Since February 2009 , this blog and Huib's 3 other Euroblogs are together at:

- In Europa Zu Hause [DE]
- L'Europe Chez Soi [FR]
- At Home in Europe [EN]
- In Europa Thuis [NL]

Sunday, September 24, 2006

Roaming Charges: EU plans under attack by Telecoms

It was to be expected.
There is a long delay between the EU Commission's announcement of a price control regulation to ban excessive roaming charges and its (hoped for) approval by Council and Parliament.
That delay will be fully exploited by some Telecoms interests to influence decision making.
As their position on the matter is of course very unpopular with the general public, lobbying takes place behind the screens.

The following article in the - Brussels has got it wrong on roaming charges (Financial Times of London, September 22 2006) is a mixture of two main tactics of the companies:
  • a. It sums up ideological (free market) arguments and cites some short term national interests in maintaining this extra source of income for country-based, sometimes ailing, telecompanies so as to convince governments in the Council to disapprove of the price cap, and
  • b. It tries to confuse issues for the greater public, mobilising the general aversion against 'Brussels' and its bureaucrats.
Saddam Hussein inspires telecom lobbying against roaming charges cap
Have a look yourself. The author is Stephen Littlechild.
Brussels has just invented the mother of all price controls. A control that specifies the same maximum price across the whole of Europe. Not just wholesale price; retail price, too. This weapon is aimed at mobile telephone operators. Brussels says their roaming charges - the charges made for using mobile phones overseas - are too high. Its solution is to regulate so that all roaming charges in Europe are the same.
Six sentences - three untruths. No wonder that the text starts with a quote from Saddam Hussein. (The Gulf War, 1991: "The mother of all wars").
  1. Setting maximum prices for roaming, doesn't mean that prices are to be identical. Companies can continue to offer prices lower than the maximum and compete liberally!
  2. The "weapon" is not aimed at mobile telephone operators - it will help them to compete on equal footing outside the boundaries of the countries where they are established - it opens huge opportunities for market enlargement.
  3. "Brussels says that ... charges ... are too high": It is not "Brussels" who are saying that - it is a widely accepted truth, even by telecom companies themselves, who announced a 40-50% rebate in 2007 (why not immediately?)
The Financial Times external commenter continues in a more reasonable tone:
Some customer concern about roaming charges is understandable. In the past, prices seem to have been considerably above costs. But the situation is now changing dramatically. Leading mobile operators have committed to reducing roaming charges by 40-50 per cent in the next 12 months. Are these merely temporary and expedient responses to the prevailing political concerns? Would roaming charges increase again if Brussels withdrew?
Yes. They certainly would.
Real problem is artificial market compartementalisation along national borders
We went into that subject before, explaining that the maintenance of technologically redundant national frontiers is the real disturbing factor in the development of a free competition. Telecoms should not be permitted to hide behind national barriers where their (foreign) customers cannot punish or recompense them for their price policies.
That is the reality on the roaming charges market, this day.
People who are living in small countries, with a vast foreign world, where roaming charges have to be paid, are unduly charged, the moment they move some hundred or two hundred kilometers from home.

It is indeed the role of the EU and its Commission, to make disappear or limit unnatural competition obstacles, in order to reinforce the European Economy and the Lisbon Objectives, making the European work force more mobile. The roaming charges cap is a good example of such an intervention.
A comparison: The banks' euro/euro international exchange rates
The Commission's proposal should be compared to the Commission's successful intervention in 2001/2002 against the efforts of most European banks, to maintain exchange rates for international transfers of money between countries using the Euro-currency. The reasonings of the banks were as conservative and futile as those inspired by the telecom companies today:
  • The banks said that they couldn't miss that source of income, but had to admit, that the costs of national and international interbank transfers, given the unique currency and the computerization of the entire process, do not significantly differ. The same is true for international calls compared to inner-country calls from company network to company network.
  • The banks asked for a much longer transition period during which they would have maintained their international transfer charges.
Both types of argumentation were rejected by the competent European authorities. And that were no loony leftists: Frits Bolkestein was competion commissioner at that moment.
Where a convinced free market fan has to stand on this issue...
But, times have changed. Retrograde and conservative lobbying is made easier by the rise of Euroscepticism and populism. That is the reason, why "At Home in Europe" has singled out the struggle around the roaming charges as a symbolic topic, hoping that the utter unreasonability of the telecom companies' stand will bring about a turning point in these developments. Every sincere free market believer will have to agree with the Commission's standpoint. so, we hope, we will be and remain in good company during our intervention into this debate!

A last point, the FT-commentor tries to make:

Price controls reduce communication and co-ordination between operators and customers. There is less awareness of what different customers want, less incentive and ability to provide it. Increasing reliance on regulators and politicians means prices and services determined by bureaucrats instead of customers.

And again, completely false! Lowering roaming charges to a reasonable level, as close as possible to the national charges, would -on the contrary- enormously increase the opportunities for well-scaled and well-organised telecom companies to win clients in other European countries. Their efforts would (will) pay off and conservative, non-dynamic and lazy market parties would be severely punished by the customers.

For, we repeat, the European regulation only caps the prices. Nobody will forbid companies to offer lower prices for roaming than the European maximum...

Author is a paid Vodafone lobbyist
And here is our final shot at the telecom lobby and the paper that offered them so willingly a tribune. The article ends with:

The writer is former UK electricity regulator and was author of the report that led to the introduction of the first retail price controls for BT in 1984. He has been invited by Vodafone to look at roaming charges.

Copyright The Financial Times Limited 2006
Well, as a Vodafone customer, I intend to formally protest against any payment being made to this biassed hack called Stephen Littlechild.

1 comment:

Anonymous said...

I am a european investor in the UK. Over the last 20 years my family's companies have invested £75 million. We provide employment with decent (european style) conditions to our 328 employees. In recent years (particularly when the UK didn't set a course to join the euro) we stopped our investment as we now perceive the UK economy as a lopsided bet on a japan-circa-early-90es-style property bubble.

Accordingly we have divested any real estate in the UK which we feel is "irrationally exuberant" and is very likely to crash. We feel that this is true even with the stimulus of running a very aggressively competitive tax and worker rights regime within the single market in effect taking investment which would otherwise be in other european countries to the UK.

Given this fact we are alarmed by the hysterical quality in British euroscepticism. We feel there is a public hysteria whipped up by the Murdoch press which may sell newspapers but its not in the interests of this country. The influence R Murdoch has over Britain via the Times the Sun and Sky over Britain is of Berlusconian proportions.

We have already drawn plans to reduce our exposure to the UK for purely economic reasons, we may well relocate entirely in Bratislava, Slovakia if the same nationalistic rhetoric persists in making us feel that there is a risk of withdrawal. So far we have found that new europe has much better educated and productive people and policies that are in line with reality.

The UK is becoming bureaucratic not due to Brussels, its the unresponsive overpriced and low quality services and property but also there is widespread dishonesty in Banking and insurance and business services, it is generally bad value for money. Banks in particular are a law on to themselves. The personal loan bubble is likely to burst along with the housing one.

The fact that UK employees have much less security and rights than the rest of the EU has made up for the currency risk so far, but if this overpriced and overconfident country continues its direction in pulling out of the EU project this will give us reasons to pull out our investments from the UK altogether to avoid the dangerous direction to anti-eu-populism that is now prevalent.

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