Mobile operators braced for Brussels regulation over data and text charges

Sarah Arnott
Wednesday 18 June 2008 00:00

Britain's mobile phone giants are baulking at the likelihood of a major pricing shake-up planned by Viviane Reding, the European telecoms commissioner.

The EU's network operators have until 1 July to make "credible reductions" in their prices for sending text messages and downloading data on mobile phones within the bloc, or face regulation. The issue is not just the retail price set by the networks, but also the wholesale prices they charge each other for routing calls across national boundaries.

But while almost all UK suppliers have cut, or plan to cut, data charges, there is less progress on text messages, as the operators wait for what is seen as unavoidable regulatory intervention.

"The view with SMS is that regulation will happen anyway so we might as well just wait," said a source at a major UK network operator.

Data roaming is not Ms Reding's first contretemps with the industry. Regulations introduced last year brought voice roaming charges down by some 60 per cent, which may have been a public relations coup for the commissioner, but it left a sour taste in the mouths of the operators.

"There was threatening language over voice roaming, so the industry brought prices down and then the commissioner regulated anyway – so the threat now is not that helpful because it is just interpreted as politicking," according to a source at another operator.

"The first time around the industry felt hijacked so it may be less willing to move quickly this time."

Data roaming charges are a skirmish compared with the real battle that is brewing, both nationally and Europe-wide, over termination rates. Under the current model, operators charge each other to terminate calls – so if a customer on one network calls someone on another, the receiving network levies a fee. BT pays around £1bn a year to the networks for calls from landlines to mobile phones, and around £1.5bn washes between the mobile players.

BT and 3, the UK's smallest operator, have a case with the Competition Commission alleging that the practice, which made sense for a nascent industry requiring massive capital investments, is now obsolete.

Ms Reding is also looking at the issue, and has stated publicly that she wants to bring the rates down by as much as 70 per cent in order to lower the floor for retail pricing. Official guidance to individual regulators on the issue will be issued early next month.

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