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Operators blame roaming charges on handset subsidies

Roaming rip-offs: European consumer group attacks roaming charges, and dismisses industry claim that the fees make handsets affordable
Written by David Meyer, Contributor on

Mobile operators have denied claims that roaming fees within Europe are too high, suggesting that the charges are necessary to recoup the cost of subsidising handsets.

The industry has spent the last year trying to fend off regulation from the European Commission, which seems set to force prices down, although operators have always maintained that they were cutting prices due to market forces rather than threats from the Commission.

On Tuesday the BEUC, a European consumer rights group, accused operators of using roaming packages and bundles as a "smokescreen", while not reducing roaming tariffs enough. The organisation claimed that customers should be charged no more than 33c/min (euro cents per minute) for roaming — around half as much as the average charge last year. This was based on calculations carried out by BEUC and UFC Que Choisir, publishers of the French equivalent of Which? magazine in the UK.

"Mobile phone operators are twisting the truth; from the beginning they have organised collusion on a massive scale throughout Europe," said UFC Que Choisir's president, Alain Bazot, on Tuesday. "The time has come to put an end to this, and build a Europe of telecommunications."

David Pringle, a spokesperson for the GSM Association (GSMA), hit back on Thursday, insisting that price reductions were "real, not a smokescreen". According to Pringle, data collected for the GSMA by consultants AT Kearney showed, by dividing roaming revenues by roaming minutes, that "prices at the end of 2006 were 25 percent lower than at the end of 2005".

This data shows that roaming charges in Europe were an average of 83c/min in 2005, but fell to 63c/min in the last quarter of 2006. Pringle added that the data on which these figures were based had been fed on a confidential basis to AT Kearney by the operators themselves.

"These packages are clearly delivering better value for customers," Pringle maintained, while questioning the basis for BEUC's figures. "There are many other different approaches you can take; for example: what's the handset subsidy? It depends on each operator's business model."

Pringle continued: "It costs operators money to subsidise the price of handsets, and they need to recoup that money. You can't just reduce the cost of roaming calls down to a simple calculation. There are other costs, like setting up a retail distribution chain and building a network." He also hinted that certain unspecified operators rely on their customers roaming to make back their investment in handset subsidies.

But Lavi Nietvelt, a policy analyst for BEUC, insisted that "if you look at the margins which are made right now, [operators] make more than enough money to provide everyone with free handsets, which they don't do in all cases".

"Handsets can form part of the way companies decide to approach the local market, but it's a scare tactic to say that we will have to increase prices in the domestic market if roaming prices go down," Nietvelt added.

Nietvelt explained to ZDNet UK how the BEUC arrived at the figure of 33c/min. The calculation takes into account the cost of terminating a call — an average of 12c/min for calling a mobile and 1c/min for calling a landline — and originating it, and also factors in the costs of international transits and even marketing. This process results in an average of around 25c/min, to which a 30 percent mark-up is then added — "reasonable profitability in our view", said Nietvelt — resulting in 33c/min.

Nietvelt expressed scepticism at the GSMA's figures, remarking: "If they would be so good as to publish all their data, we could do the calculation and decide if this is true, but of course they don't".

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