SilentJ (jb1) wrote,

UK Mobile Rant

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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