EU Roaming Rates to Fall

The European Commission continues to move ahead with its plans to make calling, texting and data services cheaper for European travelers by opening the roaming market to increased competition.

The proposal, as outlined by Neelie Kroes, the European Commission Vice President for the Digital Agenda, constitutes the Commission’s first attempt to introduce structural measures to boost competition in the roaming market. Read more.

If the plan becomes law, beginning July 1, 2014 consumers would be able to sign a cheaper mobile roaming contract for use abroad, separate from their contract with their operator at home, while still keeping the same number.

Meanwhile, mobile operators, including Mobile Virtual Network Operators (MVNOs), would be given the right to use other operators’ networks in other EU member states at regulated wholesale prices significantly lower than prevailing rates.

Over the next three years, the fees that consumers pay to browse the Internet with smartphones and tablets may be cut by as much as 78 percent. That will be welcome news to travelers, many of whom don’t realize the high cost of roaming fees until they get bills totaling hundreds of dollars or more. Read more.

The obvious implications, aside from the consumer benefits, are to put pressure on mobile operator data revenues, though precisely how much impact is unclear. Some users who have been avoiding roaming calls and Internet operations will do so, so usage will grow as prices decline. Some operators, operating without owned facilities, might find new opportunities.

The longer term impact is a bit harder to gauge. Many competitive providers in the U.S. communications market would say the Telecommunications Act of 1996 essentially failed in its effort to stimulate more competition in the market. But U.S. cable operators would not agree. Nor, in all likelihood, would hundreds of smaller telcos that have been able to enter important new markets because of the Telecommunications Act.

The point is that measures to promote market entry and competition sometimes have highly differential impact on different market segments.

In fact, one might argue that the winners are mostly firms with facilities-based business models. In Europe, one might argue, businesses using leased facilities have been more successful. Still, it might not turn out to be the case that "over the top" competitors win, while facilities-based mobile providers lose because of the new, lower rates on roaming access.

Facilities-based mobile operators also will have the right to buy roaming access services at the lower rates, as well. Smart operators will be able to use that ability to create their own roaming services, keeping "home" customers on branded services, even if those services are purchased wholesale from third parties.

There's an ironic angle here. The EU mobile market generally is considered quite competitive, within each nation, yet roaming rates are high. Competition normally leads to lower prices and higher consumer welfare. The snag in this case is that, for structural reasons, all mobile service providers benefit from high roaming rates. Whatever the state of "local" and national competition, all the providers enjoy high margins on international calling.

The other irony is that the high roaming charges exist despite robust adoption of Skype and other over-the-top services in the EC. Perhaps mobile Skype usage simply hasn't caught up with PC-based usage. Perhaps oddly, the EC is acting to curb high international roaming charges right at the point where most observers predict mobile VoIP is going to do that, in any case.