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EU tells UK to cut planned mobile-telephone tariffs

The European Union ordered the UK to lower planned mobile-telephone tariffs, saying the fees would give companies including Vodafone too much room to recoup third-generation auction costs incurred six years ago.

The European Commission challenged proposed wholesale tariffs charged by Vodafone Group Plc, O2 Plc, Orange SA, Deutsche Telekom AG and Hutchison Whampoa Ltd. for letting calls arrive from customers belonging to other networks. The commission told the UK regulator, Ofcom, to scale back 3G auction-cost calculations representing more than 20% of these termination fees. „Such costs should not be calculated on the basis of prices paid during the spectrum auctions, which are in today's context inflated,” EU Telecommunications Commissioner Viviane Reding said in a statement in Brussels.
Ofcom must heed the demand of the commission, the 25-nation EU's regulatory arm, or justify any refusal to do so. UK mobile-phone companies are seeking to recoup spending in 2000 on licenses for 3G mobile services, which offer faster Internet access, video and other data to customers. The April 2000 auction of 3G spectrum raised £22.5 billion (€33.5 billion) for the British government.

The commission, which oversees national telecom regulators, is spearheading efforts to lower phone bills in the EU. The new case represents a commission push to make price-reduction plans by Ofcom more ambitious. Ofcom wants to lower mobile-termination rates -- the fees for connecting a call from one network to another – after concluding in 2003 that the UK's mobile-phone companies had „significant” market power. Ofcom set target prices starting on April 1, 2007, of €0.078 ($0.10) a minute for Vodafone, O2, Orange and Deutsche Telekom's T-Mobile International AG unit and €0.089 a minute for Hutchison 3G.

Ofcom's inclusion of 3G spectrum costs adds an average of €0.016 a minute to the mobile termination rates for the group of four operators and €0.028 a minute for Hutchison 3G, said the commission. „The mobile termination-rate charges proposed by Ofcom disproportionately reflect their historical 3G spectrum auction value and do not appear to reflect their current value,” the commission said. „Ofcom's approach would be detrimental to fair competition in the UK's mobile market and lead to higher consumer prices for consumers.” Ofcom officials weren't immediately available to comment. (Bloomberg)