Neelie Kroes, Europe's digital agenda commissioner, has a hefty challenge ahead of her: she wants mobile operators to cut their prices for data roaming.
The former competition commissioner, who took on Microsoft over Internet Explorer, is trying to create a digital single market within Europe. To do this, she and the European Commission are pushing for data-roaming charges to become as low as domestic usage fees within the region.
Kroes and her predecessor, Viviane Reding, have already forced voice and text-roaming fees down at the retail level. Now the Commission is gearing up for a revision to Europe's current data-roaming cap policies, set to come into force in July 2012.
Here, as part of ZDNet UK's investigation into data-roaming charges, Kroes explains the rationale behind her aims and her opinion on the lack of competition within the market, while responding to operators' justifications for their high prices.
Q: Why is it so important to you and the Commission that data-roaming rates fall within Europe?
A: Data-roaming prices are set at levels which cannot be explained by underlying cost for providing this service. It is difficult to understand why a customer pays less than €0.05 (4.4p) for downloading a megabyte of data when he or she is at home and almost €2.60 per megabyte when he or she crosses a border into a neighbouring EU country.
Among the remaining challenges to achieving a true single market, roaming charges still stand out as a prime example. Although we have the technology to use mobile networks to access broadband internet anywhere in Europe, tourists and business travellers will simply not use these possibilities to their full potential for as long as it costs a fortune to do so. Achieving a competitive digital single market within the EU is the best way to get much lower data-roaming charges in a sustainable way.
At what sort of level are the wholesale and retail rates for data roaming within Europe at the moment, and how far do you want them to fall? How quickly would you like to see that happen?
So far, the EU has only set caps on wholesale prices for data roaming. There is a major problem — although wholesale prices have fallen below the regulated cap, retail prices remain way above wholesale prices, and the difference has even increased. In concrete terms, the wholesale price cap has been set by EU rules at €0.80 per megabyte since 1 July, 2010, and it will fall to €0.50 per megabyte as of 1 July, 2011. But although the average data-roaming wholesale rate (around €0.25 per megabyte) is substantially below the regulated maximum, retail prices remain around €2.60 per megabyte. That is a huge margin.
As part of the Digital Agenda for Europe, the European Commission has set an objective that the difference between national and roaming charges should approach zero by 2015. This target will be considered to have been met if competition allows consumers to access roaming charges which are approaching competitive domestic level prices. I will be coming forward with specific proposals for legislation to meet that objective for data (and voice and SMS) roaming before the summer this year.
Might those rates fall without regulatory intervention of some kind?
Ideally, competitive prices should be achieved through healthy competition among by service providers. However, evidence in the market indicates that competition has not developed to any great extent for roaming services.
While I would by far prefer to rely on competition based on market forces alone to ensure that the market operates, rather than engage in further regulation, the fact is the industry has not to date given me much hope that this would happen.
So while I would by far prefer to rely on competition based on market forces alone to ensure that the market operates, rather than engage in further regulation, the fact is the industry has not to date given me much hope that this would happen. I therefore intend to come forward with proposals to tackle the root of the problem, namely the lack of competition. This is important if we do not want to simply achieve a mere temporary solution, but want to resolve the problem in a structural way.
Why in your opinion have competition and market forces not brought down data-roaming charges to the levels you want to see?
A number of factors contribute to this situation. For example, on the supply side, there is no real competitive pressure, as there are no viable alternatives to roaming services. Another reason is that since roaming services are purchased as part of the mobile service bundle, consumers have traditionally attached little attention to the price of the roaming service alone when choosing their mobile operator.
Operators are thus not competing on the basis of the roaming element of the mobile bundle. There is also a lack of transparency, since comparison of roaming tariffs within bundles of mobile services is a complex and time-consuming task.
Operators frequently say that if they brought down data-roaming prices, they would have to raise their domestic prices to compensate. They also say their data-roaming charges reflect the expense they have incurred building their networks, running their businesses and so on. Do you believe these arguments to be valid?
First of all, the analysis by the Body of European Regulators for Electronic Communications shows the cost of providing data-roaming services costs from €0.08 to €0.15 per megabyte. [This analysis takes into account the cost of building the network.] Given the current high level of retail data-roaming prices, operators benefit from really very large margins. Therefore, there is no justification for the claim that domestic prices would need to be increased to compensate the reduction in data-roaming prices.
Secondly, I believe that competitive forces function in the domestic mobile markets. In such markets, consumers would not accept price increases.
Lastly, the evidence from the past does not support these arguments, either: domestic mobile prices are on constant decrease despite roaming prices having been lowered as a result of the price caps imposed by EU regulation. As for the argument that high data-roaming charges are used to fund new investment in better networks, it does not appear to be the case.
If it is possible to bring down data-roaming rates within Europe, as has already happened since your wholesale caps came into force, should the same principles apply elsewhere in the world? For example, when a Belgian visits Venezuela?
Bringing down data-roaming rates within the EU is already a major challenge. I would, of course, like to see price cuts for data roaming outside the EU, but we have to respect other countries' sovereign right to set their own rules.
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