EU Parliament votes to lower roaming tariffs

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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.

“We need to bring about more competition in the market to put an end to the ripping-off of consumers. The current charges, for mobile downloads in particular, do in no way reflect the real costs”, said European Parliament rapporteur Angelika Niebler, Europe’s People Party. 

S&D negotiator of the regulation, MEP Robert Goebbels said: “This agreement will bring a temporary solution to the high cost of using mobile phones and other devices when travelling in the EU.”

“We managed to include in this regulation a clear statement that if by 2016 roaming prices have not come all the way down to domestic levels, then the Commission will be obliged to propose additional legislation to ensure that roaming and domestic prices are identical,” he added.

MEP Fiona Hall, industry spokesperson for the Liberal Democrat delegation, commented after the vote: “People travelling on leisure or business are rightfully outraged by the rip-off charges for cross-border mobile phone calls and data transmission. Worse, at a time when we are all promoting the single market in Europe with a particular focus on freeing the potential of the digital market, data roaming fees are almost prohibitively expensive.”   

“The new measures will ensure that more and especially smaller operators will be able to enter the market and stir competition. However, until the measures bear results, we must protect consumers and indeed companies by capping prices at a sensible level that allows us to do business across borders and boost economic growth,” she said.  

Monique Goyens, director-general of the European Consumers’ Organisation (BEUC), commented: “This vote is another stepping stone towards better protection against excessive roaming charges in the EU. But we haven’t crossed the finish-line yet.” 

“Data downloading is increasingly where the battle for price fairness in roaming is being fought. We’re glad to see recommendations the price ceiling for data decreases annually from July 2012 to 50 cents, 30 cents and 20 cents per megabyte used. This is headed in the right direction. That is the only means of achieving a fairer reflection of usage and avoiding billshock,” she said. 

In a recent hearing in the European Parliament on roaming, industry representatives made clear their opposition to the maintaining of roaming caps.

Roland Doll, vice president for International Governmental Affairs at Deutsche Telekom, argued that “consumers did not use roaming more because of lower roaming prices. The result (of the roaming regulation) has been to take revenues away from operators.”

“The legislator should leave the caps as proposed by the Commission,” he said, adding that “price regulation should only be a safety car.”

“I urge parliamentarians to recognise the challenges they face: retail caps should not be some arbitrary multiple of wholesale caps but must instead recover costs of marketing and serving customers,” said Richard Feasey of Vodafone.

In June 2007, the European Commission introduced a regulation placing caps on prices of cross-border mobile calls in Europe, the so-called 'roaming regulation'.

The EU executive's intervention was limited to roaming because domestic calls remain a competence of national regulators. The first roaming regulation also excluded text messaging and data. A second regulation entered into force in 2009, introducing further steps to gradually lower caps for voice roaming, together with guarantees against "bill shocks" for data roaming.

Last July the Commission proposed a third roaming regulation and announced plans to structurally reform the European market for roaming phone calls slashing wholesale prices and opening access to the market to new service providers.

The measures were supposed to eliminate differences for cross-border phone calls, saying that price caps will be no longer necessary as from 2016.

  • April 2012: Possible European Parliament plenary vote on roaming overhaul 

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