Britain’s largest mobile telephone company in the UK has today warned that if plans to reduce the cost of calls on mobiles are driven forward, then this could have a detrimental effect on those users who are on lower incomes.

It was indicated that all of the main mobile telephone networks would increase their prices elsewhere in the value chain, in order to recover the losses they were sustaining as an effect of the pressure from the regulators. Smart phone users (phones like the old HTC and most Nokias) and those who usually receive a free handset every 18 months could see their costs grow drastically.

At the beginning of this year the regulator suggested lofty reductions to mobile termination rates - the charge levied by the networks on each other and fixed-line operators such as BT to connect calls - when the live price cap regime expires in 2011.

A campaign backed by BT and the mobile network 3 has been campaigning for the rates to be junked entirely; although some critics have proposed this is for less than selfless reasons.

A petition started by the two companies has already achieved 70,000 signatures, including 200 from MP - all wanting to see the complete trashing of these fees. The reasoning behind this is that it is hoped that this would provoke the introduction of unlimited call bundles which are available in places like the USA for example. In addition, when calling from a landline to a mobile, this cost is likely to fall too.

It should also be noted that in its submission to the regulator as part of the consultation process on its plans, O2 charges the two companies of being “driven .. by self-interest” and admonishes that “quick and dramatic changes to termination rates introduce a risk that the retail markets would be affected in a way that could harm, and not benefit, consumers”.

Prices of handsets, contracts and calls, are all predicted by O2 to increase dramatically if this proposal goes ahead. Prepay customers, who tend to receive more calls than they make, will be hard hit as the mobile phone companies would have to slap “use by” dates on top-up credit. For those without a landline or who are considered lower income families, this would hurt them in the pocket - like buying a luxury watch; not forgetting the fact that many of the younger generation also have a prepay phone rather than a contract. For those don’t have access to any other means of communication technology this could have a large impact.