Origin Surcharges Claim Another Victim – Price Rises Coming

Simon Woodhead

Simon Woodhead

28th April 2022

By Simon Woodhead

It has been a while since I wrote about dirty origin surcharges and the harm they’re reaping. 

The last time in fact was after I spoke in Westminster and had the opportunity to ask some questions of Ofcom, and Chair a session presented by BT. When I posed a question about the lunacy of billing based on the apparent origin of a call rather than the actual, Ofcom unbelievably said “if it doesn’t have valid CLI, I don’t know where the call came from.” Meanwhile BT defended their [in]action on nuisance calls and filtering those with invalid CLI to which I made the point “so you can’t identify them, but you can bill for them.”

Alas though, they’re still here and still causing harm, but not just in the way you might think. Simwood still stands alone as the only wholesale operator not milking the opportunity to pass surcharges (blended, marked up, or otherwise) onto their customers. It still feels the right thing to do and we know some of you appreciate it. As an industry we seem to be reaching the ‘acceptance’ stage of things where much of the industry misinterprets the presumed intent of Ofcom’s gift and gouges margin, people buy the utter BS that you can’t tell where a call came from other than from apparent CLI, and then cluelessly advise their customers to simply manipulate CLI to avoid their gouging surcharges in direct contravention of Ofcom’s rules. This is one of many head-hit-desk moments in my telecoms career!

Surcharges, which let’s be honest, were intended to prevent the French being, erm, French, to post-Brexit Britain and exploiting Ofcom caps on call charges whilst simultaneously extorting us for calls the other way. That was at a network by network level by my understanding, not by country. Its hamfisted execution however has led to complexity and an effective tax on competition with only one strategic beneficiary – BT. Sure, the networks gauging profits from passing on surcharges think they’re benefitting too, but like turkeys voting for an early Christmas, strategically they lose too.

In the early days of surcharges one massive transit network withdrew from the market. I said at the time that would benefit BT. We learned last month that a second is now throwing in the towel because of the cost, complexity and risk of surcharges. These are domestic operators handling domestic traffic. Surcharges properly executed to meet their original intent wouldn’t affect them at all, but they do.

As far as many networks are concerned, competition has been essentially eliminated in the area of the market that Ofcom has decided not to regulate and, one way or another, BT will win more traffic and continue its remonopolisation. 

Beyond the strategic fall-out that will follow, this will lead to cost increases at the wholesale level. I’m prohibited by the confidentiality clauses in the Standard Interconnect Agreement from talking about our BT rates but let me say this: a network that was previously buying from one of these competitors is seeing a double-digit percentage increase in mobile termination alone. I guess many can offset that against the slush fund from passing on blended surcharges to their customers but of course we cannot because we don’t. That is over and above the 3% increase which landed April 1st in Ofcom’s cap on interconnect rates.

Whilst we made Ofcom aware of these hazards in advance, we will be making further representation to them with appropriate evidence to suggest some of their conclusions were flawed. If this has any effect it is unlikely to be before the next review in 2026.

Thankfully we interconnect directly with peer operators wherever we can so most traffic doesn’t require transit. We do so to a greater extent than most so that softens the blow a lot. We have a few ongoing spats with a couple of networks who still wish to shut us out but they’ll be resolved in our favour at some point I’m pretty sure and then we’ll have the full deck of major operators. We’ll then just have surcharges to absorb.

So this is a heads-up that you are going to be seeing rate increases coming through on UK terminating traffic, something practically unheard of in recent times. Ours should be lower than others but perhaps not – we have supply chain efficiency on our side, they have surcharge profits on theirs. I’d ask customers to consider these in the round – anyone can give you a gift with the left hand whilst stealing your wallet with the right, which probably isn’t a bad analogy here.

Lastly, I know posts like this annoy some people. They don’t like being called out or a light being shone on the rock they trade from under. However, at least an equal number of people do welcome the insight and us taking a position. As Aristotle said: “To avoid criticism say nothing, do nothing, be nothing”. I’ll take the criticism all day long.

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