Mobile phone companies in the Republic will not face price caps next January, the telecoms regulator, Ms Etain Doyle, has decided. Instead, the regulator will review the Irish mobile market early next year before making a final ruling.
The decision by the regulator follows a consultation process during which mobile phone firm O2 warned that a decision to impose a cap on tariffs by Ms Doyle could lead to legal challenges, according to documents seen by The Irish Times.
Under current legislation, the regulator has the right to impose a price cap on telephony services in markets where there is evidence of no competition. But Eircom is currently the only operator subject to a cap on its prices until 2003. This price cap forces the dominant operator to reduce its prices on a basket of services under a formula: the consumer price index (CPI) minus 8 per cent. This formula means that if inflation is measured at 5 per cent a year, Eircom must reduce its prices on a basket of capped services by 3 per cent (CPI of 5 per cent minus 8 per cent).
Ms Doyle had proposed extending the current price-cap regime to the mobile market in March 2002. She included a number of mobile services in the price-cap review including fixed to mobile calls, mobile call termination and mobile call origination.
She also proposed to review whether international roaming calls - mobile calls made while abroad - should be capped. These calls are also the subject of an European Commission inquiry into alleged price-fixing by firms.
Her proposals provoked angry responses from the two biggest mobile phone firms here - Vodafone and O2.
O2, which has about 38 per cent market share, argued in a submission to the regulator that Ms Doyle did not have the necessary powers to impose a price cap on the mobile market. "A misinterpretation of her powers could result in lengthy and unnecessary legal challenges to any price-cap order based on that misinterpretation," it said.
O2 claims the Irish mobile sector is characterised by vigorous competition and rapid innovation, and says the regulator has never performed any analysis of the mobile market to come to a contrary view. Intervention by a regulator to cap prices would only be possible under legislation if there was no competition or one operator held a dominant position, it contends. Neither circumstance applies to the mobile sector in the State, it says.
Vodafone, which has about 60 per cent market share, also argues strenuously against a price cap on mobile operators. Its response draws on the High Court's decision in the Meridian Communications v Eircell case in 1999, which Vodafone believes proved the Irish mobile market was competitive. Price regulation should only be imposed when a firm holds market share of more than 80 per cent, says Vodafone.
The firm also argues that the imposition of uniform price controls has the effect of decreasing price competition and eliminating incentives for innovative agreements. The Irish market displays a high degree of price rivalry between operators for all tariff packages, according to Vodafone, which included in its submission OECD figures showing the Republic recorded the second-largest fall among members in mobile tariffs between August 2000 and February 2002 of 47 per cent.
But the mobile firms' comments are rejected by some fixed-line operators. WorldCom argues in its response to the regulator that there is no effective competition on mobile termination - the price of calls to mobile networks. In her recent direction on price caps, Ms Doyle decided to give priority to the fixed-line telephone market.
She says she will conduct a study of the mobile market in early 2003 and, if she finds one or more mobile operators in the Republic are dominant in any mobile markets, she will consider the most appropriate form of regulation.
The director also notes recently announced reductions in mobile termination rates by Vodafone and O2. The new average rate for Vodafone is 12.6 cents per minute and 12 cents for O2 while the average in the EU is 16 cents.
In Britain, mobile phone firms recently rejected a proposal by regulator OFTEL to reduce mobile call termination rates by a formula based on the retail price index minus 12 per cent.
The European Commission is investigating the cost of these rates in the British market.
