New EU rules on mobile roaming charges – expert reaction from Ovum

On the new roaming regulations, whereby from 1 July EU mobile operators will again be required to lower retail prices for roaming calls in line with EU rules first introduced in 2007, Ovum lead analyst, Matthew Howett, has stated the rules are good for voice but not for data.

Consumers opting for the EU-regulated “Eurotariff” will pay no more than 35 cents (32 pence) per minute for calls made and 11 cents (10 pence) per minute for calls received while abroad in the EU.

Meanwhile, rrom 1 July 2011 the cap for data roaming wholesale prices (the price which operators charge each other) will fall to 50 cents (45 pence) per megaByte (down from 80 cents – 71 pence – per MB). The current regulation does not establish a retail price cap for data services.

Howett commented: “The current regulation has been a success story for voice, but not so for data. Since 2007 the average cost of making a call has fallen by almost 75% which is very unlikely to have happened in the absence of regulatory intervention. Prices for data have not fallen by as much as the European Commission hoped, and is why they are now extending the regulation to include a retail price cap for data.

“Price caps are generally an ineffective means to regulate. Evidence so far suggests that operators have gravitated towards the price caps but not offered prices below these. With this in mind the EC is calling the retail price cap on data ‘a safety net’ and is hopeful that a structural solution will address the issue,” he continued.

He noted: “A more structural remedy has the potential to work, but must be easy to understand and cheap to implement. What’s on the table attempts to structurally deal with the underlying problem; a lack of competition. We are currently reliant on how well our home network operator has negotiated with partners in the countries we visit. Splitting out this component from our tariffs allows the emergence of new and innovative players who are likely to compete on price.

“We are unlikely to see similar strict regulatory intervention elsewhere in the world because it requires a legal basis such as the EU. Instead, we are much more likely to see bilateral agreements reached between countries with a commonality. Already examples are appearing in Asia, e.g. between Australia and New Zealand.

“The approval required from Council and Parliament is very likely,” added Howett. “The cost of using your phone abroad is very close to the key decision makers and is politically an attractive initiative to get behind. We are unlikely to see any barriers to its progress through the legislative process. Operators have tried to legally challenge the current regulation and failed. It’s not clear whether they will try again, but given the competitive potential of the new structural solution are more likely to focus their efforts on attracting new customers who roam.”

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