Abstract - Vodafone

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On-net Pricing in Mobile Moving the debate forward • The Policy Paper Series • Number 8 • April 2008
On-Net Pricing in Mobile Services
1. Introduction
Halvor Sannæs
The pricing of mobile calls have developed dramatically over
the years. From a simple price per minute for any type of call
from a mobile phone, we now see highly differentiated prices
depending on call destination and time of day. This paper
looks at one particular aspect of mobile pricing: the practice
of differential pricing for on-net and off-net mobile-to-mobile
calls, and the reasons for its development.
When the GSM system was launched in 1992 the pricing did
not differentiate between calls within the “home” network
(on-net) and calls to other mobile networks (off-net). Even calls
to the fixed network were generally priced the same flat rate.
This report looks at the development of prices for a range of
operators in markets where mobile services developed early,
with the objective to find out when and where on-net price
differentiation has been used, and by which network operators.
In order to find out more about how and when the concept
of on-net pricing started, and how it developed, Teligen has
taken historical data from its old “Voicebooks” of the 1990’s
and the later “T-World” databases. There are unfortunately
gaps in the data, so some uncertainty as to exact times
remains, but the available data does provide a good picture of
the development of on-net and off-net price differentiation
over time in European countries.
The data suggests that on-net pricing was used as a
competitive instrument by all operators in a market (country),
triggered by intensifying competition.
2. Findings
Director Tariff Services
Teligen, Harris Interactive UK Ltd.
Having worked in the telecoms industry for over 30 years, Halvor has spent the last 17 years with
Teligen, analysing tariffs and developing tariff databases and analysis tools. Teligen has a global focus
on tariffs, and Halvor has been working with major companies and organisations around the world to
analyse and structure tariff information, and compare prices and offerings from telecom operators in
Europe, North America, Asia, the Pacific, the Caribbean and in the Middle East.
Since 1995 Halvor has been responsible for the development and implementation of the Teligen
T-Basket product, which covers the OECD Price Benchmarking methodologies. Halvor has also been
responsible for the updating and re-development of the OECD methodologies over time, and has been
using tailored versions of these basic methodologies to cover specific benchmarking requirements for
individual clients around the world. Halvor works out of Norway.
The data presented in Appendix B shows the range of
discounts offered by the individual operators over time.
Highest and lowest on-net discount is shown relative to
the off-net call charge. The conclusions drawn from the
available data can only be as good as the data coverage
allows. As there are gaps in the data at different times the
exact pricing behaviour of the operators can be hard to
identify, but for the purpose of the objectives of this study
it is still possible to see the traces of the price development
since the early years of GSM, and to the present day.
The first sign of on-net price differentiation is found in
Germany, Norway and Portugal in 1995, followed by most
other major European countries throughout the second
half of the 1990s.
Table 1 shows how the first appearance of on-net price
differentiation in many countries occurred soon after the
launch of a new 2nd or 3rd network operator, corresponding
to a point at which competition intensified.