The European Union has said it wants to remove fees for receiving a roaming call, and wants roaming charges within the EU to be the same as home network calls. Its mechanisms will be the introduction of wholesale cost orientation and retail price controls, and it has given the industry only a short window in which to further make its point.
The Commission has been concerned about roaming charges since 2000. Then in September 2005 it began to get serious, setting up a website tracking roaming charges, and making it clear to the industry that unless it did something to reduce the cost of mobile roaming, it would take action.
Now, Information Society and Media Commissioner Viviane Reding, appears to be playing hardball.
A statement from her office, following a month long consultation period, said, “The price for a standard four-minute call has generally remained at the same high level across Europe since September 2005, and in some cases has even increased, despite warnings from the Commission to the industry that EU-wide regulation would be necessary if prices were not brought down.
Reding said the following action would be taken.
• Wholesale price: Ensure that operators do not charge substantially more than the actual cost.
• Retail price: Ensure that wholesale savings are passed on to the consumer.
• Eliminate all roaming charges for receiving a call when travelling abroad in the EU.
• In addition, for calls made while travelling abroad in the EU, the new EU regulation could introduce the “home pricing” principle. A mobile customer travelling abroad in the EU would always be charged only the prices that he is used to paying in his country.
Finally, the Commission, which had a previous consultation period from 20 February to 22 March, said there would now be a further consultation period ending on 28 April.
Not surprisingly, the industry wasn’t too chuffed at the idea of regulatory involvement in wholesale and retail pricing.
First off the block was the GSM Association. The GSMA had asked for a minimum eight week response period, so was upset in any case at the four week window. It described the proposals as “unprecedented, unnecessary and heavy-handed.”
It claimed that roaming prices had fallen by 8% “last year”, and proposals to cut roaming costs to home network costs didn’t reflect the complexity of carrying a roaming call.
Stefano Nicoletti, Senior Analyst, Ovum said, “We expect the industry to react strongly and challenge this decision, which could take away pretty much all their roaming revenues, but it now seems that everything has been decided — it might be too late!”
Credit Suisse estimates that the direct impact of the EU proposal is to lower average mobile growth by 1% per annum and EBITDA growth by 2%, taking 6% off industry EBITDA by 2008.
“Of greater concern,” the bank said, “are potential knock-on effects—less industry growth may spark more market share protection, lower wholesale international roaming rates may create new MVNO opportunities, while the EU proposal may put international call charges in the spotlight. The roaming proposal adds to the tough sector outlook—in particular, highlighting how European telecoms regulation is still undermining growth, consolidation potential and returns, in sharp contrast with the US.”
Even those working within the industry have described roaming charges as “unreasonably” high, so there is recognition that something will have to give.
One way operators could start is to be very transparent to the consumer about roaming, to stop the bill-shock phenomenon. Vodafone, for one, has made some steps to simplify its roaming charges. Another answer is to offset profitability cuts by increasing volumes.
There are still armies of travellers not using their phones abroad — either because of fear of the cost, or simply because, as pre-paid users, they can’t. Operators can also introduce IN based solutions that reduce tromboning and the actual cost to the operator of carrying a call.