Roaming Charges: Mobile Phone Companies score via EU Governments against Consumers

At Home in Europe announced it some time ago: The proposed EU regulations for limiting the excessive rates, mobile phone companies are charging their customers for "roaming" (making calls and being called abroad), run a great risk to get watered down in the consultation process that is actually going on with the member states' governments.

The "informal" Council meetings of, in this case, the 25 transport- and communication ministers, are a chosen spot for heavy lobbying by the concerned companies. These meetings are not public, and the positions the ministers defend, are, in most cases, not discussed with their national parliaments. Public opinion plays virtually no role in this process.
In former posts, (for instance: "Roaming Charges: EU Plans under Attack by Telecoms" [september 24, 2006]) we discussed all of the reasons, Mobile Phone Companies are putting forward, to stick with the technologically irrelevant national domains (markets).

The market fragmentation along artificial national frontiers enables mobile phone companies to charge very high rates for cross-border calls (outgoing AND incoming). The same is true for G3 roaming (mobile internet).

Technically, treating a cross-border call, automatised as it is, is but a little bit more expensive than a national call within or without the company's network. The networks are automatically linked. Computers do the work. Treating wireless calls is even less complicated than treating internet traffic, which is, as we all know, completely free of charge, and independent of the number of national borders that are crossed.

The following report by our favoured EU news source, the EU-Observer, shows, that the lobbying activities by the mobile phone companies, using the old propositions, that have been refuted long ago, have met their goal, for the moment:

EU-Observer: Brussels clashes with UK and France on mobile phone rates
11.12.2006 - 17:37 CET | By Lucia Kubosova
EUOBSERVER / BRUSSELS - A majority of EU member states have rallied behind the joint proposal by the UK and France on how to force mobile operators to cut charges for cross-border phone calls, with the European Commission suggesting this approach would lead to delays in real price cuts of several years.

EU transport ministers meeting in Brussels on Monday (11 December) in principle supported a commission plan to introduce legislation to clamp down on charges for calling and receiving calls on mobile phones while abroad.
However, the bloc is divided on whether or not to water down the proposal, with most countries voicing concerns over

• possible damage to the telecom business if regulations narrow down the space for competition and harm innovation and investment in the sector. Several ministers also pointed out that
  
• the pressure for lower roaming charges could potentially spill over into higher prices of national calls - and so negatively affect citizens who do not travel a lot and use their mobile phones outside their home country.

We dealt earlier with those two points:

1. "Narrowing down the space for competition": Absolute nonsense - a regulation imposing lower and objective rates, would enable not only national competition, but also cross-border competition, as successful and effeicient foreign mobile phone companies will be able to offer interesting rates to consumers abroad, something they cannot do now, because of the foreign roaming charges. And imagine, what huge investment and innovatiive technologies will be generated through such a process! Forced to work as cheap as possible, new computerized nodes will be installed, bringing forward European IT technology.
2. "Higher prices for national calls" - as much nonsense! The actual rates for mobile calls cover largely the investments in infrastructure, the existing one as well as the coming one for G3 communications. The roughly 30% of their income, the mobile phone companies generate through roaming charges abroad or from foreign consumers who (are obliged to) use their networks, are mainly used for the amortisation of the gigantic debts they contracted in buying G3 licences in 2002/2003 for fancy prices. For many of the companies, those charges are far too onerous. The excessive roaming charges are permitting them to finance their debts. Governments, who profited some four years ago from that windfall, are probably afraid, that, in cutting off those sources of excessive income, some mobile phone companies will become unable to pay those debts and go bankrupt. This might be a reason, why a number of national governments feel obliged to follow the nonsensical reasoning of the companies. They might get to feel it in their own budgets.

According to the report in the EU-Observer, the Commission did not give in, however:

But EU information society commissioner Viviane Reding insisted that it is primarily European citizens who would benefit from the plan as outlined by the EU executive."I know you have been lobbied before this meeting," she told the ministers ahead of the discussion, adding that while this pressure on governments was just minor on behalf of the consumer protection groups, they were lobbied "heavily by big market players." Mobile operators have strongly rebuffed the commission's initiative, arguing that the regulation would harm the mobile services markets and dubbing Ms Reding as "populist commissioner."

You might think, that this issue is a minor one, affecting only individual business people and tourists (large international companies have at this moment already reduced tariffs, negotiated individually with groups of mobile phone services providers). And another side of the problem is the injustice done to inhabitants of smaller countries: they run substantially more risk of crossing their borders and being charged fancy rates. Anyhow:

According to a commission study, excessively high international mobile roaming charges currently affect at least 147 million EU citizens - 37 million tourists and 110 million business customers.

Not being inclined to discuss the heart of the matter (for reasons mentioned before), the ministers discussed the problem under an easier viewpoint:

Which solution less bureaucratic?

For, as you'll understand, that approach offers an opportunity to join the eternal scapegoating tactics. EC = "bureaucracy", worse: "Brussels bureaucracy"! So, why not take a ... "populist" tour, and be severe about "bureaucracy"?

The main point of division among the member states was whether to introduce price caps on both wholesale and retail roaming fees straight away and whether to give the mobile companies another chance to cut charges without EU regulation. Most member states supported London and Paris in suggesting that the EU's new legislation should initially cover only wholesale fees that one operator charges another within the bloc.Under the proposal, only those operators who would refrain from voluntarily cutting the roaming rates below an agreed ceiling within six months would then have to face EU cap retail prices.

Do you understand? Let me tell you how I read this.

Capping only the wholesale tariffs, i.e.: the rates the companies charge each other for transfrontier connections, would not change a iota to the exploitation of the consumer. Now, the companies are pumping money around, paying each other high wholesale tariffs, thus receiving much money from abroad as well as paying much money to, the foreign companies. It is not there, that they make much money. The money they make, comes from the overcharged roamers.
If you leave the detail price setting for roaming, "free", the result will be, that, besides some symbolical cuts (like the ones Vodafone promised for 2007 to its clients), there will be no effect whatsoever on consumer prices. The answer of Commisioner Reding to this, seems correct to me:

The commission by contrast wants to introduce the cap retail tariffs straight away, in a bid to ensure that lower wholesale rates have a positive direct affect for European consumers. On this particular issue, Brussels has the support of Germany, Estonia, Spain, Ireland, the Netherlands, Italy and Slovenia.

Commissioner Reding said that the states that insist on the six-month "sunrise clause" in fact argue in favour of a further delay of the roaming charges reduction, stressing that Brussels had called for years for voluntary action by mobile operators - with no real progress on their part."

Those who want less red tape and eliminate administrative burdens cannot support the sunrise clause because it would create the opposite," she said.

And, indeed, if more or less bureaucracy and administrative complexity is the "real" issue, then, the proposal of the UK and France is a good example of bureaucratic complexity and lack of transparence. For, who is going to decide (and when?) if, and in what measure, retail prices do not reflect the lower wholesale prices? One would expect, that the same rules and limits will be applicable to all companies. But that is apparently not the intention of the "sunrise" states. Exceptions, transitional pricing, juridical battles, will prevail.

This will occupy 20 to 30 times more bureaucrats during the coming years, than the simple rates-cap will do. And, with previsibly much less effect. I hear the complaints coming once again, from the same people who would have imposed this way of dealing, over too much bureaucracy in Brussels.

Finally, the real and undeniable problem of small states-small networks-much foreign roaming, got some attention at the meeting. But here also, the risk of much bureaucracy, non-transparent arrangements between companies and between states, looms:

Regional roaming-free blocs?
Meanwhile, Latvian minister Ainars Slesers highlighted a regional model between the three Baltic states pointing out that that Latvia, Lithuania and Estonia introduced a rule of no extra charges for incoming calls when people move within the Baltic region. Slovakia's transport minister Lubomir Vazny said that the Visegrad group - along with Poland, the Czech Republic, Hungary - and possibly including Austria - has been also contemplating a similar regional approach." If the EU talks turn out to be too sluggish we could consider this way to push forward the issue," he told EUobserver.

Most people do not get information about negotiations as they are going on on the actual issue. If it were otherwise, a common outcry would produce itself in Europe. For, if the "danger" of rising retail prices for national use would really rise, if the roaming charges would be cut, why can the Baltic states afford themselves that risk, or, even the whole East Central Europe group of countries? It is a prompt proof of the inaneness of that argument.

Conclusion: The European Commission, in the person of Commisioner Reding, are only doing the job they are hired for. A number of European Governments, who hired them in the first place to that end, do not like the consequences of their own free-market choices. Or, let us suppose that they are blackmailed by the indebted mobile phone providers. Anyhow, the charges are being transferred to the consumers, the charges of slower and incomplete liberalisation of the market AND the extra charges of a complicated process that has all the risks of not, or but partially, working.

Particular arrangements between providers and big companies, between governments and companies, between governments amongst themselves, will, if the Commission won't have its way, produce an hitherto unknown amount of non-transparency, clientelism and bureaucracy.

The issue of the mobile phone international roaming rates is crucial, as important as the abolition of euro-euro banking transfer tariffs. It will decide, if Europe is going to be a democratic free market or an authoritarian one.

In short: if Europe will be allowed to have its citizens profit (get justice) from the unification, or if the EU will fall back into autocratic dealings behind the screens.

This issue is serious!