Many of us have noticed our mobile phone tariffs plummet in the past decade, thanks in part to key regulatory decisions underpinned by world-class market research conducted at Imperial College Business School
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The UK telecommunications industry has always presented a challenge for policy-makers ‒ how do you balance the need for businesses to operate freely with fairness and value for consumers?
One particularly thorny issue has centred on so-called termination rates. When you call someone on a different mobile network or call their mobile from your landline, the other mobile network charges your operator a fee for carrying the call – called a termination charge. It’s been long-suspected that networks simply pass this cost onto consumers, ultimately increasing their tariffs.
The solution might seem simple for the regulators ‒ reduce these charges, customers will make more calls and everyone is happy. But there can also be unintended consequences, for example a decrease in competition between networks because of their interdependency.
Between 2003 and 2012 Professor Tommaso Valletti from Imperial College Business School conducted detailed analysis into the UK telecommunications market.
He developed models to describe and predict the interaction between competition and regulation, with a focus on how wholesale deals (invisible to consumers) affect retail prices ‒ publishing in peer-reviewed journals of high international esteem.
Ultimately Professor Valletti’s models were adopted by Ofcom ‒ the independent regulator and competition authority for UK communications industries. Indeed, Valletti was a member of its Panel of Academic Advisors and its Spectrum Advisory Board (2007-11) and decisions have frequently been based on his research. He was also called as an expert witness during a BT appeal against Ofcom Termination Charges in April 2011, where his research was used extensively, and decisively, during the case.
The Chief Executive of Ofcom, Ed Richards, lauded the influence of Professor Valletti’s research, stating that "the policy implications of [his] two papers featured prominently in our final decision on this policy matter" and that his work "deals with relevant (and complex) policy questions [which are] highly relevant to organisations such as Ofcom where policy making is based on a rigorous assessment of the available evidence"