04 October 2006

The Web
Business Today

A Europe-wide call

One currency, one constitution, and now – one international roaming price. Europe, of course.

Brussels’s eurocrats know that people sending and receiving calls are paying too much for their service. And consumers also know the decision to regulate all international roaming charges is questionable: if there is something needed to boost competition, it’s definitely less intervention from the powers that be, the regulators.
The story kicked off mid-summer when the European Commission adopted a regulation to tackle what it termed “excessively high prices” for EU consumers using their mobile phones when abroad. In line with its single European market, Brussels wants consumers to pay the same call rate when roaming in Europe as if they were making a call within their own home country. Now who would disagree with such a move? But what are the operators, whose network and investment consumers rely upon, saying?

In a competitive market like mobile telephony, companies have to be innovative to remain alive and kicking. With just two operators, Malta is not exactly considered to have a competitive market, which means it’s the main players who determine the outcome, rather than the market itself.
The role of the national regulator for telecommunications in each EU member state is to review the national market, determine if there is enough competition and recommend the measures to be taken to ensure that the consumer is given a choice and not abused. Due to its emphasis on the national market, the issue of international roaming has been largely ignored by each of national regulators. So it has been the European Commission to step in and determine a solution to high roaming rates.
Roaming is only one service from a bundle offered by operators, who not only have to sustain their networks but must also pay excessively to maintain the office of their regulators. Overall any industry player expects to make a profit to exist, and have funds for reinvestment.
In Malta we have had one mobile operator for 16 years and the second one for six. Because of this two-party competition we enjoy a full range of services such as two rates for national calls: one rate for calling a number of the other operator and a cheaper rate for calling ‘on net’ – a number on the same network. Voicemail is free. Data services are charged above costs, as are roaming calls. SMS rates are classified to be amongst the lowest in Europe. The regulator sets out what the operators can charge to each other to terminate calls from other operators.
But prices have started to decrease. We are getting lower prices for roaming. Vodafone has a presence in nearly all European countries, and has introduced the passport concept whereby the charges for pre-paid users have gone down by 45% and post-paid users now experience a 30% reduction. Further deductions have been committed for next year. Another 70% of operators across Europe have announced price reductions. Indeed even Go Mobile has introduced its Travel and Talk package with more transparent pricing for its customers using their mobile phone abroad. The industry itself, which is after all the mobile competitors, has set up a website where consumers can compare the prices. What is needed next is a Europe-wide index to ensure that price reductions can be compared to a fixed value.
The Commission has ignored all these positive steps and wants to continue with its own regulations, which means more rules rather than prices being determined by the forces of competition.
It ignores the reductions carried out this year and others planned for 2007. It ignores the existing competition between operators, and it reverses the trend that prices are set by a free market. That’s why operators think the Commission to be intrusive and arbitrary.
Mobile telephony is regulated by an industry-specific regulator and competition law. The regulator is there to protect consumers from abusive dominant operators and to protect the industry from arbitrary intervention by governments.
Since a 3% excise charge was introduced, mobile operators have found no backing from the regulator for their stand against the new charge – at the end of the day, it’s the consumer that is bearing the brunt with a new consumption tax.
Now the Commission’s decision to fix the price for calls and limit the retail margins for operators have placed innovative pricing schemes such as Travel and Talk and Vodafone Passport as illegal. Popular products that have been developed after extensive research will no longer exist if the regulation goes through. The present pricing structure of products having a fixed rate for connection, rather than the variable local call rate for every minute, is prohibited. A two-part charge will be regulated by a restrictive price cap. To give an example: even if an operator decides to offer a pricing structure for roaming with one price for the first minute and a free rate for subsequent minutes, this will not be in line with the Commission’s regulation as it exceeds the price cap in the first minute.
Such a regulation is absurd when it will be the consumer who pays the price. Any price control will thwart innovative pricing for consumers. We will have an EU benchmark rate for costs that ignores the peculiarities of each market. The wages in Malta give a different purchasing power value than the wage given to the same trade of the worker in say Germany.
Roaming is one of the services given by mobile operators to their customers. Separating this from other services is not correct. Going further in not allowing a different customer segment like a holidaymaker enjoying a different rate than a businessman is not in the interest of the consumer.
Regulating roaming call rates ignores the principle of using regulation as a last resort, a return to the age of reliance on authorities and politicians with prices and services determined by bureaucrats, as against customers. It is true that roaming prices were extremely high in the past. But now coming in so heavily is like attempting to solve yesterday’s ills by creating more problems in the future. The retail prices affect the customer. Let the customer determine if a service is priced wrongly.

Business Today is published weekly on Wednesdays.
Website is updated weekly on Thursdays
Copyright © MediaToday., Malta
Managing Editor - Saviour Balzan
Editor: Kurt Sansone
Business Today, MediaToday, Vjal ir-Rihan, San Gwann
Tel: (356) 2138 2741 | Fax: (356) 2138 5075 | E-mail