What do phone company managers dream about?
Terminators. Not good dreams.
I know exactly what these nightmares are. They involve regulators. Horrible, fierce regulators with multiple language qualifications, legal knowledge and the full billing details. And whats the worst thing that could happen with phone company billing details? Yes!—they could be published.
Thats exactly the threat that is looming now.
Its quite a scandal brewing. We got the first signs of what is coming in the European market when the Hungarian regulator levied a fine of nearly $700,000 on T-Mobile—for overcharging. It didnt overcharge the phone users; it overcharged the other networks.
The thing is, termination charges are the big scam of the European telcos. And none of the phone owners has a clue how bad it is.
I honestly have no idea what I paid for the last phone call I made. And I bet you havent either—but, of course, comparing phone charges in London with phone calls in Los Angeles is the sort of exercise only an idiot—or a regulator—would attempt.
By European standards, the American phone market hasnt actually opened up. My American friends find it hard to believe, but it really is the case that there are more mobile phones in Europe than people. Which means that the billing structure is a nightmare.
Specifically, it is about to become a nightmare, because the regulators have finally caught up with the phone companies.
It hasnt been a month since all the network operators were buying each other trebles all round, because the future was all “prices going up.” Weve had a season of throat-cutting competition, just to keep the customers from leaving one network and going to another—or, if youre the other network, to make the customers leave one network and come to the other.
And finally, with Spanish operator Telefonica contracted to buy O2, they thought, “Its all over! We can consolidate, and stop cutting prices!”
Fat chance. The Hungarian move is the first. In the United Kingdom, the regulator is Ofcom, which—to the total astonishment of everybody—turns out to have gotten someone who actually understands technology and phone billing systems.
That was a shock, because in the United Kingdom, the regulator is mostly concerned, these days, with upholding complaints about whether a TV entertainment should represent the personal lives of Prince Charles and Camilla as if they were human beings. If they were humans, theyd probably (shudder) touch each other affectionately in private. Cant show that on the BBC. Call Ofcom.
Well, that was how most of us saw the new team of Ofcom; that view turns out to have been oversimplified, and the whole of Europe is about to impose the worst possible punishment on the Terminators: public exposure.
The Secrets of Telcos
The thing is, the money you pay for a phone call here is split, at various rates, between the network where it originates and the network that terminates it—hence the “termination charge”—and unlike the common North American method, the person receiving the call pays nothing for it.
Up until now, the termination charge amount was hidden. As a result, the charges could vary widely, and sometimes were simply enormous.
How enormous? Well, its still hard to get a peek at the books, but the best guess is that when the termination charges are published, the networks that have been taking the biggest slice will be reducing the charges substantially to avoid public rage.
Substantially? I am told, by more than 20 percent. Thats not to say that theyll reduce termination charges by 20 percent—its worse than that. Theyll reduce mobile phone bills by that margin.
So, the guilty will be identified by the amount by which they reduce their prices, to other networks; it wont be apparent to phone users. But they will have to change their network charges, and theyll have to do it now, because theyll want to be sure that when the curtain parts and the horrible truth is revealed, the stage has at least been cleaned of blood.
And at the end of this process, it will still be virtually impossible to know whether the last call you made cost you more or less. The thing is, almost nobody is billed per call.
Typically, the market is on a $50 per month flat fee for (say) a thousand minutes of talk time per month, or a thousand text messages or some combination. And, typically, the business user is on a similar type of bill, but paying more like $80 a month. You only pay for a call, then, if youve used up your “free minutes” for the month.
So in another six months, what youll probably see isnt an increase in charges per call. Rather, youll see an effort to offer more “free” minutes per month, for the same charge. And the effect of that, simply, will be that people use their mobile phones more, which means people will call them back on those numbers, rather than on the (cheaper) land-line numbers.
At the end of the day, youd need a very detailed spreadsheet to find out whether this meant an overall increase in mobile voice revenues. But well have another look next summer, and see what happened.
Well be back…
Contributing columnist Guy Kewney has been irritating the complacent in high tech since 1974. Previously with PC Mag UK and ZDNet UK, Guy helped found InfoWorld, Personal Computer World, MicroScope, PC Dealer, AFAICS Research and NewsWireless. And he only commits one blog—forgiveable, surely? He can be reached at [email protected]