EU proposes price controls on roaming

On Wednesday, the European Union made its proposals to legislate on the cost of using a mobile phone abroad while offering the industry a “final chance” to regulate the charges itself.

The European Commission’s President, Jose Manuel Barroso, explained that the new legislation would give the industry six more months to cut roaming charges or face pricing restrictions that would cap retail profits at 30 per cent, significantly down on current prices.

At a press conference, Barroso echoed the words used by his colleague, EU Information Society Commissioner Viviane Reding, in condemning the mobile industry for making “excessive” profits and for ignoring calls to bring prices down. The industry was given “a final chance to show they are serious about self-regulation,” Barroso said.

“Our analysis shows that very high international mobile roaming charges currently affect at least 147 million European Union citizens,” Barroso added. “We have no alternative but to intervene to protect the interest of consumers.”

Reding, hailed as a saviour by consumer groups and an antagnist by the industry, rounded on roaming charges which she dubbed “a nuisance”. She explained: ”

“For years, mobile roaming charges have remained at unjustifiably high levels, in spite of repeated warnings to the industry. I am convinced that reducing roaming charges will not only be beneficial for citizens traveling within the EU, but will also enhance the competitiveness of Europe’s industry.”

Reaction to the announcement came swiftly from the industry’s lobbying body, the GSM Association (GSMA). It said the regulation was “unnecessary as competition is already delivering substantial reductions in the prices of roaming services”. Despite the GSMA’s insistance, there is little evidence to suggest operators were cutting roaming costs prior to Reding’s proposals.

The group also criticised the Commission’s proposal to cap the retail charges customers pay to receive a call on their mobile phone when roaming abroad, arguing that it would limit operators’ ability to tailor roaming tariffs and services to the needs of specific customer groups.

“Although the European Commission has dropped its unworkable “home pricing principle”, its new proposals still amount to a straitjacket that will stifle innovation, dampen competition and ultimately harm consumers,” said Rob Conway, CEO of the GSMA.

Leading telecoms analyst Mark Newman, Chief Research Officer at Telecoms.com’s parent, Informa Telecoms & Media disagrees and suggests innovation is precisely what is needed from operators. “Operators are now going to have to find a way of stimulating the use of roaming services to compensate for the loss of inbound roaming traffic,” he said. “There are a huge number of people today who are afraid to turn their phone on when they go on holiday because of the high roaming charges for both making and receiving calls.

“The most obvious target market is prepaid customers who make up two thirds of Europe’s 400 million mobile phone users. A lot of these people don’t have their phones set up for roaming services. And even those subscribers who do roam have to make sure that they buy their top ups before they go on holiday.”

The European Commission wants the bill to take effect by mid-2007.

If by then the European Parliament and the 25 EU governments have endorsed the bill, there would be an immediate 30 percent profit cap on received calls while a six-month grace period would start for calls made from abroad to allow the industry to adapt to the new regulatory environment.