Origin based charging – what a mess!

 

By Simon Woodhead

We wanted to update you on the latest state of the train-wreck that origin-based charging is rapidly becoming.

We first advised in May that owing to Ofcom’s latest WVMR, Vodafone would be applying surcharges on traffic based on the origin of traffic to Vodafone mobiles from June 1st. As we approached the end of May, Vodafone advised, and we relayed, that they would be delaying this until July 1st. They also took the opportunity to completely restructure and markedly increase the levels of surcharge. 

Other mobile networks, notably Three and EE also announced their own surcharges for July 1st, and BT have announced that they will be surcharging traffic to land-lines from August 1st. We expect other operators to join the party and for the various mobile operators to gravitate towards a similar higher level.

We made our position pretty clear early on: we already have controls for invalid CLI and protection from arbitrage so do not intend passing surcharges on if we can avoid doing so. However, we said we need to protect our position and keep a keen eye on the competitive landscape. The reality is that no operator can afford the bill-shock of a proportion of calls at several Pounds per minute when expecting them to cost a fraction of a penny, certainly not when Ofcom has driven all the margin to the retail end of things.

For now at the wholesale level we are maintaining that position, which I believe will make us the only operator, who has said something, to not be passing on the surcharges. We will however be rejecting calls where accounts have an excessive level of loss-making calls (or are marked as having done so previously) to protect our position from arbitrage, and also increasing the rates we charge ordinarily slightly. We will be unapologetic in doing so so please do not expect to shout at our team and have arbitrage or invalid traffic allowed!

It is likely we will ultimately need to surcharge too. We have the capability already but we want to avoid doing so until there’s no other option, as the consequence of us doing so is uncertainty for our customers and, whichever way you look at it, retail prices rising. Where retail prices don’t rise, the chance of picking up the phone and successfully making a call to a mobile are diminished – certain mobile operators can’t even adhere to 20 year old CLI standards consistently already so they are going to be seeing Pounds per minute of costs on calls coming out of their bundles that assume fractions of a penny. 

Looking around the carrier market there is a worrying proportion of peer operators who have said nothing at all. They’re going to see a lot of expensive traffic and August 1st (when invoices arrive) will be a painful day for them! In one case they’ve sent out a rubbish letter that doesn’t even comply with their own contract, advising they’ll be passing charges on but not what they’ll be, how they’re going to do it, or when. With days to spare, others have announced a blend of the surcharge which is going to cause complications and uncertainty for their customers – this is what we’re trying to avoid! In another case, one of the major major transit providers has announced that they cannot handle the changes in time and will therefore be charging the maximum rate on mobile calls, i.e. Pounds per minute, on all calls! They fully acknowledge that this will swing the traffic somewhere else, likely to an operator who will subsequently get bill shock or have inadequate capacity. Contagion and the destruction of hitherto viable businesses is a very real prospect here!

To say this is an entirely avoidable mess would be an understatement! If only we had a regulator to step in and sort it out. Oh wait, I forgot this results directly from changes the regulator made which we and everyone else warned them about. You couldn’t make it up.