Orange and Vodafone have blamed higher rates for texts and calls on Ofcom regulatory changes
Orange and Vodafone are raising their rates for pay-as-you-go (PAYG) customers, saying the move is in response to Ofcom’s new restrictions on call termination rates.
The price rises aren’t related to recent EU regulatory changes designed to lower the cost of making and receiving calls while abroad.
Orange on Friday raised the cost of calls from 20p to 25p per minute and for texts from 10p to 12p. Vodafone, as of 14 July, will increase the cost of calls from 21p to 25p per minute and texts from 10p to 12p.
Mobile termination rates (MTRs) are the rates mobile operators charge for allowing calls to be received by their networks. In April Ofcom began bringing MTR cuts into force, in order to reduce the cost of calls from landlines to mobiles. Lower MTR rates also improve the competitive position of smaller mobile operators, who do not receive as much income from incoming calls.
Ofcom reduced the MTR rate from 4.18p to 2.66p earlier this year and is planning further cuts, which will result in MTRs being reduced by about three-quarters by 2014.
PAYG customers are being targeted because contract customers’ rates can’t be changed without altering their terms and conditions, according to industry analysts Billmonitor.
The company said PAYG customers make up about half of UK mobile users but only account for about 10 percent to 20 percent of revenues.
Orange and Vodafone said during negotiations with Ofcom that MTR cuts were likely to mean price hikes for PAYG customers, and they are now making good on that promise.
Regulatory changes blamed
“This price rise comes after recent regulatory changes,” said Vodafone in a statement. “During our discussions with Ofcom over mobile termination rates, we stressed that if the rates came down rapidly and dramatically, the cost of Pay As You Go was likely to rise as a consequence.”
Ofcom said the changes would be better for customers overall.
“There is a lot of competition in the mobile market and we urge consumers to shop around to get the best deal for them,” Ofcom said in a statement. “When we cut wholesale mobile termination rates – the high rates that mobile operators were charging each other to end calls on their networks – we did so in a way that would increase choice for consumers and lead to cheaper landlines calls. We have already seen some operators improving deals for consumers as a result of our decision.”