Mobile operators angered by latest roaming proposals

The European Commission faces new complaints from mobile operators after fine-tuning its proposals for roaming-charge reform
Written by David Meyer, Contributor

European mobile operators have nothing to fear from impending roaming tariff regulation if they remain competitive, a spokesperson for the European Commission has said.

Martin Selmayr, spokesman for Information Society and Media Commissioner Vivian Reding, told ZDNet UK on Tuesday that lower roaming tariffs would lead more customers to use their mobile phones outside of their home countries.

While acknowledging that the move would be "painful" for mobile operators, he insisted that they would "still be able to make a substantial profit [through] considerable economies of scale".

"Those operators who simply want to stick to the old model will see their customers say they don't want that service," Selmayr warned, adding that consumers could be able to save as much as "50 to 70 percent" on current roaming rates.

On Monday, Commissioner Reding's office released some "fine-tuned" details of its proposals for regulating the roaming rates charged by European mobile operators for usage across the EU.

The proposals seek to ensure that the EU becomes a "home market" for mobile phone users, where crossing a border within the union will not lead to higher call costs.

The original version involved flat-capping, at cost price, the wholesale rates charged between operators for terminating calls. As this was seen as unnecessarily complicated, the Commission now proposes taking a European average as a reference point for such charges, a move which would penalise operators in countries with higher wholesale rates.

Commissioner Reding had originally proposed that customers would pay the same rate for mobile calls when roaming as when at home. In the revised proposals, this retail rate could be up to 30 percent higher than the Europe-wide wholesale charge.

The GSM Association, which represents almost 700 mobile operators worldwide, reacted angrily to the concept of an averaged wholesale rate, saying it would put a "rigid straitjacket on retail prices across Europe".

"We would say that is an extraordinary degree of intervention, because you don't have a single price for any other services across Europe," GSM Association spokesman David Pringle told ZDNet UK on Tuesday. "It doesn't reflect the geographic, the demographic, the regulatory, or the commercial differences across Europe."

Referring to Commissioner Reding's initial stated aim of having everyone in the EU paying domestic mobile rates regardless of where they were in the union, Pringle said: "The home pricing principle was widely criticised by the industry and the ERG [European Regulatory Group]. It was flawed, and I think it wasn't workable and would have fallen at one of the hurdles anyway.

"The new set of principles has an equal number of flaws. We don't regard this change in the Commission's proposals as a step forward."

But Selmayr denied that the proposals would create any kind of "straitjacket", and claimed the regulation did not say what a call should cost in any specific place.

"We could have said that operators cannot charge more than actual costs, but that would have required that every regulator [across Europe] would have had to calculate in detail for every operator their cost," he said, adding that this "would have been a very burdensome exercise".

"To arrive at the same result but with a simpler and more transparent terminology, the proposal now says at the wholesale level these costs will be pegged to the national termination rate. By taking the average of all the European mobile termination rates, we peg the roaming rate to a national tariff, but we also [ensure] a certain margin of competition between operators.

"You also avoid all arbitrage effects — there was some concern that a consumer could go to Estonia and buy SIM cards and use low Estonian mobile tariffs to call everywhere in the EU," he said.

Selmayr claimed that the average would be a "dynamic figure" which would go down annually, in line with recent trends, and that mobile roaming fees would therefore follow the average down.

"We are not the enemies of the mobile industry," Selmayr insisted, adding: "We want this legislation to provide the initial ignition to a more competitive European mobile industry."

Analysts at Ovum welcomed the decision to revise the proposed roaming controls.

"Reding has sensibly moved away from the home pricing principle," said Stefano Nicoletti of Ovum. "Reding has now found a balance between it and the more sensible ERG recommendations. It is important to point out that properly functioning markets do not need retail controls, and intrusive retail regulation may reduce innovation and competitive pressure."

If the European Commission approves Commissioner Reding's proposals in July, the regulation would become effective in the summer of 2007.

Operators such as Orange, Vodafone, T-Mobile and O2 slashed their roaming fees following the original proposals, in a move some said was intended to pre-empt the regulatory process.

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