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Are mobile operators free to set the prices for termination of calls and messages in their own networks?

Termination prices are the prices charged by an operator to the other operators for termination in its own network of calls and messages (SMS / MMS) delivered by the other operators. The Spanish Telecommunications Regulator (CMT) has been considering that the market for voice call termination on mobile networks is not developed in an environment of effective competition, regulating the freedom of mobile network operators (since 2006) and of some full virtual mobile network operators (full MVNO - since early 2008) to set the prices for termination in their networks. In particular, the CMT believes that mobile operators have a dominant position in their corresponding termination markets and that the absence of a specific regulation could lead to competition problems such as excessive pricing and discriminatory behaviours. On December 2008, the CMT has approved the new pricing regulation for termination of calls in mobile networks for the next two years, which includes the following points:

  • The new regulation maintains the price regulation system based on a 'glide path'. By this mechanism the CMT provides a final termination price, equal for all mobile operators, and a biannual series of milestones along the new period of regulation, in which prices will be reduced gradually until reaching the final termination price.
  • In the case of Movistar, Vodafone and Orange, their termination prices in each milestone shall be cost-oriented and will be determined through a new 'glide path', which the CMT will define before 30 July 2009, to be effective from 15 October 2009.
  • Xfera’s (Yoigo) termination prices will also be subject to a new 'glide path'. Before 30 July 2009 the CMT will determine the reduction of the margin currently granted to Xfera in respect of the average termination prices of the rest of the operators. Xfera currently has a differential margin of 48.82% compared to the other operators, due to its latest entry into the market, its smaller customer base, and the costs it must bear by the deployment of its UMTS network.
  • In respect of the full MVNOs, the new regulation expands the number of operators subject to this price regulation, to include those full MVNOs appeared after the decision approved in early 2008. In this case, the full MVNOs must limit their termination prices to "reasonable prices", which correspond to the new prices as approved by the CMT in 2009 for its host mobile network operators.
  • Termination prices will only be invoiced by seconds, i.e., the operators will only be able to charge for the real traffic consumed from the first second of communication.
  • As regards the termination market for SMS/MMS messages, the CMT believes that this is an entirely different market, which could be subject to specific regulation, if the CMT considers that it is not operating under proper competition conditions.

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