The German regulator has announced a draft proposal to cut mobile termination rates from 01 December to a uniform rate of 1.85 cents per minute. A further cut to 1.79 cents per minute would follow in December 2013. This would eliminate the difference in tariffs between operators, which currently charge 3.36-3.39 cents per minute. Before the cuts take effect, a four-week public consultation is planned, followed by input from the European Commission.
The share price of KPN, which owns mobile operator E-Plus in Germany, appeared to fall on the news released late 16 November, going from around EUR 4.20 to end the day at EUR 4.03. Deutsche Telekom said in a reaction that the new cuts will cost the four operators together around EUR 500 million per year in revenue.
The regulator (BNetzA, Bundesnetzagentur) noted that voice traffic accounts for an increasingly smaller portion of costs, as data becomes a growing part of traffic. The calculation of the new rates is based on a cost model by WIK Consult. The regulator assumes an efficient operator with a 25 percent market share (voice, SMS, data volumes). Releasing the draft proposal, BNetzA said it hopes the rates meet with the approval of the European Commission, which has recommended the use of the LRIC (Long-Run Incremental Cost) model to set termination rates.
Court appeals could also stop implementation of the new rates; BNetZ's last decision on rates is still going through the courts. The rates would then apply retroactively, if the proposal wins approval. However, this is far from certain. The EC's favoured method (LRIC) would lead to much lower rates (see for example, France at around 0.3 cents per minute). In short the operators will fight for a higher rate, while the EC will push for a lower price. It appears the BNetzA is aiming for a compromise, but both the operators and the EC will try to win the difference.
