The European Parliament yesterday (28 February) gave its first green light to the roaming overhaul, reducing the price caps on cross-border mobile telephone services.
Parliament's industry committee voted in favour of a compulsory reduction of cross-border mobile tariffs, which is stricter than what the European Commission proposed.
Instead of the 24-cent cap (excluding VAT) on outgoing calls suggested by the EU commissioner in charge of telecoms issues, Neelie Kroes, MEPs led by Germany's Angelika Niebler (European People's Party) are proposing to bring the ceiling down to 15 cents from July 2014.
Text messages should not cost more than 5 cents, said MEPs, while Kroes had proposed a cap of 10 cents from July 2014.
The deepest cut is on the price of data accessed while abroad. The Commission wanted to put a ceiling of 50 cents per megabyte, while the Parliament more than halved it to 20 cents from July 2014.
The Industry, Research and Energy Committee proposals have to be supported by the plenary of the European Parliament, which is expected to vote on the legislation in April. Negotiations with member states will start shortly in order to find a common ground among the EU institutions. “I count on a deal being done by Easter,” Niebler said.
MEPs proposed to further slash caps in a bid to attract consumer praise – and possibly votes. Indeed, for the industry it remains hard to justify higher prices for roaming than for domestic services. Costs are in fact not very different and often even lower.
Many observers still wonder why a phone call from Brussels to Cologne (some 200 km away) should cost much more than the same call from Cologne to Berlin (over 500 km away) just because there is a border in-between. Switching networks is not a sufficient justification since many operators already operate across the EU. Users often change networks for their domestic calls, too, argue MEPs.
The wholesale battle
The original compromise reached by MEPs in the last weeks was partially modified at the last minute on a small, but important detail.
MEPs agreed to slightly widen the gap between wholesale and retail capped prices for data roaming. Wholesale prices are those paid by companies to obtain access to the networks owned by others.
Under the adopted text, the difference between retail and wholesale capped prices for 1 megabyte of data would increase to 15 cents instead of the 10 cents initially suggested by MEPs. Kroes had proposed a gap of 40 cents.
Why does it matter? “The highest the price differential, the highest the competition you may expect. The lowest the price differential, the smallest the competition you will have,” argued Innocenzo Genna, a telecoms industry consultant.
The compromise is far from meeting industry expectations, especially of new entrants, but it represents a step forward. If the differential between the wholesale cost and the retail price is not big enough, operators’ profit margins would be squeezed, deterring them from entering the market.
This is obviously an issue for operators who do not own a network but pay fees to use other operators’ networks. It is the case of smaller telecoms operators, and also of a new breed of so-called virtual operators (MVNO), who have no network and are usually active in sectors other than telecoms – retailers such as Tesco or postal services.
If they are allowed to enter the roaming market, argues the Commission, they will increase competition. This should drive prices down, eventually making price caps no longer necessary, according to Kroes’ thinking.