Bulk Messaging Charges – Will Ofcom Come to the Rescue?
Ofcom, the UK’s communications regulator, has recognized that the market for mobile termination charges for bulk messaging isn’t working. With significant market power, some providers have increased these charges by 70% since 2021 and there’s no end in sight. On January 28th, Ofcom proposed a price cap on mobile termination charges for messaging.
In this 5-minute podcast, Deb Boehling, a partner at LB3, joins Tony Mangino to describe the proposal and consider what enterprise customers can do to take advantage of the potential savings.
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Bulk Messaging Charges – Will Ofcom come to the rescue?
Tony: Hello, today is Friday, January 31st, 2025. I’m Tony Mangino from TC2 and this is Staying Connected. On today’s podcast we’ll be discussing an unusual move by Ofcom, the UK’s telecoms regulator, which could save businesses a lot.
Joining me today is Deb Boehling from LB3. Deb advises Fortune 500 companies on their ICT transactions and is keenly aware of how regulations impact enterprise customer costs. Deb, welcome back to Staying Connected!
Deb: Thanks Tony, it’s good to be back!
Tony: So, Deb, what’s Ofcom done that is unusual and of interest to enterprise users.
Deb: Well, Tony, in recent years, Ofcom – like the FCC – spent its time protecting customers buying telecoms or cable service for their personal use. It left enterprise customers to fend for themselves. On Tuesday, January 28th, Ofcom recognized a battle business customers were losing with no end in sight and offered them a hand.
Tony: This doesn’t sound good. What help is in the making?
Deb: Most enterprises use bulk messaging around the clock.
Tony: That’s right. Everyone gets them – those texts reminders that your statement or bill is available, you have an appointment, your package has shipped, there’s a new product release or a sale that’s running…you get the picture. These messages help keep businesses running efficiently and have become commonplace.
Deb: You’re right. And Ofcom noticed that wholesale costs of bulk messaging have increased by up to 70% so far this decade with nothing to reign them in. Texts must be delivered to their customers regardless of the customer’s mobile provider, but with a limited number of infrastructure-based mobile providers (not VMOs) the providers can demand what they want, and bulk messaging providers have no choice but to pay. These increasing costs then contribute to the final price businesses, large and small, pay for bulk messaging services. Ofcom proposes to cap the mobile provider termination charges at the charges in place in 2021 adjusted for inflation. Comments are due on 8 April 2025.
Tony: Wow! That sounds like a huge savings opportunity. Prices increased by 70%, while UK inflation was only around 16.5%. Businesses could see a 50% savings.
Deb: That’s right but not immediately. Ofcom can take a year or more to adopt regulations after the comment period closes, Ofcom is proposing a 3-month implementation period after adoption, and there’s always the possibility the proposal will not pass.
Tony: Okay, that makes sense. Contracts are often 2+ years long and TC2 typically recommends prices be fixed to avoid the typical increases. But you’re talking about an atypical decrease in provider costs. If prices are fixed, your provider’s margins will increase until your deal ends. Is there anything enterprises should do now?
Deb: Yes, two things. First, file your 9-question response form with Ofcom in support of the proposal. It’s available on the Ofcom website or contact me and I’ll send it to you. Second, during negotiations with your bulk messaging provider, share your knowledge of Ofcom’s proposal. It should help you convince them to give or share the savings with you through an annual benchmarking of the rates or contract requirement to pass through savings from changes in regulations, such as the Ofcom price cap, if they occur.
Tony: Great idea, but knowledge of the Ofcom proposal may not be enough to get strong benchmarking and pass through clauses in an amendment to an existing contract. An RFP or RFI where the provider is aware of the competition will reveal the true market prices and provide additional leverage. Deb, any last thoughts?
Deb: Many savvy businesses prefer regulators not to be involved in their ICT prices. That’s understandable, but keep in mind that on rare occasions regulators and regulations can help their budgets.
Tony: Thanks Deb. To our listeners, if you would like to learn more about Ofcom’s proposal or strategies for protecting the savings in your supplier agreements, or if you’d like to discuss other ICT needs with Deb or me, or any of our LB3 and TC2 colleagues, please give us a call or shoot us an email.
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