It is fair to say that Wednesday’s speech by Neelie Kroes, the Vice-President of the European Commission responsible for the Digital Agenda, will not have earned her, or the Commission, a legion of new fans amongst the serried ranks of the region’s mobile operators.
Although, in all fairness, when your speech
comes bearing the title, “A better deal for roaming”, it rather gives the game away in that it suggests that those responsible for roaming (that’s you, MNOs) are not necessarily offering Joe Public an optimal solution in this regard, and that she was going to flag various means by which the balance could be redressed.
Which is precisely what she did, and without mincing her words:
“Customers still get a raw deal when they cross borders. Operators still enjoy outrageous margins, particularly on data downloads. Within a Single Market, there is simply no justification for huge mark-ups, just because you've crossed an invisible internal border that is supposed to have disappeared. And just because customers have little or no choice in the matter.”
And it didn’t end at “raw deal”, “outrageous margins” and “no justification”, because then Ms Kroes spelt out what the Commission was going to do about it. After some reiteration about the limited impact of the measures imposed thus far – that consumers were not benefitting from the sharp reduction in wholesale data roaming prices, and that MNOs were still pricing “close to maximum safeguard levels” – Ms Kroes announced that “we are proposing to introduce profound structural market changes because the time has come to tackle the root cause of the problem, the lack of competition, rather than trying to regulate prices forever.”
Essentially, this will involve opening up the roaming market by allowing MVNOs to offer separate roaming services, under a model whereby the MNOs would be obliged to provide network access to the MVNOs at wholesale prices. In addition, it also included – as an interim measure - a cap on the retail price of roaming data, falling to €0.50 by 2014, by which time Ms Kroes was sanguine that competition would have improved sufficiently for the cap to be withdrawn.
Certainly, there is strong evidence to back up Kroes’ argument. The Body of European Regulators for Electronic Communication (BEREC) found that while the average price of wholesale data for inbound roaming fell by €1.32 ($1.87) (69%) between Q1 2009 and Q3 2009 (in anticipation of the then forthcoming regulatory requirement which required it to be capped at €1 ($1.42) per MB), the retail (unregulated) cost fell by just €0.71 ($1) (20%). In short, the difference between the retail and wholesale price actually rose by €0.61 in that time, and has not ventured far south of that mark since.
While some MNOs have responded in a fairly relaxed manner to the announcement, this is presumably because they had wind of what was imminent. The MNOs’ core revenue streams (voice and data) are already plateauing thanks to limited subscriber growth allied to diminishing ARPU; this in turn is accompanied by a cost base rising sharply primarily due to backhaul costs associated with the surge in consumer data usage. The regulators’ move may not have been unexpected, but that hardly sweetens the pill for the MNOs: it simply means that there must be yet greater urgency on their behalf if they are to avoid the nightmare scenario we recently envisaged – of costs overtaking revenues within a few years.