteed a big chunk of income, because they have the most mobile customers in the UK and know that they'll receive substantial termination charges when those customers receive calls; those guaranteed revenues are now set to shrink fast; which means that they will have less of an endowment of protected revenues that they can channel into initiatives aimed at crushing new entrants.
So perhaps the biggest benefit to consumers will be that we'll see more competition from nimbler, younger mobile phone providers. Which should deliver some combination of lower prices and better services - although right now it is impossible quantify the monetary gain for consumers with any precision.
By the way, I should point out that this is not Ofcom's final ruling. There's still a bit of consultation to come before the new termination charges are set in stone - and even at that stage, the mobile phone companies could appeal to the Competition Commission.
That said, a more competitive landscape for mobile looks a pretty certain prospect.