Termination Charging - There are other ways
There are essentially three reasons for a large mobile operator to like high mobile termination rates (MTRs).
First, they restrain (from the operators' point of view) negative sum price competition. It's not that all operators price at or even remotely near MTRs, but the risk of going below is very high. So if MTRs >> cost (and on my reading of the Ofcom numbers, MTRs are >5x cost), total industry profit is going to include a foundation of every minute carried X (excess cost). And from a consumer point of view, that guarantees that even intense competition will NOT yield prices down near cost levels.
You can come to your own view about the rule-of-thumb pricing norms. If an operator tends to price to the broad market as MTR + M pence, a 4p reduction in MTRs will tend to lead to a 4p per minute off everyone's bill. Or if they tend to price as MTR x F, an 80% reduction in MTR could lead over time to an 80% reduction in call bills. No-one's quite this simplistic, but you get the idea.
Second, they provide an embedded cross-subsidy from fixed lines to mobiles. All those calls are further bunce for the industry.
And third, they represent a barrier to entry for new players. It's pretty expensive starting a new mobile network, and it often tends to be the case
(i) that new entrants sweep up the worst customers
(ii) that new operators tend not to be anywhere near the balance point where calls in match calls out)
(iii) that new entrants are more likely to innovate in ways that hurt profits
There are other ways.
The most radical alternative is Sender Keep All (SKA). SKA is, as the name suggests, an arrangement that avoids MTRs altogether. It's intellectually respectable - a large part of the cost imputed to a mobile call minute is in fact the score-keeping cost. It's not a free-for-all - operators pay one another to for interconnection facilities, simply not on the basis of call minutes.
In a world where voice is just a low bit-rate, high priority data stream, it seems to me that SKA or something like it is required if we want true service innovation. MNOs rail against being turned into economy bit pipes.
High MTRs are the crutch of the mobile industry. They keep it firmly upright. And they keep it moving v-e-e-e-e-r-y slowly.
Biting the hand that feeds IT
