Operators should be more open about roaming charges - report

March 28, 2006

European Commission's plan to reduce mobile roaming charges is undoubtedly a positive step for the consumer, but generally mobile operators will not be happy about the news. Deriving between 10-18% of revenues from roaming services, operators will be hardest hit should the European Commission's proposal become legislation.

The recent case of a UK-based Orange user who received a bill of over GBP 750 for using his 3G card overseas highlighted the problem facing customers. It was estimated at 75 times more than the cost for the same amount of data download at home. Roger Steare was unaware of the excessive cost of using his 3G datacard overseas, though he lost his appeal to an adjudication panel. Whilst an extreme example, the volume of complaints over roaming tariffs has prompted the commission to act.

Of course, whilst operators are required to pay pre-agreed levels on behalf of their roaming subscribers to the foreign operator, the home operator will also add on an additional premium for its efforts. The major problems behind the roaming issue are that charges to the end-user are deemed too high and customers are often not aware of the price of calls. Confusing tariffs and disparities between countries have contributed to this. For example, British tourists in Italy are charged 50% more for calls than French tourists. In addition, charges vary so much from country to country and operator to operator that consumers are confused as to how much they will be charged for making a call. All of which is unacceptable to the European Commission, which has the backing of European Telecoms Regulators in EU countries.

If the EU does step in this is likely to have a more serious impact on the level of roaming tariffs than if operators were to act more competitively on the area and advocate a program of self-regulation. The potential impact of political intervention is another worry for operators' profits, which are already threatened with voice revenues in decline and a slower than expected uptake to advanced services offered by 3G.

Moves to reduce roaming charges are long overdue, as consumers have been paying excessively for too long. European operators are expecting the end of inflated and disparate roaming charges, but this must be seen as a call for increased competition in the market, before regulation is imposed. As the premium points that mobile operators can charge extra for are gradually being eroded by competition trying to attract new subscribers and reduce churn, it is only a matter of time before roaming becomes a serious point of competitive advantage.

Visiongain believes that the operator's would actually benefit from being more open about roaming charges. If roaming charges are more transparent and simple, subscribers abroad might actually use the service more frequently, this would potentially offset revenue loss from decreased tariffs. Furthermore, the operator's image with their customers would receive a much-needed boost, and would reduce churn for an operator.

The move by the Commission is a good starting point for solving the roaming problem, from the consumers' perspective. But visiongain believes that operators need to be more proactive in providing a solution to this problem and using it as a competitive advantage rather suffer the political intervention that could further harm voice revenues.