SIM Cards - CC / Flickr
SIM Cards - CC / Flickr

I have respect for the UK blog Political Betting – I never bet on anything, but I like Mike Smithson’s rigourous analysis of odds. However when it comes to anything to do with the European Union reason and rigour seem to go out of the window. Take his recent rant entitled “Why’s the EU soft on the data roaming racket?”, a post that ends with an appeal to Vince Cable to make the EU get tough on the fact that 3G data is capped at €1 / Mb when roaming, but costs one hundredth of that price when at home.

Don’t get me wrong – Smithson’s point that roaming charges are too high is all too true. I spend so much time on the road that I rely heavily on 3G data and have all sorts of tricks and a variety of SIM Cards to allow me to get online where I need to.

But – as I have emphasised on this blog before – price caps of the sort imposed by the EU are a non-market friendly, partial solution to a problem that would not even exist if the market for 3G data (and by extension the mobile phone market in general) functioned properly.

The essential problem is that the market but not the technology for 3G and mobile phones remain resolutely national. Each country in the EU has between 2 and 4 mobile operators, each of which has made massive investments in infrastructure, and yet face reasonably competitive national markets. Virtual operators that piggyback on the networks of the main players make things tougher.

But which operators actually compete on their roaming prices – their prices outside their home markets? None of them, not with any determination anyway. Because very, very few consumers are ever going to decide whether to opt for one network rather than another on the basis of the cost of a couple of weeks spent abroad. The incentive is just not there. Mike – rant though you do – will roaming prices make or break the decision about your next mobile phone contract? I doubt it.

The situation may be different for companies that have hundreds of workers operating internationally where data flat rates abroad will surely apply, but having never been in such a situation I cannot know.

So what could happen? The European Commission could propose ever stricter roaming charges, bringing the costs for data or calls down to a rate that was perhaps double the rate nationally – but if the Commission proposed something like that you bet Vodafone and 02 would come crying to Vince Cable with considerably more ferocity than Smithson himself can do – and with predictable industry rather than consumer friendly results.

Lest we forget, when call charges were first capped the Commissioner responsible at the time – Viviane Reding – wanted tougher caps and the Member States were more lenient to the operators.

Alternatively – and really radically – the European Commission could bring forward legislation to create a truly Europe wide phone and mobile data market. Just as the EU has a .eu domain name ending, so the EU could create a Europe wide international dialling code for phones – +89 or something like that. Calls made to a +89 number would be the cost of long distance national calls from whatever member state, and calls from a +89 number to a member state line would be costlier than a regular long distance call, but not exorbitant. 3G data for SIM Cards associated with such numbers would then be at a flat rate in all EU member states, once more with a price premium. Essentially the Commission could bring forward legislation to create a proper EU wide market, and allow companies to operate at a pan-European level, and impose rules for access to networks.

OK, this is all a bit pie in the sky you may think, but what’s the alternative? Ever more draconian price caps? Hell, it’s communist regimes that are known to impose those, and here’s Mike Smithson, a Liberal Democrat, calling on Vince Cable, a Liberal Democrat, to get the EU to enact them. I know the coalition has turned a lot upside down in British politics… but really?

So the next time you wince at your mobile bill after some time spent outside your home country think about incentives, think about market failure, and think about pan-European solutions. And just maybe be a little thankful that the inadequate EU price caps in place just now have at least lessened the pain a little.

8 Comments

  1. I don’t understand carriers. They would rather make X euros by ripping off Y people, than make X * 100 by charging Y * 1000 people affordable prices. It’s really strange.

  2. Kallisti

    I must have missed this post previously.. But as Andy is touching on the only real way to create a European market is handing out (by setting requirements, selling or auctioning) EU-wide frequency rights. We already have a number of operator that are operating in several or many countries but they are still working the markets as national ones. Even when the same company own the infrastructure in two countries they will sometimes charge roaming fees. Union-wide operators, either by massive investment or strategic alliances, with clear restrictions that there will be no international roaming within the EU is the only way forward to create a single market. Then your area code comes in! 🙂

  3. An in addition, Belgian competition authorities should start to think why in Belgium mobile calling prices (including for mobile internet) are about twice (or sometimes 5-10 times) as high as in neighbouring countries (or similar-sized countries) like Austria.

  4. robert

    Essentially, the EU is directly setting prices for services which is quite a significant and drastic interference with the market – so it’s no wonder that they have gone about this with caution and only set a rough and indicative cap on rates.

    It’s not to say they shouldn’t go further but such direct market interaction must be done carefully and preferably in stages. Hopefully this stage will ‘nudge’ companies into fixing the problem themselves.

  5. There might be an alternative solution: mobile network providers could refuse to compete at the European level and maintain the status quo. Roaming charges really frustrate European travellers for the next 5 years. Then, high-speed, low-cost wi-fi or similar technology gradually spreads out across the continent – allowing users to make free VoIP calls from anywhere to anywhere. The network providers are all bought up by ISPs.

  6. An “EU” country-code? Might be a good idea anyway, but it won’t work for roaming.

    Roaming prices are basically set by the network that your handset connects to. Unless your new EU network builds networks (meaning all those cell towers, antennae, fibre backlinks etc) all over the EU, which would cost many, many billions, then its subscribers will be roaming on the national networks. And the national networks will be charging roaming rates to the EU carrier.

    There’s no way around it, except by regulation (the EU is going down this path anyway), by getting local SIMs when you travel (fine, except for issues such as credit expiry, poor rates etc), or use another substitute.

  7. More or less what I do… I have a MiFi and 3 SIM cards for it – for UK, Germany and Belgium – and I will acquire more in the coming months.

  8. Agree, pretty much, I thought Mike’s post a bit weird as it obviously hadn’t thought things through.

    Friend of mine, Cambridge resident German citizen, is visiting his parent back home, so just bought a pay as you go dongle for use over there. I have a cheap dongle contract for the UK (because it was nearly as cheap over 2 years as buying the laptop would’ve been straight up), but if I went abroad I’d look into getting something local.

    I think the crucial thing is I’d look into getting something local and make sure 3 knew I was doing so or did so, possible send them the receipt or something. I’d happily pay them a bit more for less hassle, but not that much more.

    Interesting idea though.

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