An EU regulation that would cut the cost of using mobile phones abroad by up to 70% was tabled by the Commission. The Commission wants to ensure that prices paid by consumers for roaming services within the…
An EU regulation that would cut the cost of using mobile phones abroad by up to 70% was tabled by the Commission. The Commission wants to ensure that prices paid by consumers for roaming services within the EU are not unjustifiably higher than those they pay for calling within their own country (European Home Market Approach). Very high international mobile roaming charges currently affect at least 147 million EU citizens (37 million tourists and 110 million business customers). Provided that the European Parliament and the EU Council of Ministers support the Commission`s proposal, the new EU regulation – which is a legal instrument directly applicable in all EU Member States as soon as it is published in the Official Journal of the EU – could come into effect by summer 2007.
“The Single Market is first and foremost for consumers”, commented Commission President Jose Manuel Barroso. “Here is a practical application of our Europe of results approach. With our proposal today, consumers using mobile phones within the Single Market will get a fairer deal.”
“We are tackling today one of the last borders within Europe’s internal market”, added Viviane Reding, EU Commissioner responsible for Information Society and Media. “For years, mobile roaming charges have remained at unjustifiably high levels, in spite of repeated warnings to the industry. This is why Europe needs to act now. I am convinced that reducing roaming charges will not only be beneficial for citizens travelling within the EU, but will also enhance the competitiveness of Europe’s industry. 80% of roaming customers are businesses, and in particular small and medium sized companies suffer from this substantial cost factor when doing business within the internal market. The EU regulation we propose today will transform mobile roaming from being a nuisance for consumers into an attractive service that will encourage both citizens and businesses to profit even more from enhanced mobility within the European Union.”
The European Home Market Approach
The EU regulation proposed would work by capping, first of all, the wholesale charges that mobile phone operators charge each other for carrying calls from foreign networks. The method used by the Commission for this cap – which takes as its starting point the tariffs for connecting mobile phone calls from other domestic networks – ensures that operators can recover at any rate the cost of providing roaming services.
As it is crucial for the Commission to guarantee that the benefits of the new EU regulation reach the level of consumers, it also proposes a price cap at retail level. Operators will be allowed to add to their wholesale cost a retail mark-up of up to 30%, which is the margin that operators can normally make with domestic phone calls. This retail mark-up would apply to calls made and received while roaming. For calls received, this retail cap would become effective on the day of the entry into force of the new EU regulation. For calls made, the retail cap would take effect automatically after a final transition phase of 6 months.
Beneath the wholesale and retail ceiling for roaming charges proposed in the new EU regulation, operators would remain free to compete by offering cheaper roaming services or by offering cheaper packages of services differentiated according to customer demand.
The Commission finally proposes to enhance the transparency of roaming charges for consumers. Mobile operators will be required to provide customers with full information on applicable roaming charges when subscriptions are taken out and to update consumers regularly about these charges. National regulators will also be tasked to monitor closely the development of roaming charges for SMS and multi-media message services (MMS).
Background
The Commission has been working on reducing mobile roaming charges for several years, with consumer warnings and calls for self-regulation, competition law investigations and by empowering national regulators to take action at national level. However, because of the cross-border nature of roaming, the results of these initiatives have so far been limited. In spite of recent announcements by some mobile operators that they will start bringing down roaming charges to anticipate the effects of possible legislative intervention by the EU, the average retail charge for a roamed call today is, at €1.15 per minute, still more than five times higher than the actual cost of providing the wholesale service.
Retail roaming charges are also roughly four times higher than domestic tariffs. For example, a typical price for a local call in Poland is around €0.19. A German customer who crosses the border to Poland will have to pay from €0.34 to €2.56 per minute for making the same local call i.e. from more than 3 to 9 times the price for the Polish customer. A French customer roaming in Italy will have a similar experience. The price of a typical local call for an Italian customer can be around €0.10. However, if a French customer crosses the border to Italy he/she will pay from €0.50 to €1.18 per minute for making the same local call. These differences cannot be explained by cost differences.
“Consumers should be aware that roaming will remain an expensive experience when they are going on holiday this summer”, warned Commissioner Reding. “I sincerely hope that with the support of the European Parliament and the Council, the European Home Market approach proposed by the Commission today will bring prices down substantially by summer 2007.”
“A public consultation by the Commission from 20 February to 12 May 2006 showed that progress could be made only through regulating mobile roaming charges in the EU. The European Council noted on 24 March “the importance for competitiveness of reducing roaming charges.”
According to the impact assessment that accompanies this proposal for an EU regulation, the EU market for international roaming is estimated at around €8.5 billion, which is 5.7% of total mobile industry revenues. The new EU Regulation would lead to consumers paying around €5 billion less.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
