The termination crunch: telecom rates may be forced down by 70 per cent

In a recent announcement the commissioner has recommended that both fixed and mobile termination rates (the rate operators charge each other to deliver calls across their networks) be lowered from their current high levels to a couple of cents per minute or less - a proposal that has lead to a predictable outbreak of grumbles from operators - especially large ones.  More on this in a moment.

As things currently stand national regulators mandate very different termination rates across Europe. Mobile rates range from about  €0.02 per minute in Cyprus up to €0.18 per minute in Bulgaria, with an average of about €0.09 overall. Fixed network termination is much lower at an average of about €0.0057 (about half a Euro cent) but can also be much higher too.

Reding wants guidelines in place that will push both fixed line and mobile network termination rates down to around 1.5 to 2.5 Euro cents per minute by 2011.  Her recommendation is designed to open a period of consultation, so stand by for dire prophesies of increased charges, increases in spam calls and so on if the reductions go through.

However don't be fooled.  The real argument here is about the underlying business dynamics not the interests of the consumer.

About two weeks ago Reding caused a storm when she appeared to give a green light to European operators to adopt the North American practise of charging the mobile premium on a conventional (non-roaming) call, to the call receiver, instead of to the caller, as is the case in Europe.

In fact, such an option might make a certain amount of sense to some operators if the termination rates must be cut as Reding is now outlining.  If they did so, operators would essentially be rebalancing their charges from caller to callee and that may well happen in the longer term if Reding's changes go through.

Then again - and more likely in the short term - operators may simply continue to charge their own customers the same retail premium for calling (to either a fixed or mobile network), even though the underlying immediate cost to the operator of  that call being made (as expressed by the termination rate) no longer exists.  That would result in the same amount of cash available for network investment, operations and profits.  It would just see it arrive from a different direction. So no change there then?

Not quite.