Under the Spotlight: EU Mobile Roaming Tariffs Down 60% on New EU Rules

Mobile roaming tariffs within the European Union (EU) have fallen by 60% since July 2007 as the new "Eurotariff" regime came into force. The EU Commission announced yesterday that tariffs have fallen massively over the European summer months, although some operators' pricing remains "too opaque" for the Commission's liking. "As of now, some 400 million consumers are protected by the Eurotariff when using their mobile phones abroad," an elated Viviane Reding, the EU's Telecoms Commissioner, said, adding that the transition has been "smooth".

The EU had in June agreed to introduce mandatory caps on roaming tariffs charged in the bloc as an incentive to consumers holidaying in the region. In a unanimous vote then, EU national telecommunications ministers approved the proposal to cap calls made while abroad to 0.49 euro cent per minute, starting from mid-2007, and falling to 0.43 euro per minute by 2009. Similarly, the cost of receiving calls while abroad will be reduced to 0.24 euro per minute and 0.19 euro per minute within two years. The new Eurotariff structure must be offered to all EU mobile phone users by July 2007 and customers will be given the choice between choosing the Eurotariff or staying on their old pricing plan (see Europe: 8 June 2007: EU Ministers Give Final Go-Ahead to Mobile-Roaming Price Caps; 24 May 2007: EU Parliament Approves Pan-European Cap on Roaming Charges; 16 May 2007: EU Negotiators Agree Compromise Mobile-Roaming-Cap Fees; and Europe: 23 March 2007: EU Lawmakers Divided over Mobile Roaming Charges).

Outlook and Implications

• Is the Gain Sustainable?: Although achieving a 60% drop in mobile roaming charges is already a landmark achievement for an EU ruling that was so vilified at inception, the EU Commission will be hoping to reach its target of a 70% reduction soon, or at least by the time further reductions will come into force in 2009. From inception, the concept of forcing telcos to slash their roaming prices was laden with heavy political undertones, pitching the telcos, and their industry representative the GSM Association, against politicians who were unwittingly selling the merits of the EU to an increasingly disgruntled population in the wake of the botched EU constitution saga. However, despite the obvious success of the Eurotariff, the key task facing the EU is to ensure that tariffs across other segments of the telecoms value chain are not propped up (see Europe: 6 February 2006: EU Seeks Reduction in International Roaming Charges; 12 July 2005: EU to Highlight High Roaming Costs; and World: 18 April 2005: Mobile Roaming Charges Under the Spotlight).
• The Impact on Telcos: Although the telcos are the biggest, and only, victims in this brouhaha, there may be light at the end of the tunnel for them. Several statistics have been reeled out by the telcos themselves or by observers pointing to a significant drop in revenues for the operators. Already Belgacom has warned that the Eurotariff will cause a 1% fall in its 2007 revenues and Vodafone is forecasting a drop of about £200 million (US$407.2 million) in revenue across its European footprint. However, although it is obvious that the 60% drop in prices equates to a 60% drop in revenues for the operators, they have remained silent on the expected boost in mobile usage outside home countries. Fears of hefty bills have always discouraged private customers from making full use of their phones while abroad, leaving business customers as the chief users of roaming services. However, with the Eurotariff and the attendant awareness campaign that went with it, private consumers are being wooed into using their phones while abroad. Given this, revenue decline may not be as huge as currently predicted, and Global Insight believes that some operators may actually record a positive growth in revenues from increased roaming volumes (see Europe: 5 July 2006: EU Divided over Plans to Cut Mobile Roaming Charges; 12 May 2006: National Regulators Object to EU Roaming Plans; 1 May 2006: Mobile Operators Up in Arms Over EU's Roaming Charge Cuts; and 23 March 2006: GSMA Criticises EU's Roaming Fee Plans).
• Template for the Future: In addition to the current feel-good factor from the success of the Eurotariff, the scheme has perhaps become the most visible positive advert for the EU, well beyond telecoms. The EU's argument is clear—if consumers want to enjoy the benefits of a single market, then greater integration is necessary. Since conceiving the Eurotariff plan, the EU has floated the idea of a super regulator (modelled on the likes of the Federal Communications Commission (FCC) of the United States) that proposes the creation of a unified and homogenous regulatory environment for the telecoms sector across the 27-member bloc. Backed by the success of the Eurotariff phenomenon, the EU will be emboldened to brush aside opposition and lay down further top-down Eurocentric legislation for the telecoms industry (see Europe: 16 July 2007: Alternative Telco Heads Urge Tighter EU Telecoms Regulation; 1 June 2007: EU Outlines Plans for "Super" Regulator; 29 March 2007: EU Renews Call for Telecoms Network Separation; 22 March 2007:The EU's New Regulatory Framework; Benefits, Opportunities and Risks for Telcos; and 14 December 2006: Incumbent European Telcos Take Swipe at New EU Rules).