The EU Commission has put forward a proposal for continued price regulation of roaming charges (i.e.: when you use your phone or computer abroad) for mobile phone calls, text messages, and data traffic.
The European Parliament will decide on the proposal this autumn, and it is going through the relevant committees right now. On the Commission’s PreLex page you can find the relevant documents, including the proposal itself.
I agree with the Commission that we need to continue to regulate prices for roaming, and I will support it when it comes up in the EU Parliament. I think the suggested price caps for voice and text messaging are quite reasonable.
But when it comes to data roaming, I think we need to put the price caps considerably lower than what the Commission proposes, if it is to have any positive effect.
The Commission proposes price caps for data roaming for both wholesale (what telecom operators may charge each other), and for retail (what they may charge the consumers).
In Article 11 and 12 of the proposed regulation, the Commission proposes wholesale caps of 30, 20 and 10 eurocent per megabyte from 1 July 2012, 2013, and 2014, respectively, and retail caps (excluding VAT) of 90, 70, and 50 eurocent, at the same dates.
When the caps are expressed in megabytes like this, they perhaps look reasonable at first glance. But in actual fact, they are way too high.
”To produce 1 GB of mobile data transfer costs about 1 dollar, and a client with a smartphone uses about half a GB per month,” says the head of R&D at Ericsson, Håkan Eriksson, in an article published last year in Swedish technology journal Ny Teknik (translated).
Note that he is talking about gigabytes, i.e. 1000 megabyte.
This is the relevant unit to use when discussing the data roaming prices, and this is the first amendment I would like to make to the Commission’s proposal. From now on, I think that all prices should be expressed per gigabyte, both in the regulation itself and in the warning messages to consumers that are stipulated by the regulation. This makes it much easier for everybody, including consumers, to see what kind of money we are really talking about.
Reformulated in gigabytes, the Commission is thus proposing wholesale caps of
- 300 euro per gigabyte from 1 July 2012,
- 200 euro from 1 July 2013, and
- 100 euro from 1 July 2014,
and retail caps (excluding VAT) of
- 900 euro per gigabyte from 1 July 2012,
- 700 euro from 1 July 2013, and
- 500 euro from 1 July 2014.
Considering that the production cost for the telecom operators is less than 1 euro per gigabyte, as evidenced by Ericsson’s R&D chief, these caps make little sense.
Not only are they unreasonably high in general, considering the underlying production costs. More importantly, they are meaningless when it comes to opening up the internal market for data roaming. Even three years from now, when the lowest retail cap is planned to go into force, an average user consuming half a GB would still have to pay 250 euro per month to use his smartphone abroad. This far to high to get people to start using their smartphones abroad without thinking about the cost all the time.
I will instead propose in the relevant committee that we should introduce a wholesale cap of
- 10 euro per gigabyte from 1 July 2012,
and retail cap (excluding VAT) of maybe
- 20 euro per gigabyte from 1 July 2012,
This is drastically lower (and faster) than the Commission’s proposal, but it would still leave the telecom operators with a markup on the production cost of more than 1000%.
If there are any (big incumbent) telecom operators out there who feel that they are unable to run their business on only a 1000% markup, then quite frankly they shouldn’t be running a business at all. If this is the case (which of course it isn’t), then they are more than welcome to return their frequency spectrum licences, and let more competent competitors take over instead.
The digital infrastructure is one of the most important enabling factors for economic growth in Europe. The fact that it is impossible today to buy a mobile subscription that lets you use data roaming at a reasonable price wherever you are in the EU is a major obstacle, both to companies who want to develop new applications for smartphones and portable computers, and to business in general.
If European businessmen can’t use their phones and computers as they are used to just because they cross a border, then it is ridiculous to even talk about an internal European market.
This is not about what may or may not be best for the telecom industry as such. It is a big industry, and it is economically important, but it is not the only one. Even if I am confident this regulation will be good for telecom industry as well, because it will open up a whole new market segment, that is not the primary purpose.
This is about creating the best conditions for strong and sustainable growth in all sectors of the European economy. An infrastructure that works across the borders is absolutely necessary to achieve that.
We should regulate as little as possible, but not less.
This is a good principle for legislators and politicians in general. We shouldn’t introduce a lot of unnecessary rules and regulations just because we can. But if we have to, we have to, and in this case we obviously do.
For once, we politicians can do something that is both popular, sensible, and sustainable, delivers results quickly and improves the economy, without even costing the tax-payers any money.
At a time when Europe’s economy needs all the help it can get, this is too good an opportunity to be missed.
Others on the subject: Europeans for Fair Roaming