The Fall Of The Roaming Empire

EU mobile operators are currently smarting from the EU’s agreement to cap the rates charged for roaming in the EU. Certainly Viviane Reding, the commissioner behind the price cap, seems to revel in bashing industry and is uncompromising in tone and approach. But many of the mobile industry’s counter-arguments were disingenuous. Nobody doubts or denies that these operators make a lot of money from charging for roaming. In fact, the threat being used by operators is that they will have to increase other charges to compensate. What does this tell us? Well, it tells us in pretty straightforward terms that some calls – roaming calls – are being charged at excessive rates in order to subsidise other kinds of calls. These other kinds of calls – local and national standard rate calls – are the ones that customers look at most closely when choosing a telco, but are also important to strategic objectives like fixed-line substitution. I know this is no simple cartel that has driven up the prices of roaming. If anything, the problem here is the usual one in telcos: operators try to squeeze every penny out of other operators when they do not have to suffer the unhappiness of the end customer who ultimately pays. But the overall tendency to favour local and national call rates at the expense of roaming does create an unfair competitive burden on the fixed-line operators that the mobile carriers now openly compete with. And if substitution of mobile for fixed is successful, it could mean fixed-line providers being driven out of business, leading to less competition and increased prices for customers in the long-run. So whilst the EU has been fairly heavy-handed in how it has targeted mobile providers, the best argument that the mobile players can come up is not very persuasive: intervention could lead to more balanced pricing that more accurately reflects the real cost of providing a service. For the eurocrats, attacking the mobile players is an easy way to increase their popularity. Regulating against straight bananas and writing long constitutions has left the European citizen cynical about the purpose of the EU. It is a bad sign for the mobile industry that in a confrontation with the EU over prices, the typical European supports the eurocrats and thinks Viviane Reding is doing a good job.

Perhaps I should be more charitable to the mobile operators who have created such a marvellous infrastructure for working together. They have truly created a new communications empire. By working collaboratively, they have benefitted the world. But of course, that supposes they do work collaboratively. Roaming is underpinned by the bilateral agreements between operators. But the technical and business models for roaming are so well established now, and the profits so clear, I find it surprising that there are still so many more bilateral agreements yet to be reached. Okay, there are diminishing returns in reaching more roaming agreements with more operators, but in the end companies make money for providing a service, not for failing to provide one. The costs of setting-up a new roaming agreement are largely one-off, whilst the revenues will persist indefinitely. This means it should be econmically rational to aim for roaming agreements with every foreign network in the world. Perhaps operators are wary of offering roaming if they lack the resources to test handsets actually work abroad. I can understand that providers are wary of a negative customer reaction if someone takes a handset abroad only to find it does not work. But I was disappointed with my own carrier’s seeming solution to the problem: if not sure, just say the handset does not work for roaming. I am in Japan at the moment, and knowing a thing or two about technology, I was pretty confident that my 2100 MHz UMTS phone would work on the Japanese networks. The advice from my service provider was that I was wrong and that it would not. Perplexed, I check the advice on NTT DoCoMo’s website. Their answer was not much more helpful, but at least it was honest; it said my handset might work but they made no guarantees. Why it would not work is beyond my technical understanding. My phone model is also sold in Japan, so there is no obvious reason for obstacles to interoperability. So I took my phone to Japan, and yes, it worked. So if I had listened to the advice of my mobile provider, I would probably have got a local SIM and my provider would have missed out on the revenue. So whatever the mobile operators think of Viviane Reding, perhaps they can take a good look at themselves and find ways of making more money and providing a better service at the same time. If they did that more often, they may even find their popularity rises. Perhaps one day the mobile providers might be more popular than bureaucrats…. but not anytime soon.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.