Last week I met with lobbyists from Telekom Austria, on the subject of data roaming. Everybody agrees that today’s roaming charges of around 3000 euro per gigabyte are unreasonable and are hurting the single market.
The Commission wants to introduce a retail price cap of 900 euro per GB from the first of July 2012, combined with a wholesale price cap of 300 euro per GB.
I am instead proposing at retail cap of 20 euro per GB, and a wholesale price cap of 10 euro per GB by the same date. This would bring data roaming surcharges in line with the domestic price for using your smartphone or laptop to access wireless Internet.
When I met with the lobbyists from Telekom Austria, they made clear that they agree with the Commission, and think that a 300 euro per GB wholesale price cap is reasonable. I explained why I think the price cap should be 30 times lower, at 10 euro per GB.
I base my suggestion on the fact that the production cost for 1 GB of mobile data transfer is about 1 euro or less. I have several public sources to back up this estimate of the production cost, which makes a 10 euro per GB wholesale cap more than reasonable.
I promised that I would come back to the lobbyists with references. Here is my reply:
Dear Telekom Austria,
It was a pleasure meeting you in my office in the European Parliament in Strasbourg last week, to discuss the Roaming III Regulation proposed by the Commission, and in particular price caps for data roaming.
As you remember, we also met at the breakfast in the European Parliament in Brussels the week before that, when a representative from your company made a presentation of your views on the regulation of data roaming.
Since your company’s position is shared by all or most of the former state monopoly telecoms that are now the dominating players in their respective home markets, such as Telefónica and Deutsche Telekom, I have published this letter on my blog in addition to sending it to you.
On both occasions we met, you made clear that you support the Commission’s proposal to set the price caps at 900 euro per GB retail for consumers, and 300 euro per GB wholesale between telecom operators from July 1, 2012.
When we met, I promised to come back to you with references showing that the production cost for 1 GB of mobile data transfer is less than 1 euro, which would make a wholesale cap of 10 euro per GB more reasonable.
Here are the references I promised (with emphasis added by me):
- Ericsson: The head of R&D at Ericsson, Håkan Eriksson, in an article published in August, 2010 in Swedish technology journal Ny Teknik:
”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”
- Nokia Siemens: White paper Mobile broadband with HSPA and LTE – capacity and cost aspects (May 2010), page 8:
”The cost of delivering a GB of data is highly dependent on the network utilization. If total data use is high, either due to a high number of subscribers or to high use per subscriber, the cost per GB can be below 1 EUR. Figure 8 shows that a cost of less than 1 EUR can be obtained with 40% mobile broadband penetration and 2 GB/sub/month.”
- Plum Consulting: The study The open internet – a platform for growth(October 2011), page 19:
”Ericsson, Nokia Siemens Networks and “3” in the UK have published estimates of the costs of carrying additional traffic on mobile networks (considered in Appendix B). Forward-looking estimates which take account of the transition to LTE, additional spectrum and traffic and subscriber growth (which improves overall network utilisation) put the cost to the mobile network operators at under €1 per GB. WiFi and femtocells may also offer low cost options in terms of traffic offload.
Mobile network incremental data traffic costs are therefore substantially greater than those for fixed networks, but well below existing smartphone data tariffs of around €10 per GB. Data traffic growth not only appears profitable, but may contribute to lower average costs per GB carried.”
- Swedish National Regulating Authority PTS (Post- och Telestyrelsen) has published a very comprehensive overview of the Swedish telecom market in 2010 (in Swedish). On page 35 they say that the total revenues for mobile data transfer in Sweden in 2010 were 4.2 billion SEK, and on page 27 they say that the total volume of mobile data transfer was 53,100 TB, i.e.: 53.1 million GB. Dividing these two numbers gives an average income for the Swedish mobile operators of 80 SEK per GB, which is about 9 euro per GB.
I hope these references are helpful to you in understanding why I think that 20 euro per GB retail, and 10 euro per GB wholesale, would be quite reasonable price caps from July 1, 2012.
I repeat the link to my earlier blog post Proposing a 10 Euro Per GB Cap On Data Roaming for your convenience.
I look forward to your comments in due course.
Christian Engström, MEP