Recent cuts in data-roaming costs won't be enough for the EC

The recent announcement by France Telecom's Orange that it has reduced its data-roaming tariffs demonstrates that the industry has a lot to do when it comes to addressing the perceived problem of high data-roaming costs.

June 2, 2008

5 Min Read
Recent cuts in data-roaming costs won't be enough for the EC

By Paul Lambert

The recent announcement by France Telecom’s Orange that it has reduced its data-roaming tariffs demonstrates that the industry has a lot to do when it comes to addressing the perceived problem of high data-roaming costs.

Orange’s move is evidence that operators are concerned about the European Commission’s decision to continue looking closely at roaming prices. In the absence of major reductions to data-roaming tariffs, the EC is poised to mandate a reduction to them in July.

But although Orange’s cut in data-roaming costs is welcome, in that it will make such services cheaper for some Orange roamers, it fails to reduce them enough.

To head off regulation on data-roaming tariffs, operators are taking the initiative in cutting them, just as they did with voice-roaming rates before the European Commission introduced the mandated Eurotariff. The Eurotariff, which came into effect June 30, capped roaming prices at ?0.49 ($0.77) a minute for calls made within the EU by subscribers of European mobile operators.

At the same time, perhaps sensing that regulation of data- and SMS-roaming rates is inevitable, Boris Nemsic, CEO of Telekom Austria Group, said last week that “it is worrying that at a time when the long-awaited benefits of mobile data are beginning to be felt in the European marketplace, the Commission is considering more price regulation.”

Nemsic said that Austria’s market and others are functioning well without additional regulation, because when volumes go up, prices come down. In less than a year, data-roaming prices have been cut in half, Nemsic said. He said that one megabyte of data use while roaming costs ?0.42 with Mobilkom’s daily and monthly roaming packages and ?2.40 without a specific data-roaming tariff.

“Take a look at Austria today, and you’ll see the European price levels of tomorrow,” he said. “Extrapolate this price development over the next two to three years, and sending e-mails, receiving MMS or using specific data services, such as telematics or mobile navigation, when abroad will cost close to nothing.”

Operators have made some moves in the right direction and look set to reduce data roaming tariffs, but such measures will probably fall short of the scope of reductions that the EC says it wants to see. It was a similar situation that led to the introduction of the Eurotariff.

The EC reportedly wants interoperator wholesale prices for data roaming services set at ?0.35 per megabyte. They currently stand at about ?1. And it wants SMSes sent while traveling in the EU to cost ?0.12. The average in Europe is about ?0.29.

At the Mobile World Congress (MWC) in February, Viviane Reding, the EC’s telecoms commissioner, said that the EC would “take stock” of data-roaming prices July 1. “We’ll put the current SMS-roaming prices on a web site” and then “go to the European Parliament and Council of Ministers and give them an answer on what has to be done with data,” she said.

The EC “won’t be satisfied with only a few large operators [making reductions],” she added. “July 1 will be the moment of truth. Operators know perfectly well that if the movement isn’t right, the EC will be ready to regulate.”

Although the EC is most likely to regulate only SMS roaming rates in the near term, it might also address data roaming July 1, and if not, it will do so soon. So how will the EC react to the latest roaming-rate cuts from Orange and others?

Orange announced a fixed-price data-roaming tariff May 19, Travel Data Daily, under which users pay a fixed price for data roaming. The service costs Eur12-15 for 50MB of daily Internet access within the EU.

Orange is not the only operator to make reductions in data-roaming rates under close scrutiny by the EC.

Mobilkom owner Telekom Austria, which owns mobile operators in southeastern Europe, last week reduced its SMS-roaming rates another 20% in Austria, to Eur0.20 per SMS, and almost 40% at Mobiltel in Bulgaria.

On the subject of SMS roaming, Nemsic said that “when it comes to standard tariffs, we already have very competitive SMS levels today compared to national tariffs.”

Many cuts have already been made this year. For instance, at the MWC, T-Mobile unveiled a Pan-European flat-rate data offering of Eur15 a day for a laptop using any network in any EU country. Usage is capped at 50MB a day, resulting in a cost per megabyte of Eur0.30. The company says it will also launch a tariff of Eur2 per megabyte in all markets later this year.

Vodafone, meanwhile, announced a price reduction of up to 45% on its monthly data-roaming tariff, but only for European business travelers. In June, it is planning to lower the maximum charge for its monthly data-roaming bundle from Eur75 to Eur60 a month.

But these efforts, and others like them, important as they are, are unlikely to stop the EC from intervening to force operators to lower data-roaming prices.

Operators seem set on keeping data-roaming rates higher than the EC wants them, preferring instead to reap the benefits of higher prices until forced to cut them.

Meanwhile, it is only a matter of time before European regulators start to question operators about why roaming calls to and from countries outside the EU are so expensive. The European Regulator Group, which represents the regulators of both EU and non-EU European countries, says it is “monitoring the situation.” It is surely only a matter of time before the price of data roaming in the EU and roaming calls made and received outside the EU are set by the European Commission.

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