EU Data Roaming to Become Cheaper

The costs of using mobile data services while travelling within Europe could fall drastically if upcoming proposals from digital agenda commissioner Neelie Kroes become law.

ZDNet UK has learned that European Commission is looking to introduce tough new proposals on data-roaming charges.

ZDNet UK understands the proposals, due to be unveiled on 22 June, will contain a triumvirate of measures combining retail price caps with deeper, structural changes intended to give people greater ability to choose between data-roaming packages. This would make it cheaper for people with smartphones such as the iPhone, or tablets such as the iPad or Xoom, to use the internet on those devices while travelling within the EU on holiday or business.

According to a source familiar with the situation, the proposals would also see retail caps for voice and text-messaging continue to fall, as they have been doing since the Commission addressed those services in 2007. Kroes has repeatedly stated that she wants to see the difference between roaming and domestic prices fall to zero within the EU by 2015, a goal that is crucial to her Digital Agenda and the single European market as a whole.

If adopted by the college of commissioners, then approved by the European Parliament and the Council of the European Union, the new rules would come into force on 1 July, 2012, when the current regulatory regime expires, and apply until 2016.

Under existing rules, operators are limited in the amount they can charge each other to let customers roam between networks — that cap will fall on 1 July, 2011 from €0.80 to €0.50 per megabyte — but there is no cap on the amount an operator can charge its customers.

This is a major reason why out-of-bundle retail prices still cost between £1-£3 per megabyte within Europe. That is less than the £3-£10 charged for those travelling outside the EU, but still represents a significant mark-up on the actual penny-a-megabyte cost of providing data-roaming services.

According to the source, the new retail caps would start out at €0.90 per megabyte, falling to €0.70 in 2013 and €0.50 in 2014. However, the Commission would also force operators to let their customers split off their roaming mobile contracts from their domestic contracts, if they want to do so.

The move would create competition where currently there is none. A major reason prices are so high at the moment is that most people choose their mobile provider based on the prices they get charged in their home country. Once they cross national borders, they have no choice as to who provides their mobile data coverage, and how much they, as the customer, get charged.

The Commission's proposals are intended to let people choose between competitively-priced data-roaming deals. Unlike the workaround of using local SIM cards to avoid high roaming charges, this approach would also let people keep using their existing mobile number.

However, the Commission does not intend to stop there, the source said. A second structural change would oblige operators to give mobile virtual network operators (MVNOs; operators that do not run their own physical network) from other EU countries access to their networks on fair and reasonable terms.
This would mean a UK-based MVNO such as Tesco Mobile, for example, would have the right to demand access to Deutsche Telekom's network in Germany for Tesco Mobile's customers.

The Commission would also impose a cap on the amount Deutsche Telekom could charge Tesco Mobile for this access. Again, this second structural measure is intended to boost competition and provide customers with more choice.

"In recognition of the fact that those measures might take a while to give rise to more competition, the current caps on voice and text messaging would remain and indeed be gradually decreased, and — in view of the fact that there are humongously large profit margins at the moment on data — there would be retail price caps for the first time," the source said.

Nick White, the executive vice president of business telecoms group Intug, told ZDNet UK on Tuesday that the roaming charge "scourge" has "afflicted cross-border trade based on mobile communications".

"It would seem that the Commission's next phase of regulation, if confirmed, should at least make progress towards the goal of aligning roaming rates with domestic rates and improving the prospects for multinational MVNO offers," White said.

The GSM Association (GSMA), which represents mobile operators, declined to comment on the proposals as it said to do so would be speculative.

Telefonica, the company that owns the UK operator O2, said in April it was sure the difference between data-roaming rates and the data rates charged domestically would reach zero by 2015, as Kroes has demanded. However, it claimed this would happen without new regulation — a scenario that the European Commission clearly does not trust to take place.

According to Morgan Stanley analyst Nick Delfas, the eradication of roaming premiums within the EU would not have a "huge impact" on operators.