Carriers Wrestle With Roaming Caps
The European Commission wants to reduce international roaming charges by up to 70 percent by July. Commissioner Reding's proposed roaming regulation would introduce price caps at the wholesale and retail levels.
The International Telecommunications Users Group (INTUG) and the European VPN User Association (EVUA) -- whose members include Philips, Shell, BNP Paribas , Socièté General, Royal Sun Alliance, and Unilever -- strongly support the measure.
INTUG chairman Sergio Antocicco estimates that multinational corporations could save more than 50 percent on their mobile bills if the European Commission introduces the proposed retail price caps.
In response, mobile operators have lowered their roaming rates since Commissioner Reding announced her intentions last year to tackle this issue. GSM Europe, the GSM Association (GSMA) 's European interest group, claims that operators have voluntarily reduced roaming fees by 25 percent compared to early 2006. (See Telenor Cuts Roaming Charges and 3 Offers 'Like Home'.)
But users say these decreases are not enough.
"Even when operators have cut prices, we don't believe it's sufficient, and often there is a monthly payment before the savings take effect," says Colin Mackenzie, managing director of Savantia Consulting, which works with the EVUA. "Pricing needs to be simpler, straightforward, and transparent, not just cheaper."
Mackenzie says that roaming can account for up to 80 percent of a large company's monthly mobile spend. For example, one unnamed multinational company's annual mobile spend in the U.K. alone is £500,000, and 80 percent of that is roaming charges. The charges increase the cost of doing business outside a company's home country, he explains.
In case you don't understand what all the fuss is about, the European Commission has produced this handy cartoon to illustrate.
At the heart of this problem for multinationals is that they cannot control their costs. The EVUA says they can spend 3.5 percent of revenues on telecom and network services. But business mobile users who take calls when traveling internationally are not the ones responsible for paying the bill.
"This can be a big problem for the company," says INTUG's Antocicco. "It makes it impossible for a company to have control of costs." User groups also have their sites set on mobile data roaming charges, which are not part of the Commission's proposed regulation. T-Mobile (UK) and Vodafone Group plc (NYSE: VOD) have recently announced rate cuts, but users say they don't go far enough. (See Vodafone Offers Flat Rate and T-Mobile Alters Fees.)
"We are being charged prices that are absolutely scandalous for data transmission and roaming," says Antocicco. "It's easy to find users with mobile bills of thousands of euros."
Even though the Commission estimates that the new regulation would result in mobile users spending €4.4 billion (US$5.9 billion) less on their calls abroad, the impact on mobile operators' revenues may not be all that much.
Jeremy Green, principal analyst for enterprise mobility at Ovum Ltd. , says operator roaming revenues can range from 7 percent to 15 percent. "They're not going to go broke," says Green.
Dresdner Kleinwort estimated last year that Vodafone's European roaming revenues were about £1.6 billion ($3.1 billion). The bank says the large-cap stocks "most exposed" to this regulation will be Vodafone, Telefónica SA (NYSE: TEF), Telecom Italia (TIM) , Orange (NYSE: FTE), Deutsche Telekom AG (NYSE: DT), and KPN Telecom NV (NYSE: KPN).
For large business users, the proposed regulation should mark the beginning of the end of a long saga on mobile roaming. INTUG first officially complained to the Commission about roaming back in 1999.
At CeBIT last week, Commissioner Reding held an informal meeting with telecom ministers and they reportedly agreed in principle to a retail price cap of €0.50 per minute. Next, the European Parliament will vote on the regulation in May, and the Telecom Council of Ministers is scheduled to decide on the issue at their meeting in June. The European Commission says roaming charges affect 147 million EU citizens, of which 37 million are tourists and 110 million are business users.
— Michelle Donegan, European Editor, Light Reading