EU Roaming Plans Could Drive Greater Innovation among Operators

Operators Hit Back at Proposals but the Industry Stands to Benefit

Plans by the European Commission (EC) to abolish roaming charges in Europe by July 2016 could finally bring an end to the prohibitive tariffs suffered by tourists and business travellers for many years.

The latest clampdown on roaming is part of a wider package of telecom reforms recently presented by Commissioner Neelie Kroes. Her aim is to create a more competitive Europe as the region continues to lag behind leading US and Asian operators in the deployment of 4G networks.

Unsurprisingly, reaction from UK mobile operators was downbeat. Under pressure from strong competition and the weak economy, they’ve already seen roaming fees slashed over the past few years.

Vodafone pulled no punches when it told me the move was harmful to the industry and went against the principles of consistent regulation. It also criticised the “hundreds of millions of euros” it would cost to implement.

Vodafone is keen to point out that, like its UK rivals, it has been making roaming services more accessible and affordable over the past few years. Its EuroTraveller service, for example, allows customers to use their UK minutes, texts and data allowance in most European countries for £3 a day. The network’s high-end Vodafone Red tariffs now also include roaming minutes.

Interestingly, despite Vodafone’s strong response to the proposals, CEO Vittorio Colao played down their effect on a recent call for analysts. He explained that although roaming contributes 6 percent to 7 percent of group revenue, a large proportion comes from outside Europe or is contained within business tariffs.

Mr Colao’s principal concern is that new regulation discourages investment. I subscribe to the counter-argument presented by the EC: improving accessibility is vital to boosting usage, in turn driving higher revenue. This will free up operators to invest more in new technologies and develop innovative services. Indeed, Swedish operator Telia reported a sharp increase in data traffic in 2011 following the introduction of lower roaming rates in its Nordic and Baltic markets.

The fact that my mobile provider recently advised me to switch off data roaming before even leaving the UK undermines what should be fundamental goals of the industry: to encourage the uptake of new services and capitalise on many of the opportunities presented by 4G.

Feel at Home is a service recently launched by 3 that eliminates roaming charges within the group’s sister markets. The move feels like a pre-emptive response to the EC’s proposals, but the inclusion of Australia and Hong Kong is significant. For Europeans, roaming charges outside the region have remained stubbornly high and this deal could save travellers a lot of money.

It’ll be interesting to see whether UK networks react by raising prices elsewhere. O2 told me that the new proposals “introduce uncertainties into the regulatory framework”. Yet last year the operator significantly increased charges outside the EU, a move that felt suspiciously like an attempt to recoup the shortfall in its European roaming revenue.

I find it hard to understand any other justification for a 60 percent increase in the cost of sending a text while roaming the US for example, which now stands at £0.60. This compares with just €0.08 within the EU. As there is no cross-continental jurisdiction, networks can effectively charge whatever they like in other parts of the world. Travellers unaware of these huge differences could get a nasty shock on their next bill.

Like its UK competitors, O2 doesn’t report how much revenue it generates from roaming. However, the loss of any income will heap further pressure on its financial performance that’s only gradually showing signs of improvement. My view is that, to compensate, operators should focus on new sources of revenue and creating more innovative services.

O2 recently took a significant step in this direction by signing a smart metering deal worth over £1.5 billion with the UK government. It claims this is the world’s largest machine-to-machine contract win to date. Rather than berating regulators and airing grievances about their policies, operators would be better off focussing on the many new opportunities that the industry currently presents.