WASHINGTON-One of the most contentious wireless issues in Europe-mobile phone termination fees-is has landed in the United States as Bush administration trade and telecom officials investigate whether U.S. telecom carriers are being overcharged by wireless operators across the Atlantic and elsewhere.
Last week criticism continued to pour in here about such charges by European mobile-phone service providers. The U.K. Competition Commission released findings of an investigation into U.K. termination charges this week, proposing the country’s four operators lower their mobile termination fees an initial 15 percent, followed by additional annual price cuts (see U.K. operators ordered to cut termination charges).
The controversy is playing out slightly differently here than in Europe, where the European Commission and the U.K. Competition Commission have been investigating the issue.
In Europe, the uprising has been fueled by domestic wireline carriers and subscribers who pay mobile termination fees under the calling-party-pays regime. U.S. long-distance companies primarily brought the issue to the attention of the Bush administration.
U.S. Trade Representative Robert Zoellick and Federal Communications Commission (FCC) Chairman Michael Powell have open proceedings to examine the issue to determine what action, if any, should be taken.
Aside from the merits of arguments presented to trade and telecom officials, the high priority given to the dispute here and overseas reflects a recognition of a fundamental, if not radical, shift in global communications: the untethering of the telephone and, increasingly, the Internet. In other words, the only reason mobile termination fees is a flash point in regulatory circles is because mobile phones are becoming a substitute for landline communications around the world. But there is another key component that may help explain why mobile termination fees have become so combustible in Europe. Mobile-phone carriers are sunk in heavy debt as a result of collectively bidding more than US$100 billion for third-generation (3G)wireless licenses.
Generally, though, the issue-like so many others faced by wireless here and abroad-is an outgrowth of the industry’s enormous success the past two decades. The challenge is now to manage that success. It is not easy.
“U.S. consumers are directly harmed by being forced to pay higher costs to call foreign mobile networks, and this harm is compounded by the fact that many subscribers are unaware of these surcharges before they make such calls,” said Cable & Wireless, a U.K.-based global telecom powerhouse.
The mobile termination fee backlash has put European mobile-phone operators on the defensive. It is bad enough that European wireless operators face domestic anger over the issue. But now, the barbs increasingly are coming from outside Europe-namely across the Atlantic.
“As a result of their market power over mobile termination, all mobile operators large and small maintain termination rates that are far above actual cost,” WorldCom, the number-two U.S. long distance carrier, told the FCC last week. WorldCom, seeking to emerge from bankruptcy protection, said European wireless carriers are the worst culprits. The firm said mobile termination fees can be as high as 25 U.S. cents per minute in Europe, higher than termination fees charged by landline carriers in the European Union and about five times more than mobile termination fees charged by U.S. mobile-phone operators.
“Due to poor policy and lack of regulation, mobile operators have abused their dominant position to turn mobile termination into a ‘cash cow,'” the Competitive Telecommunications Association recently told the USTR.
CompTel, which represents long-distance companies and other U.S. telecom carriers, said Europe-particularly Switzerland, Netherlands, Spain, the United Kingdom, France, Belgium, Italy and Germany-charge high mobile termination fees.
“Mobile operators across Europe have used the abusive and excessive margins they earn on fixed-to-mobile termination to cross subsidize other activities and to discriminate against fixed network operators,” said CompTel. The trade group said the problem exists in Japan as well.
NTT DoCoMo, Japan’s top mobile-phone carrier and the target of criticism from long-distance carriers on the mobile termination issue, told the FCC the problem may have more to do with long-distance billing practices than mobile termination rates themselves.
“U.S. carriers were requiring U.S. consumers to pay surcharges that amounted to 164.2 percent and 184.2 percent, respectively, of the interconnection rates charged by mobile-phone operators in the United Kingdom,” said NTT DoCoMo.
The clear suggestion is that while there may well be legitimate grounds to protest mobile termination fees in Europe, U.S. long-distance companies may be making the problem worse. GW
