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


...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.

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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

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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  • 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.
  • 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.
  • 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.
  • 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!!
  • 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)
  • 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!
  • If you want to see this in action have a look at my thread on the Vodafone Forum.

    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.
  • 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