Can innovation still flourish?
The European Parliament voted on Wednesday in favour of an EU Regulation to substantially reduce the charges for using mobile phones abroad.
The parliament’s decision sets a ceiling price of 49 eurocents per minute for outgoing calls and 24 eurocents per minute for incoming calls when users are outside their operator’s national network. Roaming charges in the EU varied between 58 eurocents and 5 euro, depending on the individual operator and the new measures would mean a gradual reduction of 70 percent by 2009.
It took four rounds of talks between the European Commission, the European Parliament and member states to reach the compromise agreement that was endorsed earlier this week by parliament’s telecoms committee.
Commissioner Reding was purring like a cat that had got the cream, the milk and been awarded the saucer as a souvenir.
“”In a record time of only 10 months, a political agreement could be reached on the EU Roaming Regulation, thanks to the impressive support of the European Parliament and the negotiation skills of the German Presidency,” she miaowed.
The EU Regulation approved by the European Parliament will, as from this summer, cap mobile roaming charges both among mobile operators and for consumers. These price caps (also called “Eurotariff”) will be further reduced in 2008 and 2009.
By this summer the maximum limit for the Eurotariff for calls made abroad will be 49 cents per minute, dropping to 46 cents and 43 cents in 2008 and 2009. The maximum limit for the Eurotariff for calls received abroad will be 24 cents, 22 cents and 19 cents. The maximum Inter-Operator tariff will be 30 cens,t 28 cents, ans 26 cents over the same three year period.
The Council of EU Telecom Ministers is expected to endorse the EU Roaming Regulation on 7 June. The EU Roaming Regulation will then become directly applicable law throughout all 27 EU Member States following its publication in the EU’s Official Journal, expected by mid-June.
Reaction from the industry soon followed. Vodafone said users of its Passport service already average lower than the mandated Eurotariff. The GSMA said that the regulation was “unnecessary” because “operators are delivering increasingly good value to consumers on roaming services”.
“The average cost of making and receiving calls while travelling in Europe is now 29% lower than during 2005, according to the European mobile phone industry’s roaming Retail Price Index. Across the EU, the average cost of a roaming call has fallen from 83 Euro cents per minute, excluding VAT, in 2005 to 59 Euro cents per minute* in the first quarter of 2007,” it said.
ECTA took a different view, arguing there should be no roaming at all. Innocenzo Genna, Chairman, said of the decision, “While ECTA welcomes the Commission’s moves to reduce mobile roaming rates, we believe the only long-term solution is to encourage the development of pan-European services, which would abolish the concept of roaming once and for all.
“Roaming rates are a symptom not the cause of the problem. The problem is that operators are able to establish artificial national boundaries where none should exist, because there is not sufficient competition within the market. And the reason there is not competition is because non-incumbent mobile operators, which are in a position to create European-wide services, cannot get adequate access to the necessary networks.”
Making a more sophisticated point, Lord Freeman, Chairman of the House of Lords European Union Sub-Committee on the Internal Market, felt that averaged wholesale caps, rather than retail price caps, could have “ensured customer savings while maintaining an element of competition in the market that would encourage innovation.”
The question is, would mobile operators have made the cuts they have done to their roaming pricing structures without the political pressure they came under? And having lost the regulation battle, will the cap on retail rates rather than wholesale, effectively limit competition and innovation, making roaming a non-differentiator?
The answer to the last is perhaps more relevant. Operators are looking only at ever-decreasing prices if they seek to compete within the cap – therefore it seems likely data will come more into the equation – with text and content service bundles being included. And there will be more work on ensuring ubiquity of service when users are roaming, and introducing the little services and applications that keep users texting and calling while they are abroad.