Telefonica balks at new EU roaming proposals

Telefonica has said ultra-low roaming caps would hamper competition, following an MEP proposal to halve the retail caps that digital agenda commissioner Neelie Kroes put forward in July
Written by David Meyer, Contributor

It would be counter-productive to make voice, text and data roaming too cheap, Telefonica has argued in response to strict new proposals by a member of the European Parliament.

Telefonica HQ Madrid

Telefonica has argued that strict new proposals on data-roaming charges in Europe would be counter-productive. Photo credit: Telefonica

Excessively low retail caps would make it too unprofitable for new investors to enter the European mobile market, and stymie the Commission's goal of increasing competition, Telefonica regulatory chief Robert Mourik told a European Parliament debate on Tuesday.

"Don't prescribe a structural solution if you don't think it will work in the first place," Mourik said, referring to less stringent proposals put forward by the European Commission. "When we look at the latest proposals… my impression is you actually think that the structural solution won't work and you need price caps that are extremely severe. Those are bare-bone prices. Most [smaller operators] won't be able to make any money or even break even at any stage. Those price caps are not really conducive to attracting new investors."

MEP Angelika Niebler proposed amendments to the European Commission's draft roaming regulations earlier this month, drastically lowering the wholesale and retail price caps that commissioner Neelie Kroes had put forward. Niebler suggested halving the retail price caps.

This week Niebler, who is steering the new regulations through the parliamentary process, debated the changes with operators and regulators in an Industry Research and Energy Committee. Mourik, who participated in the debate, said the Commission proposal went far enough.

You should make sure the price caps you're setting actually entice new people to come into that market.
– Robert Mourik, Telefonica

"For us the Commission proposal with regard to the price caps is fine," Mourik said. "You should make sure the price caps you're setting actually entice new people to come into that market — if they don't come into the market in the first place, you won't have a structural solution."

Niebler told the debate on Tuesday: "We need to be very ambitious... The target [is] to ensure that by 2015 we will have a situation where national costs and tariffs are similar to European tariffs so we won't have a separate roaming tariff any longer — that's the ultimate goal. Consumer organisations will agree; providers have a different take."

Kroes's proposals have two main strands — she positioned them as options before unveiling her plans, but ended up including both simultaneously. The first is to gradually lower price caps over the 2012-2015 period the regulations will cover, and the second is deeper structural change that will let customers choose roaming deals separately from their domestic tariffs.

The new caps continue a trend that former digital commissioner Viviane Reding started, while the structural change is intended to promote real competition in the roaming market, where such competition is currently very limited.

Roaming charges

Niebler's proposed amendments (PDF) more or less halve the caps Kroes had originally suggested. For voice roaming, Niebler would have retail prices end up at a maximum of 10 euro cents a minute for calls made and 5c for calls received, rather than 24c for calls made and 10c for calls received.

Text messages would end up at 5c rather than 10c each. As for mobile data, maximum retail prices for these would, halfway through 2012, fall to 50c per megabyte rather than 90c. At the last stage of the regulatory period, on 1 July 2014, retail caps would fall to 20c per megabyte, not the 50c proposed by Kroes.

These retail caps would also last through to 2017 under Niebler's amendments, not just 2016 as originally proposed.

Telefonica response

Mourik told Niebler and other committee members and stakeholders that they "don't want to limit the retail formulas that operators can come up with too much".

Mourik told ZDNet UK before the publication of Kroes's proposals that the industry would eliminate roaming premiums without any regulatory intervention at all.

Now, according to Mourik, Telefonica is "broadly supportive" of Kroes's original proposals. "We were a bit sceptical at the beginning but after a lot of soul searching and analysis we think the structural solution can be made to work," Mourik said.

Mourik's words to some extent echoed those of Kroes herself, who last month warned — specifically on the issue of data roaming — that operators must be given "sufficient margins for competition to develop".

However, when Mourik was asked how much it actually costs operators to deliver data-roaming services, he said he did not know. "To be honest with you, there are various data products," he said. "It depends on technology that you use. But the rates are going in the right direction."

ZDNet UK revealed in March that the cost of providing such services is around a penny a megabyte. At the 10c-per-megabyte final data wholesale rate proposed by both Kroes and Niebler, and the 20c-per-megabyte retail cap proposed by Niebler, there are arguably still margins to be made.

Further proposals

Apart from her halved retail caps, Niebler has also proposed several other changes to Kroes's draft. Several of these would make the regulations more technologically neutral, increasing the ways in which the new choose-your-roaming-provider system could work from the operator side.

Niebler would also remove the possibility of the caps being lifted ahead of the original 2016 target if average retail prices fall below 75 percent of the mandated maximum.

"The maximum wholesale and retail charges should be removed only when there is effective competition," she explained in her report. "Therefore, this decision should be left to the review, which should be held in 2016 in order to allow sufficient time for competition based on the structural measures to develop."

Niebler also wants to extend the scope of some parts of the regulations to citizens travelling outside the EU, not just within it. Because people travel both within and outside the Union, and there are no regulations protecting phone users on a global scale, the situation can deter people from turning on their data services while on any trip, she said.

"That has an indirect adverse impact on the development of the internal market for roaming services," Niebler said. "It is therefore necessary to address this problem by also applying certain transparency and safeguard measures to roaming services provided outside the Union."

These safeguards should include forcing operators to give free, easily-accessible information on charges to customers roaming in any country, not just in the EU, she said.

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