Global Insight Perspective | |
Significance | The European Parliament moved to slash mobile roaming charges despite criticism from the industry group, the GSM Association. |
Implications | The ruling promises to cut the cost of calls for consumers travelling abroad within the European Union (EU) by between a half and a quarter of average current charges. |
Outlook | The loss of revenue for mobile operators from the new lower roaming charges is likely to be partially offset by the increase in call volume as the publicity surrounding the move encourages consumers to make and receive mobile calls while abroad. However, mobile operators are considering taking extra precautions, such as increasing cost of domestic calls and decreasing handset subsidies, in an effort to guard against the impact of new roaming charges on revenue growth. |
The European Parliament voted by a vast majority in favour of a cap on the cost of making and receiving mobile calls while abroad within the EU. Under the new plan, calls while abroad will cost 0.49 euro per minute staring from mid-2007, falling to 0.43 euro per minute by 2009, while cost of receiving calls abroad will be reduced to 0.24 euro per minute and 0.19 euro per minute within two years. The decision will be rubber-stamped in June by the governments of the EU member states and will be enforced as early as August this year. The move is a success for Viviane Reding, the EU telecoms and media commissioner, who launched the campaign to lower roaming charges in the EU in 2006.
Outlook and Implications
Voice of Reason: According to Reding, the current ceilings still leave ample room for competition to propose attractive price packages. The move will reduce roaming charges for outgoing calls by 36% this year and 43% by 2009, while incoming calls will fall by 35% and 49%, respectively. According to the European mobile phone industry's roaming Retail Price Index, the average cost of an outgoing call in the first quarter of 2007 was 0.76 euro per minute, while the average cost of an incoming call stood at 0.37 euro per minute. The current price cap is a compromise between the mobile industry and the European Commission, which intended to push ahead with even more drastic cuts (see Europe: 16 May 2007: EU Negotiators Agree Compromise Mobile-Roaming-Cap Fees and Europe: 23 March 2007: EU Lawmakers Divided over Mobile Roaming Charges). The current ruling, however, does not affect mobile data services, such as internet browsing on mobile phones while abroad, which still hinder the growth of the mobile internet sector.
Voice of Concern: The industry, as represented by the GSM Association, dismissed the new European Union (EU) roaming regulation as "unnecessary", anticipating that it will curb competition and harm the consumer in the long term. It attacked the price cuts, claiming that mobile operators have reduced roaming prices, and launched a range of innovative tariff plans driven by innovation and competition in the context of the market economy. According to the European mobile phone industry's roaming Retail Price Index, the average cost of roaming calls across the EU, which is an average of the cost of both making and receiving calls, fell by 29% to 0.59 euro per minute in the first quarter of 2007, from 0.83 euro per minute (excluding VAT) in 2005. The GSM Association has expressed concerns about the consequences of market regulation, such as a lack of room for more competition on price and new services, plus the inability of mobile operators to contact all their customers within one month of the regulation coming into force to inform them of the new roaming tariffs. European mobile operators have expressed their concern that the new regime will threaten the revenues they generate from roaming, as well as their ability to remain competitive. They have warned of increasing prices for domestic calls and the price of handsets in an effort to compensate for the expected loss of roaming revenue, which would, in turn, penalise consumers who use mobile phones mostly at home.