WASHINGTON-Global giant Vodafone Group plc and U.S. mobile-phone operators are aggressively lobbying policy-makers to stay out of a controversy that already has rocked Europe and now is erupting in other regions over fees charged by wireless carriers to connect calls to their subscribers. The Federal Communications Commission could decide early next year whether to take action to reduce mobile termination rates levied by foreign mobile-phone operators, even as overseas regulators and competitive pressures are forcing down wireless surcharges in some countries but not in others.
Last Friday, it was reported that mobile termination tariffs in the Netherlands would be halved by the end of 2005, beginning with a 20-percent cut on Jan. 1.
“U.S. regulators are not in as good a position as others to evaluate mobile-termination costs in foreign markets,” said Dianne Cornell, vice president of regulatory policy at the Cellular Telecommunications & Internet Association.
The Bush administration generally has supported the mobile-phone industry’s position, but U.S. officials are being pressured by top long-distance carriers to take steps to reduce foreign mobile-termination fees.
FCC staff recommendations are being drafted, with little indication where regulators are headed on the issue. Given the variety of comments received by the agency, the FCC itself may not know yet how it wants to treat a complex issue also being monitored closely by the U.S. trade representative. Wireless firms say that is exactly where the issue belongs. Let the World Trade Organization be the final arbiter of disputes over foreign mobile-termination fees, they argue.
In some respects, it is an odd issue for U.S. policy-makers because the level of mobile-termination fees is not an issue in the United States where the mobile subscriber pays for calls made and received. Rather, the controversy flows from the calling-party-pays system in Europe, Japan, South America, the Caribbean and elsewhere.
The dispute over whether foreign mobile-termination fees are too high and, if so, whether a regulatory fix is in order, is part of a broad policy review of charges U.S. carriers-and by extension, American consumers-pay to have international calls completed by wireline and wireless carriers abroad. But with wireless traffic growing by leaps and bounds here and in other countries, and mobile-phone carriers on the tails of legacy landline telephone companies, the mobile-termination fee issue is far more than a footnote to the FCC rulemaking.
Indeed, it is an issue of the times.
AT&T Corp. wants the same regulatory regime governing international calls completed on foreign wireline networks applied to mobile-phone traffic. Its independent offspring, AT&T Wireless Services Inc., thinks otherwise.
“Proposals by the commission and others to regulate foreign mobile-termination rates, while well intentioned, may fail to address core competitive problems in many markets by failing to consider particular market structures, the positions of incumbent carriers in multiple market segments and the status of telecommunications liberalization in those markets,” AT&T Wireless told the FCC.
The subtext of AT&T Wireless’ stance is the wireless carrier’s frustration in trying to break into a Caribbean market with a strong presence by Cable & Wireless plc, an international telecom and wireless carrier.
As such, representatives of Vodafone and other stakeholders-wireless and wireline carriers from around the world-are spending lots of time these days visiting federal regulators and Bush administration officials.
Vodafone, 45-percent owner of Verizon Wireless, is aligning with other wireless carriers on the issue but arguably has the most to lose if the FCC takes an activist approach to mobile termination fees.
In fact, Vodafone says mobile-termination fees in some European markets could be too low and may be distorting pricing. Replying to critics, Vodafone insists termination fees are not being inflated to subsidize other operational functions.
In its October 2002 proposal, the FCC said the highest mobile-termination rates are charged in France (28 cents), Haiti (22 cents), Panama (32 cents), the United Kingdom (22 cents) and Uruguay (33 cents). Wireless carriers argue mobile-termination fees are cost-based and inherently higher than older networks operated by carriers that did not have to spend billions of dollars on licenses and network buildout.
What is the appropriate cost for terminating calls on mobile-phone systems? Some would say mobile-termination fees should be a penny or so, certainly far lower than they are around the world.
Last week, two leading experts released a paper arguing against price regulation of foreign mobile-phone carriers. “With the appropriate market design, there is a good chance that MNOs [mobile network operators] acting in their own interests, or negotiation with fixed operators, will select the socially optimal fixed-to-mobile termination rate,” stated authors Robert Crandall of the Brookings Institution and J. Gregory Sidak of the American Enterprise Institute.
The FCC has successfully lowered the cost of U.S.-originated international calls completed on landline telephone networks in other countries. Now federal regulators, at the urging of AT&T Corp., WorldCom Inc., the UK’s Cable & Wireless plc and others, want to see if they can do the same for mobile-termination rates.
That is precisely what worries mobile-phone operators. They say a regulatory framework that worked well to lower termination fees charged monopoly landline networks abroad is not appropriate for competitive wireless markets abroad. Hands off, they say.
The Bush administration is on record as agreeing with that tack, though one source said the White House has indicated it would be forced to step in if foreign mobile-phone carriers discriminate against U.S. consumers.
“High termination rates are negatively impacting U.S. consumers and carriers,” said WorldCom. WorldCom and other long-distance carriers say mobile-phone operators have market power. Wireless carriers disagree.
But wireless carriers here and abroad have tried to turn the table on U.S. long-distance carriers, claiming the later are adding their own surcharges to bills and not passing any cost-savings to their customers.
