The U.K. Competition Appeal Tribune recently issued a “judgment on the core issues” in a dispute concerning U.K. mobile call termination rates. The judgment concerns mobile call termination rates that were in effect from 1 Sept. 2006 to 1 April 2007. That’s a period slightly shorter than the period between the Competition Appeal Tribune’s judgment (20 May 2008) and Ofcom’s most recent decision (7 July 2007) in its lengthy regulatory proceedings considering call termination rates.
The Competition Appeal Tribune (CAT), however, has not yet decided what money will be shifted among the companies. The CAT’s Judgment explains:
On handing down this judgment, therefore, the Tribunal will set a date for the submission of any further contemporaneous evidence as discussed in paragraph [194] above. The Tribunal intends then to proceed to determine the rates in dispute. At that stage the Tribunal will seek the parties’ views as to which, if any, of the non-core issues remain to be decided. Once any such issues have been decided the Tribunal will be able to remit the decisions to OFCOM with appropriate directions, in accordance with section 195 of the 2003 Act.
Which company gets what money for mobile calls made from 1 Sept. 2006 to 1 April 2007 probably won’t get decided, I’d guess, before mid-2009. Such a decision has no effect on the public’s mobile calling behavior, because calling behavior can’t be adjusted retrospectively. Maybe that’s why the OfcomWatch folks don’t seem much interested in the details of the issue.
The CAT referred some related call termination issues to the Competition Commission on 18 March 2008. The Competition Commission is required to report to the CAT on these issues by 31 Oct. 2008. The CAT noted (para. 196) that it “needs to balance the desire not to prejudge the Competition Commission’s investigation against the desire to resolve these disputes as soon as possible.” Having three government agencies involved in resolving a mobile call termination dispute undoubtedly adds to the time required to do so.
The economic behavior relevant to this dispute is that of lawyers, lobbyists, and regulatory affairs staff persons. Ideally, each party in the dispute will expend resources pursuing it until the party’s marginal cost is equal to its marginal expected return (roughly, increase in probability of winning times size of expected winnings plus probability of winning times increase in size of expected winnings). It’s entirely possible that all parties together will spend more on pursing the dispute than size of the winning pot the final decision establishes. Regulatory affairs’ principal-agent problems in large companies make this outcome more likely.
Call termination rates are a difficult problem best viewed in light of an overall structural strategy for communications industry development. Having multiple government bodies deciding narrow, short-period, backward-looking termination rate issues in an adversarial case-and-appeals process isn’t likely to produce a forward-looking regulatory framework for communications industry development.