Last year’s big news item was of course the slashing of roaming rates within all 27 EU states. Seamless roaming is a major factor in why GSM has become the most widely used standard for mobile communications. The ability to arrive almost anywhere in the world and turn on your GSM phone and it “just works” is something of an engineering miracle.
This ubiquity of service has been a key driver behind the growth of mobile and has led to it becoming an integral part of society in the 21st century. Originally the preserve of international business travellers, it is now entirely normal for consumers to rely on their mobiles whilst travelling the world over.
Eurotariff
The so-called “Eurotariff” came into force in the summer of 2007 setting price caps at €0.49 per minute for making calls and €0.24 per minute for receiving calls anywhere across the EU member states. A year on and the limits have been dropped to €0.46 and €0.22 respectively, with further reductions to €0.43 and €0.19 set to come into play by next summer.
But whilst consumer groups will be happy with the reduced prices, what has been the impact on the operators?
Roaming has traditionally been a very significant source of revenue for mobile operators, so it was no great surprise that this was an area to be targeted by the regulators. However, the case was made that whilst the price per minute was being forced down, the increase in minutes of use would more than make up for the damage done.
Earlier this month, the mobile operators in Austria united to release the results of a study of the impact of the Eurotariff, conducted by the Helmut Schmidt University of Hamburg. And the results make pretty grim reading. Having reduced their tariffs by an average of 43% to meet EU price caps, they have only achieved growth in minutes of use of 3.7% for calls made and 10.3% for calls received. The net effect of this is a reduction of roaming revenues of 41.4% for calls made and 37.4% for calls received within the EU.
Analysis of the impact of the Eurotariff in other countries is yet to emerge. However it would be something of a surprise if operators elsewhere reported it as a resounding success. So are the EU lawmakers in any way accountable for the results of their policies? Their initial analysis pointed to roaming prices being relatively elastic – i.e. the change in price would be more than made up for by the increase in minutes of use. But the experience of the operators in Austria indicates this is not the case, so far.
Roaming Shortfall
Clearly in a commercial enterprise, you can’t take away with one hand without expecting to give back with the other. So whilst consumers travelling within the EU have benefitted from lower prices, those from EU states travelling to non-EU countries have been faced with significant price rises as operators look to make up for the Eurotariff shortfall.
Research conducted by Informa shows EU roamers are now paying much more to call home when roaming in non-EU countries.
For example, German roamers in Africa are now paying up to 160% more than two years ago, whilst Spanish mobile users have been hit with 30% price rises across many non-EU destinations.
Following the “success” of the Eurotariff for voice roaming, SMS and Data tariffs are next in the firing line with rates set to fall dramatically from summer 2009. It would seem that the EU Commissioner is keen to emphasise that current prices are disproportionate to the actual cost of delivering the service and this must be rectified.
Commoditisation
Having worked in the telecoms billing industry for nearly 15 years I find it somewhat concerning that the powers that be seem to want to commoditise our core telecoms services. Setting retail prices based on a cost-plus model goes wholly against the concept of value-based pricing that the industry has championed for so long.
If ever there was a fast track for turning operators into the dreaded “dumb-pipe”, it would seem to be such tight regulation of the tariffs that can be offered. There’s a real danger of this stifling the innovation that operators strive so hard to achieve.
With the threat of the Eurotariff several operators took pre-emptive action by introducing new roaming packages to provide better value for money for their customers. Take Vodafone, for example, who launched (and continue to offer today) their “Passport” service giving preferential roaming rates within the Vodafone family of operators. For a UK subscriber, the service works by setting a fixed fee for every call made and received whilst roaming and then applying standard UK tariffs including use of bundled minutes.
Looking outside the EU, Zain has created the compelling “One Network” roaming proposition which offers borderless roaming in 15 countries across Africa and the Middle East. Under this service, customers pay no roaming surcharges and have the benefit of paying local rates wherever they are in the network with no charges for incoming calls. This is something that the EU lawmakers can only dream of.
Transparency
Vodafone Passport and Zain’s One Network are just two examples of the innovation that can be achieved and the benefits that can be delivered to customers. However this is not a one-way street. Schemes such as these are the way in which operators can differentiate from their competition and build loyalty amongst their customer bases but this becomes a huge challenge when the market is tightly regulated.
Clearly regulators have an important role to play in ensuring fair competition, however the very nature of the communications industry is that it is global. So whilst Commissioner Reding can tinker with pricing structures in Europe, the knock-on effect further afield is beyond her control.
Whilst roaming prices continue to be pushed in one direction, the latest EU proposals also introduce the need for operators to provide improved transparency of roaming prices. This includes delivering an “Advice of Charge” so users know what tariff will apply when roaming and the ability for customers to set their own spending control limits.
If the EU proposals are approved, this will result in online charging becoming the de-facto standard for managing both prepaid and postpaid roamers as usage must be managed in real-time. With consumers concerned about the credit crunch, the sooner operators can offer this visibility and control over roaming spend the better. This should build confidence amongst users and help drive up roaming usage without customers fearing a huge bill when they return home.
