“Europe finally abolishes mobile phone roaming charges” was an appropriate headline in The Guardian yesterday. For this was the end of a long, and also pretty tortured, journey, and one that tells us quite a lot about the nature of EU decision making. I’m going to try to tell this story chronologically, so bear with me.
The problem phase
As mobile phones became prevalent in the 1990s, each European Union Member State had its own mobile phone companies. Normally each state had 3 or 4, at least one of which was a spin-off from a privatised former monopoly telecommunications operator. While the technology (thanks to the GSM standard) worked fine when someone crossed from one EU Member State to another, the prices to send SMS and to make or receive calls were extortionate. A customer from, say, Germany, could not easily get a SIMcard in, say, Austria, without having a permanent address there, and as there was no cross-border market, and no regulation of prices when roaming, a customer had to either just turn their mobile off at the border, or pay the high roaming charges the mobile firm imposed.
This is clearly an issue with cross border effects within the EU, and the European Commission – as early as 1999 – started to think about what to do about the problem. Back in 2006, when the EU activity in this area really started, there were already 147 million people who roamed – about a third of EU citizens, and at that stage no reduction in roaming charges. Reding used the lack of action by industry as her motivation for acting.
The what-do-we-do phase
Seeing the problem (very high charges for customers who roam, and many who do (albeit many of them infrequently)), the European Commission had to choose what to do. It could have chosen to do nothing, and hope something non-legislative might solve the problem. Or it could choose to act; with Viviane Reding (never one to duck something she thinks might be popular – even though she had to overcome quite some internal pressure) as telecoms Commissioner, that is what happened.
It strikes me that then (as now, actually) the Commission had two options to deal with roaming.
The first, and more radical route, would have been to have blown open mobile phone markets in the European Union, allowing, say, a Portuguese resident to buy a German SIMcard but not need a German address to do so, meaning the roaming problem would have been solved by making it easier to behave like a local when in another EU country. This could then have been followed up with EU wide spectrum auctions to create genuine EU-wide mobile phone companies. Mobile phone firms that had invested in 2G and then 3G networks, nationally, and Member States who had done nicely out of spectrum auctions, both resisted this approach.
The second route, which was the one the Commission chose, was less radical, and tried to deal with the high cost of roaming alone, while leaving the rest of the structure of mobile phone markets largely untouched. So you still need to have a mobile phone SIMcard from the country where you live, most SIMcards still expire if not regularly used, and mobile phone contracts are still largely sold on the basis of what they offer nationally. The Commission – by essentially imposing a price cap first of all, and now moving to a sort of outright ban – basically acknowledged that mobile phone markets were largely national and just tried to do something about the cross-border impact this had. This whole thing – contrary to what Stuart Maclennan tries to argue – is not about creating a single European mobile phone market. Take a look at – for example – 4G data use across the EU and you can see we’re a long way away from having similar mobile markets in each EU state, and mobile use and market competitiveness does not simply correlate with the wealth of a country.
[UPDATE: 28.10.2015, 1830 – it has been pointed out to me by journalist Alexandros Koronakis that the European Commission was wondering whether to launch a competition case against mobile firms, as Alexandros’s article explains here. So was the decision to drop the case basically motivated by mobile phone operators conceding to the elimination of roaming charges, rather than potentially being exposed to more competition through a case? And the irony of course is then Kroes became digital Commissioner and took over from Reding to push for further price caps!]
Anyway, back in 2006/7, the Commission’s initial way forward was itself a compromise – the mobile phone firms (who lobbied like hell) got to keep their largely national markets, and their largely national structure, and EU law would impose a price cap to deal with just the roaming issue.
The path dependency phase
Once an approach has been agreed on – especially this having been a sort of compromise in itself as explained above – political actors start working from the new reality. The principle that the EU can impose limits on roaming charges sets the terms of the debate, and hence the discussion moves on to practical matters – how much should the charges be cut? Calls? SMS? Data? How quickly should the changes happen? The 2007 Regulation, and the 2009 review explained here set out the path until 2012 for all of the first round of changes. Having reduced charges to some extent, the debate then moves on to whether the EU ought to go further or not – to an outright ban on roaming charges or not (the stage we have more or less reached).
The market reacts stage
Knowing the writing is on the wall, some operators then choose to get ahead of the game, and lower prices anyway before they have to. I recall a conversation with Telefónica’s EU people back in 2007 who were a little sheepish that despite having argued with the Commission for price caps as lenient for the mobile firms as possible, the firm then cut its roaming call charges to a rate lower than the Commission stipulated rate, with the rationale that it could gain customers as a result – thanks to the discussion that the Commission’s initiative had caused. We see the same now in 2015 – with a schedule now in place for roaming to end, some mobile operators are getting ahead of their competitors to be first to reduce charges.
The other things happen phase
Markets change, tech changes, and customer preferences change. So mergers have taken place between mobile phone companies, meaning some of them de-facto are EU-wide operators. Three’s ‘Feel at home‘ system is often cited to me as an example of what the market can do – but Germany isn’t covered by it. These mergers have changed the structure of the market, and have helped, but they have not eliminated the roaming issue completely. Competition, and mergers, helped – but were not enough to make this whole thing happen (contrary to what KIPpers try to claim – plus roaming charges were not dropping before this whole story started, back in 2006).
The importance of mobile data – not really forseeable when this whole debate started – has risen in importance, and hence that (as well as calls and SMS) have been brought into the roaming debate. Also the types of things you do with mobile data – checking maps for example – are also precisely the sorts of things you will need when travelling in another country.
The we’re-tired-of-this phase
This whole thing has been going on so long that people that deal with the EU on an everyday basis are tired of it. We’ve been trying to solve this issue for more or less a decade, but – as explained above – for reasons of market structure, path dependency and techical change – we’re still at it. We’ve also had the Council (where the Member States sit, and where Deutsche Telekom can lobby the German government, France Telecom lobbies the French etc.) delaying the end of roaming, while the European Parliament has been pushing for a tougher timetable. This means we feel we’ve read about the end of roaming loads of times, when actually it’s the same issue just being batted back and forth between the EU’s institutions.
The it’s-finally-done phase
So – after all of that – we have the end of roaming. Or do we, actually? Well, no, not quite. Some small charges can still be levied (see the EP’s news story here), and roaming is subject to fair use policies – so if you use your phone too much in another Member State you could still be hit with a surcharge. So while “EU ends roaming” sounds like a nice news story, I think that’s rather overdoing it. It’s more that roaming – for data, calls and SMS – has been reduced enough to mean most people can do it without getting a nasty shock. Conversely the main critiques (that this will burden people who do not roam, and that this would all have happened anyway if had also all just been left to the market) also do not hold – mobile firms are pretty well protected in the final agreement (in that small charges and fair use policies still apply), and as the history of this story above demonstrates, all this would not have happened without EU action.
I’d personally have liked a more radical outcome here, and a proper EU-wide mobile market, but anyway there you have it – that’s how the EU came to agree to a welcome reduction in roaming charges.