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UK Mobile Rant [Feb. 14th, 2006|01:26 pm]
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I saw an ad in the Tube yesterday that drove me nuts: Three's new Get Paid To Answer Your Mobile promotion. This isn't a gimmick and the reason why they can afford to do this demonstrates why the UK's system of billing for phone calls sucks.

There are three components to a phone call's cost: the charge for the caller's connection, the charge for carrying the call (long distance), and the charge for the receiver's connection (the termination charge). On landlines, the connection is free (included as part of your monthly bill) so the per-minute connection/termination charges only enter the picture on mobiles.

The termination charge is billed to the caller in the UK, with the rationalization that "the caller wants to make the call, so they should pay for it". As a result, calling a mobile is more expensive than calling a landline. On the other hand, receiving a call on a mobile is free. The US bills the termination charge to the receiver. This means that you pay to receive calls on your mobile in the US. The argument is that the receiver is paying for the convinience of using a mobile phone and the caller shouldn't have to worry about what kind of phone the receiver is using. No matter which billing system you think is more fair, the US system has one major advantage: it gives consumers the ability to force down prices.

When you shop for a mobile plan in the states, you usually care about one number: the cost per minute. It's easy for consumers to pick out the cheapest rate.

In the UK, all the mobile operators charge very little for both the caller's connection and long distance because that's what people shop for. However, they charge exorbitant termination fees (on the order of 10-20p/minute). As a caller, I have zero control over the termination fee because I don't choose the receiver's calling plan. So there's no way I can convince mobile operators to lower their termination fees.

Now Three is taking advantage of that fact. They make huge profits whenever someone calls their mobiles, so they are encouraging people to accept incoming calls by paying them a share of the termination fee.

The only reason UK mobile tariffs have decreased in the last few years is because Ofcom has forced mobile firms to reduce their termination fees. If it weren't for government pressure, the rates would still be sky high.
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Comments:
[User Picture]From: pirate_destrin
2006-02-14 04:35 pm (UTC)

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Thats is very interesting...didn't know that was the reason behind the way this works.

Personally I'd agree at least logically with the 'the caller wants to make the call, so they should pay for it' attitude but, as you say, the corporate bunnies will always manage to find ways of stiffing you despite best intentions!
[User Picture]From: bleandweller
2006-02-14 04:39 pm (UTC)

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I too had not realised the intricacies of the current billing system.

With the population having got used to the receiver not paying a dickiebird, I feel that to try to introduce a termination fee to the receiving party would be very difficult indeed now.

That said, if it meant that free-market economics would drive down the cost of the termination fee, at the same time as removing it from the *outbound* call, I can certainly see people's bills heading southward.

Might be an interesting study, that...

Food for thought, certainly.
[User Picture]From: jb1
2006-02-14 10:27 pm (UTC)

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Yeah, I neglected to mention that rates in the states are *much* cheaper...

The best AnyTime/AnyNetwork rate I could get here was 9p/minute (£45 for 500 minutes) which is about 15 cents/minute. A quick check of T-Mobile US has a plan with 1000 minutes for $40 (4 cents/minute). If you consider that you'll need twice as many minutes, that's still half the UK price.
[User Picture]From: bleandweller
2006-02-14 11:41 pm (UTC)

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As usual, the UK consumers are charged through the nose.

Fair play to the companies though, what the market will bear and all that, even though it does seem to be nearing exploitation!
[User Picture]From: jb1
2006-02-14 11:50 pm (UTC)

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Fair play to the companies though, what the market will bear and all that

Gah... I hate it when you English people say stuff like that!!! :) Partly because it's so defeatist and partially because I think a lot of people use that attitude to justify ripping other poeple off...
[User Picture]From: bleandweller
2006-02-15 12:12 am (UTC)

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See the next bit of of that sentence ;o)

As a nation however we do tend to grin and bear it rather than saying 'hang on a moment, this is not right'.

Although I think it is slowly changing. Perhaps.
From: (Anonymous)
2006-02-20 02:53 pm (UTC)

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He's got a point ... are mobile voice calls so desperately important that government price regulation is the answer? Maybe gas/electric/999 service, but mobile phones?

-Trevor
From: (Anonymous)
2007-05-08 08:29 pm (UTC)

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well although i agree with you, i really dont mind my network O2 at all. For £20 ($40 at todays exchange rate) i get 1000 text messages, 500 mins to landlines and O2 mobiles (which most of my friends are) a month. Plus, i get the £20 calling credit to spend aswell. i'm on a price plan where i'm charged 35p a min for the first 3 minutes, then 5p a min there after. which suits me perfectly as some days i'll just text, i wont call, and other days i call a lot. So considering i only spend £20 a month, i'm getting £120 ($240) worth or freebies, plus the credit i topped up with aswell.

And hopefully Ofcom are going to intervene again as there was talk that the highest price they should be charging for cross-network calls is 10p per minute (its cross-network calls that the networks make all their money from)

i used to work for t-mobile and apart from offering half price line rental to its employees for life, it was a crap network. ridiculously overpriced and hard as anything to get a signal if you were indoors.