How Big a Problem are Roaming Charges?

High gross revenue and high profit margin services are both good and bad for service providers. Though it is obvious why service providers might like service that offer high gross revenue and high margin, those conditions are all the incentive competitors need to enter a market. 

And, in many cases, such circumstances drive regulators to take the margin out of a business by regulating it away.

Roaming services are such an issue, even if currently representing only about six percent of total service provider revenues. Also, roaming is a bigger problem in some regions than others. The European Union and roaming between Australia and New Zealand are some examples of regions that are taking steps to curb bill shock and roaming charges.

Juniper Research predicts mobile roaming will represent more than $80 billion worth of revenue by 2017, compared to over $46 billion in 2012, despite a general trend to lower roaming charges. In 2017, roaming will represent about eight percent of operator billed revenues.

In some cases, roaming revenue might represent as much as 10 percent of revenues, though.

Informa predicts roaming revenue will grow 86 percent globally over the next five years, with revenues of $67 billion by 2015. That means roaming will account for 6.3 percent of total mobile service revenues worldwide by then. 

If operators are to capitalize on what can remain a very high-margin business, they have to stop the current trend of roamers shutting off their data roaming capabilities when traveling. B

usiness travelers often stop using their mobiles when traveling internationally, representing lost revenue, of course.

Bill shock, the unexpected surge in a mobile phone bill that often happens when a user is roaming, especially internationally, is a growing problem for service providers, for several reasons. The first reason is simply that after the first “shock,” users learn either to limit their use of mobile devices when in a roaming situation, switch providers, adopt prepaid or take other actions to prevent future shocks.

Excessive roaming charges also increase customer irritation and draw regulator ire. As in the European Union, high roaming charges not addressed by service providers themselves can lead to regulator action to force lower rates.

Sandvine says that audio and video streaming account for 28 percent of roaming data as observed on a tier-one European mobile network. That tends to suggest high roaming charges are an issue for traveling consumers as well as business travelers.

For example, a three-minute YouTube video uses approximately 10 MBytes of data which would cost a European mobile subscriber about 7€ while roaming in Europe.