Regulators at war over roaming charges

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The Independent Online

The regulatory push to lower the price of using mobile phones abroad has taken another twist after a group of European national telecoms regulators opposed the European Commission's proposals.

Separately, the Spanish operator Telefonica and its UK subsidiary O2 slashed roaming tariffs and abolished the charge levied to receive a call while abroad for frequent travellers.

The European Regulators Group (ERG) comprises the national telecoms regulators of the 25 EU member states and advises the European Commission. It agrees that regulation is required to bring down roaming charges but disagreed that action as drastic as that proposed this week by the European telecoms commissioner, Viviane Reding, is necessary.

Ms Reding wants roaming charges to be subject to regulation at the retail and wholesale level. This means price caps would be placed on what a consumer has to pay and what the networks charge each other to connect calls. Ms Reding also proposes harmonising roaming rates with call charges for customers in their home country.

The ERG said yesterday it has "significant reservations" about such action, arguing regulation at the retail level could have "unexpected consequences". It added that harmonising a user's domestic and international tariffs is unlikely to significantly reduce retail prices.

The ERG prefers a single Europe-wide price cap on wholesale rates, suggesting network operators charge each other about 30 euro cents (20p) to connect a call from an international rival. The current average wholesale charge is about 75 cents. Vodafone, the largest European mobile network, wants to reduce wholesale charges to no more than 45 cents in reciprocal agreements with other operators.

Rather than forcing operators to pass the lower wholesale charges on to consumers through regulation, the ERG suggested the establishment of an index of international roaming charges to monitor whether wholesale regulation has had the desired effect on retail prices. Regulatory action should be taken only if that has not happened, it said.

O2 and Telefonica are the latest operators to slash roaming charges. The sister companies have established a two-tier approach to roaming. Travellers will be charged a flat rate of between 50 cents and 59 cents a minute in all European territories, regardless of network.

That is a cut of more than 60 per cent compared with current rates. From 1 July, British travellers will be charged 35p a minute to use their phone overseas if they opt into the scheme.

How mobile firms ring up big numbers

What is roaming?

Roaming is when a mobile phone customer uses a handset abroad. That could be a holidaymaker ringing home to check football scores or staff phoning the office while away on business. Roaming is worth £7bn in revenue a year for mobile phone companies.

Why are charges so high?

Using a mobile phone overseas can result in hefty charges and users also pay to receive calls. Mobile phone companies argue that a call made to or from a travelling customer has to be routed through other networks including fixed-line and satellite providers. That applies even if the call is made between sister networks in different countries. Software is available to connect a call through the cheapest route, but it is still an expensive process and the cost is passed on to the consumer.

What do the regulators want?

Lower costs for consumers or even the abolition of roaming charges. The Commission believes that roaming tariffs should be equivalent to domestic charges.

What could happen?

The risk of imposing draconian regulation is that phone companies could respond by raising domestic tariffs to offset costs. With many big operators slashing roaming charges, the need to force down prices might prove unnecessary. Yet if customers feel more comfortable using phones abroad, it could drive more call volumes among travelling customers.