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EU determined to cap mobile phone roaming charges

An EU proposal would impose gradually lower price caps on mobile phone and data roaming charges. Digital agenda commissioner Neelie Kroes hopes to spur a more competitive market for roaming services.
 
By July 2014, mobile phone and data users traveling within the European Union could see their roaming charges capped at 24 cents per minute for outbound calls and 50 cents per megabyte transmitted, not including sales tax.

That would be down from today's 35-cents-per minute cap for outbound calls and a currently non-existent cap for data, the office of Neelie Kroes, European Vice President for the Digital Agenda, announced Wednesday.

The proposal is intended to spur market competition for roaming charges and help meet the EU's goal that "differences between roaming and national telecom tariffs should approach zero by 2015," according to Kroes' office.

Consumers would also gain the right to buy roaming packages separately from their domestic mobile phone contracts, and mobile operators would be entitled to buy network capacity in other nations at regulated wholesale prices.

If the proposal is adopted by the European Parliament and the EU's Council of Ministers, it will become a binding regulation in all EU nations. The current EU roaming regulation expires in June 2012.

"The proposal tackles the root cause of the problem - the lack of competition on roaming markets - by giving customers more choice and by giving alternative operators easier access to the roaming market," Kroes said in a statement. "It would also immediately bring down prices for data roaming, where operators currently enjoy outrageous profit margins."

Lobbying against regulation

Analysts contacted by Deutsche Welle say revenues collected through roaming fees vary between companies, but that they are generally accepted to be 10 percent or less of total revenue. According to the European Commission, the roaming market generated 5 billion euros ($7 billion) in revenues during 2009 - about 4 percent of the EU's mobile market.

Germany-based Emma Mohr-McClune, research director with Current Analysis, said mobile operators "lobby hard against regulation" and are unified under the industry association GSMA.

"The GSMA has always taken the stance that mobile regulation on prices, wholesale or retail, is unnecessary, and possibly counter-productive to the self-regulation which Europe's high level of competition ensures," she told Deutsche Welle.

"Some of the European Commissioner's arguments for data roaming retail price regulation have started to sound like consumer protectionism; that's not actually what the digital agenda commission is all about," she added.

However, Mohr-McClune pointed out that new regulations are unlikely to have an impact on investment into mobile networks as projects for next-generation LTE (4G) networks are already under contract and "the ongoing trend towards shared networks within markets is anyway changing the economics of network upgrades."

'Virtual' operators covered

The new regulations, which would grant wholesale-price access to foreign networks, would also apply to "mobile virtual network operators" (MVNOs), which maintain no infrastructure of their own, relying instead on other companies' networks.

Analysts say MVNOs are likely to play an increasing role in the mobile telecommunications and data market, as they can partner with operators and access niche markets like youth or immigrant populations.

According to Paolo Pescatore, an analyst with CCS Insight in London, carriers "don't necessarily see their [MVNO] partners as competitors, but they see them as an opportunity to actually grow an audience and traffic as well."

"I think the approach today for many operators is to work with specific brands to focus on specific segments," he told Deutsche Welle. "That seems to be a very sensible strategy. You're obviously not diluting your brand - you're focusing on the need of a specific audience."

German mobile carrier E-plus, for instance, operates Ay Yildiz, which offers international calling packages for the Turkish diaspora in Germany. Ay Yildiz is not an MVNO, however, but rather a wholly-owned subsidiary of E-plus.

Current Analysis' Mohr-McClune said MVNOs are increasingly being used to fulfil functions similar to Ay Yildiz.

"It has taken some years for operators to fully recognize the MVNO market as a valuable channel proliferation boost," she said. "Of course the best MVNO partner is one which targets a niche audience which does not fall directly within the core brand's target segment, or is difficult or expensive for the core brand to target directly."

Less fear of bill shock

According to Katja Ruud, a Sweden-based analyst with Gartner Research, roaming revenues have "been under pressure for some time" in part because wary consumers have avoided using roaming minutes or data at all.

"The loss of revenue... may be addressed by operators who now try to encourage usage by those consumers who have avoided data roaming altogether or limited use in order to avoid bill shock," Ruud told Deutsche Welle. "Lower prices may lead to mobile data use or increased mobile data use by those subscribers who have not used it at all before."

Author: Gerhard Schneibel
Editor: Nicole Goebel

(DW-WORLD.DE)