Why data roaming costs too much

Summary:ZDNet UK investigates the real cost of using the mobile internet while travelling abroad and explains why the price you pay is unnecessarily high

...it may be possible for national or regional regulators to control the margin charged by operators at the retail level, within those regulators' jurisdictions. For example, a European visitor to South Africa may incur a certain wholesale charge from the local operator there, but their European operator back home may only be allowed to include a limited mark-up when formulating the final retail price.

"In principle, that could be possible," Hoernig says.

According to Dean Bubley, alternative means of connectivity such as Wi-Fi may "slowly and patchily" put pressure on operators to cut their prices. However, Gannon thinks Wi-Fi will not be a serious rival because it lacks mobility. "People seem to think that mobile is some sort of necessity that has to be provided at flat rate," he says. "There are alternative solutions — people use different telephony services — but if you want mobility, you have to pay the premium."

Whoever the head of data roaming is for some operators must have to go to work every morning knowing his customers hate him.

– Dean Bubley, Disruptive Analysis

Could it be in operators' own interests to lower their prices? Bubley says there is not yet enough data to suggest lower prices would necessarily lead to greater revenues, but he reckons the real benefits would come in the form of customer loyalty — the ultimate prize in an industry where most providers offer the same thing in a fairly undistinguishable way.

"It's very difficult to generate real loyalty if half your customers hate you for egregious pricing — customer loyalty is earned and you don't earn it by showing contempt for your customers," Bubley says. "Whoever the head of data roaming is for some operators must have to go to work every morning knowing his customers hate him."

Creating competition

We're looking at a market where wholesale prices are negotiated in secret, and retail prices are unregulated anywhere. The big operators are benefiting most, and smaller operators feel unable to make a difference. Prices have fallen to some degree, but not yet to the levels one might expect from typical competitive forces. These may appear to be symptoms of a cartel, but Hoernig dismisses this analysis. "I don't think this is a cartel problem," he says. "We don't need the explanation that it might be a cartel to arrive at high prices."

The one thing that would really change this would be to move the competition from competition for domestic subscribers to competition over roaming tariffs.

– Steffen Hoernig, Universidade Nova de Lisboa

High data-roaming charges may largely stem from a lack of effective competition, Hoernig suggests, but he has another simple explanation. Most people choose their operator because of the prices they will pay at home. Only a few businesses select mobile contracts because of the data-roaming charges on offer. Once the majority of people sign up with their operator, they are absolutely at the mercy of that provider when it comes to leaving the country and wanting to stay connected.

"Once you go abroad, you're captured, locked in, and your home operator can charge you what they think best," Hoernig explains. "And 'thinking best' here is quite often to charge you the price that gives [the operator] the highest profit."

Hoernig is sceptical about the idea of people deciding en masse to choose their operators on the basis of data-roaming rates, but he does mention an interesting proposition. Radically, it would involve separating data-roaming from domestic data use — someone arriving in a foreign country would be able to select their roaming operator, not just for coverage, but because they know they will be charged less for using that network.

"The one thing that would really change this would be to move the competition from competition for domestic subscribers to competition over roaming tariffs," Hoernig says. "You need to decouple, in some sense, the domestic subscriptions from the roaming subscriptions. Companies may give you a menu of roaming tariffs, for a day or a week. That may improve things a bit."

Working around the problem

For now, however, no such system is in place. Data-roaming charges remain unregulated, and they remain high. In the absence of regulation, people are left with few alternatives. One popular workaround is the purchase of local SIM cards — this means changing numbers, though, and is therefore not practical for business travellers. Another is the use of Wi-Fi, but that lacks the convenience of mobile broadband.

In Europe, data-roaming charges have fallen considerably, but more needs to be done. Everywhere, people are increasingly carrying around small computers that constantly need to connect to the internet, but they are still too scared to turn on those devices.

These smartphones, tablets and laptops offer alternative means of communication to the basic voice and text services offered by the operators, and perhaps that is why the providers seem resistant to change. Developers may be queuing up to offer people clever new location-based services that are tailored to the traveller, but that is of little concern to an operator trying to preserve old business models.

Whatever the reason for the inertia, you, our readers, have clearly said it is unacceptable. Maybe things will only move on when those paying the bills become sufficiently angry.


Sign the petition for fair data roaming.

Topics: Data Roaming Charges, Mobility

About

David Meyer is a freelance technology journalist. He fell into journalism when he realised his musical career wouldn't be paying many bills. His early journalistic career was spent in general news, working behind the scenes for BBC radio and on-air as a newsreader for independent stations. David's main focus is on communications, of both... Full Bio

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