The roaming holiday is over

01 Aug 2006

The intransigence of Europe's mobile operators has helped make the unthinkable possible; they've made a eurocrat into a folk hero. Even traditional Euro-bashing British and German tabloids have got behind Information Society commissioner Vivien Reding in her campaign to force cuts in roaming charges.
That's surely a measure of just how out-of-touch and politically inept the carriers are.
Reding began her effort nearly 18 months ago, warning carriers that change was on the way if they didn't take an axe to charges that are as much as 400% above domestic rates.
Nothing much has happened. The same operators that over four years fought a stonewalling operation against an EC price-fixing investigation clearly believe they can do the same again. They've been claiming vaguely that prices are already coming down and, in yet another illustration of how they live in their own distinct universe, have asserted there is no need for lower charges.
Vodafone UK, for one, made those arguments in its submission to Reding's consultation earlier this year. Funnily enough, it made precisely the opposite points when launching its new roaming product, Vodafone Passport, in July 2005.
Based on a survey of 1,159 UK citizens, Vodafone revealed that one-fifth 'don't take their phone abroad because they think it is currently too expensive.'

Nervous roamers
Says CMO Tim Yates in the press release: 'Customers told us they were nervous about using their mobile abroad because they were worried about the costs. A quite typical scenario would be for someone to switch off their phone at the airport and only switch it on if they had an emergency.'
Tim knows truly that of which he speaks. Which makes you wonder about the government lobbyists. Are they merely misinformed‾
In any case, the squeals from the industry lobby group, the GSM Association, were loud and inevitable when in March Reding announced she would legislate for lower roaming fees.
Now we are at the tricky part of price regulation. The operators say that Reding's planned regulations are heavy-handed and will distort the market. Leaving aside the irony of firms on an 80% margin worrying about price distortions, there is no simple mechanism for reforming roaming prices, which comprise both wholesale and retail parts and of course two operators for each call.
Reding aims to cap the whole termination rate, but has also promised that retail tariffs should not be unjustifiably higher than regular domestic rates. She also intends that incoming calls should be free.
While it's a good move to focus initially on the wholesale price, it would be fairer to do so in the manner advised by the European Regulators Group in using a price cap that is benchmarked across a number of markets.
Reding might be more effective in ensuring lower wholesale rates are passed on by giving operators a sunset period of 18 months in which to do so before the regulators step in.
Retail price regulation is also fraught. Reding should not overlook the potential of name and shame type techniques, such as forcing operators adopt more transparent and simple pricing practices. There is already some sign of the industry already taking some steps, with the GSM launching a Web site advising on the best prices for European roamers.

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