Viviane reding, EU telecoms commissioner
The European Commission has been fighting for over 50 years – in the name of companies and consumers – to remove barriers to trade in the single market. It is therefore highly regrettable that the mobile phone industry, a clear beneficiary of the right to offer services across borders on the basis of the European GSM standard, now makes these borders re-appear on customers’ phone bills when they use their mobile phone abroad.
The mobile market is developing, with 24% of households in favour of mobile phones rather than a fixed telephone, and Europe has the highest penetration rates of mobile use in the world (an average of 111%, with some countries reaching over 150%).
However, when we take a closer look at mobile phone charges abroad – so-called roaming charges – whether for text messages or data, one discovers that these are abundantly high within the EU. And what’s worse is that these high roaming charges are completely unjustified, they are not based on actual costs incurred by the operators, and go against the principle of borderless trade and travel upon which the EU is based.
This is why the European Commission acted last year when lots of people rightly felt ‘ripped off’ by the roaming charges for making and receiving a call abroad. In the summer of 2006, the average retail charge for a roamed call was !1.15 (90p) per minute, more than five times higher than the actual cost of providing the wholesale service.
With five minutes on the phone abroad costing more than !5 (£4), the use of mobile phones was being limited. Some 70% of students, for example, said in a survey that they avoided making roaming calls because of the costs involved. We therefore tabled the EU roaming regulation to bring down voice roaming charges and make calls cheaper.
Thanks to the strong support from the directly elected European Parliament, this regulation was adopted swiftly. It has now been in force for just one year but has already delivered tangible benefits to European consumers; the new ‘Eurotariff’ has led to savings of up to 60% and prices for roaming calls will be further reduced by 30 August (from !0.49 to !0.46 for making calls and from !0.24 to !0.22 for receiving calls (37p to 33p and 18p to 16p)).
Thanks to EU action, the cost to talk abroad is getting substantially cheaper; however, the price for sending text messages is still very high when abroad. Back in 2006, before the Commission reduced roaming calls by 70%, 21% of mobile users only sent text messages while abroad to try to limit the rip off. So given that each year around 2.5 billion roamed text messages are sent from abroad in the EU, the dimension of the problem is indeed quite considerable.
That is why in February I called on mobile operators to voluntarily reduce costs for SMS roaming and avoid regulation. The deadline was 1 July – but where are we today? There has been no movement in the market. Prices have fallen from !0.29 to !0.28 (£0.23 to £0.22), which is far from what operators are actually paying to provide this service and can expect to make a reasonable profit. Instead of passing on just the real costs, operators are overcharging – they are profiting excessively while consumers are paying excessively. Let me stress that we are not against operators making profits: the problem comes when roaming customers pay three to over 10 times more than domestic customers.
New figures collected by the European Commission show that a British consumer pays up to !0.50 (40p) for sending a text message abroad compared with !0.15 (12p) at home. In other words, a text message costs more than three times more abroad for UK consumers.
In Denmark, the national telecoms regulator has just published a study which suggests that the roaming price per text message, based on a market working effectively, could be as low as !0.042 (£0.034)! The current price level of !0.28 (22p) per text message is thus neither fair nor justified. I will therefore soon propose changes to the EU roaming regulation to include text messages in order to reduce consumer prices across the EU.
I no longer want to see borders affecting customers’ mobile phone bills. Phone charges, whether for voice, text messages or other data, should reflect competitiveness and cost effectiveness, encouraging the take-off of new and attractive mobile services.
In the forthcoming battle for cheaper text messages abroad, I hope very much to be able to count on the support of consumers and their organisations. I expect fierce lobbying that will try to ensure that the new rules on text messages from abroad come into force as late as possible and allow prices as high as possible. As EU telecoms commissioner, I will do what I can to achieve the best deal for Europe’s consumers.
Vodafone spokesman: ‘Prices need to be clear and transparent’
Termination rates – We think that before making a drastic cut, costs should come down. The European Regulator Group (umbrella body of 27 national regulators) said that it would cut termination rates by 40% in three years. If you take the cost cutting and efficiency gains into consideration, we agree with this.
We don’t know how the EC reached the 70% figure. If that was to happen, you could see a mirror of the US pricing model, where customers pay for incoming calls, and the entry point to owning a phone is high, and the prepay market is almost non-existent. Mobile penetration in the US is only around 50%, while it’s above 100% in the UK.
The cost of terminating calls will have to be absorbed somewhere, as there are overheads that don’t just disappear.
SMS roaming – SMS prices are very clear. Most of our customers know that the price of an SMS is a flat-rate cost. SMS is a hugely competitive market and the price needs to be clear and transparent. The industry can do that without regulation.
Data roaming – We are keen to stamp out bill shock. There are a few people that run up massive bills. We want to eradicate this so we have introduced caps that prevent you spending over a certain amount of money.
Ofcom spokeswoman: ‘The high cost of data concerns us’
Termination rates – We have set termination rates on a cost basis until 2011, and they will come down incrementally until that date. We have said that after 2011 it is important that customers continue to benefit from low termination rates.
The approach Viviane Reding has taken is a good one and it benefits customers, but we are open to debate on how the reduction should be done. We think that national regulators controlling termination rates has worked well.
SMS roaming – We called for roaming prices to come down, and were the first to call for this in January. We have been encouraging the industry to bring prices down, as there have been some cases of very large bills.
Data roaming – There should be more caution with data roaming because it’s still a young market, but we are concerned about the high cost of data. Some advice is available on our website for consumers before they go travelling. Pricing needs to be clear and consumers need to understand the cost.
We welcomed T-Mobile’s red