Ofcom moves to pure LRIC approach for mobile termination rate charge control

Ofcom yesterday announced a forward looking charge control on the UK’s mobile operators which is designed to reduce mobile termination rates to pure LRIC over the four year period of the price cap. The effect of this will be to reduce mobile termination rates by 80% from c. 4.18 to 0.69 pence per minute over the period.

Ofcom’s decision shifts the underlying basis of control from LRIC+ (which permits recovery of shared and common costs) to pure LRIC which only permits the recovery of costs directly caused by the incremental termination of voice minutes, assuming that all other costs have already been incurred.

This is a controversial decision in a market in which Ofcom’s decisions have generally been appealed and I suspect this recent decision will be no exception.

Today’s post is short as I am in Madrid for the Olswang Madrid launch party, and consequently blogging from an iPad. I hope to feature regular guest posts from the Spanish telecoms and technology markets in the future.