Why data roaming costs too much

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

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Using the mobile internet on your smartphone, tablet or laptop while travelling abroad is far too expensive, our readers say.

When ZDNet surveyed its readers around the world in March, 80 percent said they had received a data-roaming bill they thought was excessive — we heard tales of bills running into hundreds and thousands of pounds. Additionally, 20 percent of readers thought data-roaming charges in general were "too high", and 76 percent said they were "much too high".

But how high are data-roaming charges, and can the operators justify it? Figuring out the going rate for data roaming can in itself be a tricky business. Retail prices for data roaming vary between operators. For Europeans, the prices also differ depending on whether you are travelling inside or outside of the continent. The picture is muddled and answers hard to find: however, the end results are clear.

Operators have also started offering bolt-on bundles of roaming data that do make usage somewhat cheaper on a per-megabyte basis, particularly within Europe, but these bundles require the user to opt in. This means planning ahead rather than using the internet casually. Most users who do not plan ahead and who do not disable data roaming on their smartphones will find themselves paying the standard per-megabyte rate. Even for those buying bundles, people do not naturally tend to think in megabytes, and choosing the right package for your needs can be difficult.

UK operator
In-bundle European price (per MB)
In-bundle worldwide price (per MB) Out-of-bundle European price (per MB) Out-of-bundle worldwide price (per MB)
T-Mobile £0.20 - £0.33
n/a £1.50 £7.50
Orange £0.49 - £0.82
£0.49 - £0.82
£3.00 £8.00
Vodafone £0.08 - £0.20
£0.60 (on laptops or tablets only)
£1.00 £3.00
O2 £0.60 - £0.80
£0.60 - £0.80
£3.07
£6.00
3 n/a
n/a
£1.28
£3.00 - £10.00

UK operators' standard rates for data-roaming vary between £1 and £3.07 per megabyte for data roaming within Europe, and between £3 and £10 per megabyte for the rest of the world. If you use 500MB on a two-week trip — this can easily be achieved when factoring in email, Twitter, Facebook, Google Maps, a few photo uploads and some light browsing — then, in the worst case, it would cost you £5,000. The best case would still be £500.

Compare that with the same operators' domestic data pricing, which usually works out at a penny or two per megabyte or less in some cases, when taken as part of a standard contract. Even with the lower intra-European data-roaming rates, this represents an overall mark-up in the thousands of percent — and elsewhere, 80,000 percent is easy to find. On the best-value tariff we could find, a Vodafone UK iPad user pays £15 for 2GB locally, but £29.99 for 50MB when roaming outside Europe. That's an increase of 79,000 percent.

This may be one of the highest differentials in the history of commerce — and it's between two different retail rates, not even wholesale to retail. By comparison, estimates for the mark-up for cocaine from grower to consumer range up to a maximum of 32,000 percent (PDF). How do operators justify charging close to four times the highest drug mark-up for carrying data which, to their systems, is the same as any other?

Operator logic

It is important to understand the basic mechanism for the formulation of data-roaming charges. Imagine that Operator A's customer travels abroad and uses their smartphone on Operator B's network. This can be done because of prior, secret negotiations between the two operators, in which a wholesale price was agreed. Operator A can then add whatever mark-up it likes to arrive at the retail price, which is where the big bills come from. The higher the secret wholesale price agreed, the more the consumers from both networks pay — at no cost to the operators.

Costs are way too high. It's the equivalent of walking into a bar in Germany and being told 'here's a glass of wine for €500 because you're a Brit or a Spaniard'.

– Hugh Davies, 3

Large operators tend to benefit most from this setup, because they are more likely to have other operators' customers stray onto their networks. They are also more likely to see their customers from one country use another of their networks in another country, in which case they are negotiating the wholesale price with themselves.

As the smallest UK mobile network operator, 3 has a different attitude to data-roaming charges than that of its larger rivals: Vodafone, O2 and Everything Everywhere (T-Mobile and Orange's merged operations). It is therefore unsurprising that 3 is willing to break the industry Omertà surrounding the actual costs involved. The company's regulatory chief, Hugh Davies, tells ZDNet UK that operators do need to incur some one-off costs when enabling data roaming, but these do not explain the charges being levied on consumers. In fact, he says, data-roaming retail prices bear no relation to the underlying costs of data transport — between 1p and 3p per megabyte, depending on the operator.

"It costs you [the operator] about the same as it costs you at home — plus a little bit extra for the cost of billing from someone else's systems and the integration and connection with someone else's systems, and the risk of countries where you don't have fully integrated systems — but essentially it's the same as what it costs you to sell it in your own market, plus a little bit more," Davies says. "And that little bit more is not the same as what consumers are paying. It's way too high. It's the equivalent of walking into a bar in Germany and being told 'here's a glass of wine for €500 (£439) because you're a Brit or a Spaniard'."

David Gannon is the senior expert for global products at T-Mobile, the eleventh-largest operator in the world. He tells it a different way.

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"Operators buy [mobile spectrum] licences for a finite period, and then build the infrastructure and roll it out," he says. "That's a hell of a cost, and it drives economic growth across the globe. You've got to get a return on that investment."

Gannon gives the stock industry justification for high data-roaming prices: infrastructure and spectrum are expensive, and these costs need to be recouped somehow. Margins are very low on domestic data pricing because that is where the real competition takes place — in the words of Orange roaming chief Yves Martin: "Right now, the mobile operators are a bit stuck into low domestic data prices." So the money has to be clawed back from roaming customers instead.

The problem with the argument is operators don't build their networks for foreign visitors; they build them for their domestic customers. Most have already made their money back. "Roaming charges are prohibitive, very expensive if you compare them with local charges, and there's no reason why those prices should be that high," Charles Njoroge, the director-general of the Kenyan telecoms regulator CCK, tells ZDNet UK. "There's investment in infrastructure [but the operators] have recouped their money, and we need to be able to communicate without any barriers."

Dean Bubley, an analyst at Disruptive Analysis, also says the investment argument is completely unjustified. "I can't see why...


Sign the petition for fair data roaming.

Topics: Data Roaming Charges, Mobility

David Meyer

About David Meyer

David Meyer is a freelance technology journalist. He fell into journalism when he realised his musical career wouldn't pay the bills. David's main focus is on communications, as well as internet technologies, regulation and mobile devices.

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Talkback

9 comments
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  • This is not just a consumer issue. I have a friend who recently had a baby. When she returned form the hospital she received a call from the accounts department at her company. They had received a mobile data bill of £750 for her corporate mobile. On the day in particular when the charges were incurred she definitely wasn't using the phone - as she was giving birth! The mobile provider refused to accept this as an excuse and said she (or someone else) must have accidentally activated a data service and let it run in the background. So even though they tacitly acknowledged that it was accidental, they would not write-off the charges. In the end the company just paid up. This was most likely a fault in the operators system but the company paying the bill had no real way to prove otherwise. Suspect this happens a lot with companies paying up on charges rather than querying them just because its the path of least resistance.
    Eco_IT
  • Surely if data charges were more reasonable people would stop simply turning off their data when abroad. At the moment the profit comes from the few careless people that forget to switch it off and get charged hundreds of pounds for checking a few emails, or using their phone's maps. The majority simply go without data. Surely the best approach for phone companies is to charge for a bolt on that allows you to use some data abroad. I'd pay £20 a week for such a service and I'd imagine so would many others. The company would still make a healthy profit, I could check google maps when I get lost in Paris, and nobody hates the phone company for sending them a £700 bill and moves to a rival company when their contract expires. Everyone wins.
    tomtarrell
  • I recently (December) used my O2 iPhone abroud (outside Europe) for 3 weeks. I called O2 about a bolt-on but they said that had been dropped and I could have 50MB for £40. That was OK. However the real issue is lack of clarity on pricing in advance. Currently you really need to call your operator in advance to find out what the costs and any options are.
    I've now bought a mini wifi modem that turns any hotel LAN into a personal wifi hotspot and it works well so I now depend much less on 3g and save money.
    AndredPA
  • The rip off continues. Just back from Dubai (UAE) having turned off data roaming, using WiFi only (and found quite a few free HotSpots), so I didn't get charged £8 per MB.
    Still got back to find I'd been charged 50p per SMS txt!!
    bm@...
  • I had this problem with O2 whilest roaming in Slovenia. This is a network problem as a telecomms engineer who has worked on the mobile network iI was able to argue the point.
    Go back to network provider SEND IN A WRITTEN COMPLAINT. Threaten them with ofcom as it is an offence not to provide correct billing, and don't back down. (Although in Fairness it is not always their fault)
    bmduffy
  • Great comments - don't forget to sign our petition at http://www.petitionbuzz.com/petitions/fairdataroaming
    David Meyer
  • Great article David! Data roaming rates are incredibly expensive! Internet took part of people's life, and they deserve to stay connected, even when they're abroad. There is so much advantages to use internet while travelling (travelling apps, google map, etc.)! AndredPA mentioned the mini wifi modem solution, and that is exactly what Fonmigo consider as the best alternative to avoid data roaming! So, while waiting charges change, you can rent this kind of device!
    Fonmigo
  • If you want to see this in action have a look at my thread on the Vodafone Forum.
    http://forum.vodafone.co.uk/t5/Pay-Monthly-Services/Vodafone-are-Stealing-from-me/td-p/1031659

    I basically have been completely stitched up by Vodafone and nobody, I mean nobody at Vodafone are willing to even explain how this happened or even prove it's possible.
    ratmanhk
  • 3 Like Home problem

    You mention that Three tried to fix the problem but that random roaming sabotaged that effort. I thought that each network made separate deals with each foreign operator to roam with. Did Three have roaming deals with other operators than their local counterparts?
    Arne Evertsson