Mobile firms block £250m price cuts

MOBILE phone customers are missing out on £250m in price cuts because of a legal loophole.

Watchdog Oftel has demanded that the cost of making calls to mobile phones be slashed. But while the telecoms regulator can order BT to lower its charges, it cannot force mobile firms to cut the cost of calls to rival networks.

And Orange, T-Mobile and O2 all admitted yesterday that they had no intention of lowering charges.

BT - which controls 70% of the land-line market with 18m home telephones - has also upset consumer groups by delaying its reductions until October.

Oftel estimates BT overcharges by £500m in calls from landlines to mobiles while the mobile networks are responsible for another £250million.

A new Oftel charging regime came into effect yesterday aimed at returning this cash to customers.

Backed by the Competition Commission and the High Court, it set out staged cuts in the charges telecoms firms levy for handling incoming calls.

Calls from BT landlines to mobiles are due to fall from 20p a minute to 13.5p by 2006.

But there is anger that mobile networks will not follow suit.

David Edmonds, director general of Oftel, admitted earlier this year that a loophole existed but insisted it would be 'totally wrong' for mobile firms to exploit it.

Yesterday an Oftel spokesman said: 'In terms of the mobile operators, it is a commercial decision for them as to whether they pass on the savings to consumers.

'We would hope to see some benefits passed on to consumers, in terms of calling between mobile networks. But this is a decision for the operators to make.' Overall telecoms regulation is soon to be switched to Brussels, while Oftel will be being swallowed up by a new broadcasting and telecoms watchdog, Ofcom, at the end of this year.

Neither Ofcom nor Brussels will regulate mobile rates - in line with the thinking that competition alone will keep prices down.

James King, of the National Consumer Council, said: 'It is peculiar that the regulatory regime can require BT to pass on cost reductions to the customer, but does not have the same power over mobile networks.

'If three out of four mobile operators don't plan to pass on cuts in call termination (incoming) charges to their customers it is totally unacceptable.

'This should ring alarm bells about how competitive the mobile market really is.'

Vodafone says it altered prices in April to meet Oftel's demands. But it is thought that any gains for customers have been offset by higher charges for handsets and raised pay-as-you-go bills.

An Orange spokesman said the firm did not have any savings to pass on, while T-Mobile said it had no plans to cut bills.

A spokesman for O2 ruled out lower charges, saying: ' Competition will drive down prices, rather than heavy-handed regulation.'

He added that the new pricing regime imposed on BT would lead to lower revenues for mobile networks as well.