Operators to hike IOTs says Informa

An analyst has warned of the emergence of a two-tier market for roaming services, following the EP’s approval of new price controls last week and predicts that non-Europeans will face rising costs when travelling in Europe.

Informa Telecoms and Media – parent of Telecoms.com – reveals Monday that operators will increase the wholesale prices (IOTs) they charge non-European operators whose customers roam onto their networks.

Mark Newman, chief research officer at Informa, suggests the move is to compensate for the loss of revenues resulting from the new European price caps. “On average, retail prices are set 20 per cent above the wholesale rate,” he says.

In its report, Global Mobile Roaming; Business Models and Forecasts in the Evolving Environment, Informa said: “Until now, operators have been free to set their own wholesale prices for roaming services. Some operators set much higher wholesale price levels than others. It is quite normal for two operators on a single route – for example between Germany and India – to charge each other different prices for calls made by their customers on each others’ networks.

“Some of the highest wholesale prices are levied by operators in developing markets for whom inbound roaming is a key source of income”, Newman says. “In India, for example, wholesale roaming prices are up to 30 times more expensive than the retail price that Indian operators charge their own customers for making the same call”.

But Newman, who co-authored the report, says that faced with lower revenues from their European roaming business, operators in Europe will now start to seek reciprocity in wholesale price arrangements. And if operators outside Europe refuse to reduce their wholesale roaming charges, the European operators will increase their own wholesale charges. These higher charges will be passed on to non-European customers.

“What we are beginning to see here is the emergence of a two-tier market for roaming services’, says Newman. ‘With the new price caps and the emergence of pan-European groups such as Vodafone, Telefonica/O2 and Orange, Europe is going to start resembling a single market in terms of retail prices.

“Countries such as the U.S.A and India already have national roaming markets where people can make calls on other operators’ networks without incurring higher charges. The same is also beginning to happen in Greater China. However, when people want to use their phones outside of their countries or regional groupings they will pay a substantial premium.”