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European Union Approves Cutting Cell Phone Roaming Fees

AP
Wednesday, 23 May 2007 | 9:46 AM ET

Cell phone users in the European Union could enjoy cheaper rates for calls made and received abroad as early as August, after EU lawmakers endorsed a deal Wednesday to cap mobile phone roaming fees in the 27-nation bloc.

The landmark measure, which is all but certain to be backed by EU telecommunications ministers as well next month, should become binding on June 29, said German Economy Minister Joachim Wuermeling, whose country holds the rotating EU presidency.

Operators will then have one month to offer customers a new pricing structure with considerably cheaper roaming rates - the extra charges added to the cost of a cell phone call made or received abroad. Cell phone users will have another two months to choose whether they want to go with the cheaper roaming or stick with their existing service contracts. After that, they will be put on the new tariff automatically.

EU Telecommunications Commissioner Viviane Redding said this means proactive customers would be able to benefit from the capped rates in August.

"This is putting an end to the saga of excessive roaming charges. The regulation will protect the vast majority of ordinary customers who up to now have been heavily overcharged when traveling abroad," she said before the vote in the European Parliament.

Currently, a Maltese calling home from Latvia can end up paying as much as 11.21 euros ($15.19) for a four-minute conversation. Under the new rules, the retail roaming cap will be set at 0.49 euros ($0.66) per minute for making a call when abroad and 0.24 euros ($0.33) per minute for receiving one, plus VAT.

The price ceilings would drop further, to 0.43 euros ($0.58) for making calls abroad and 0.19 euros ($0.26) for receiving them, by 2009. The regulation will then lapse automatically, unless the EU decides to extend it.

"I hope very much this won't be necessary," Reding said.

Roaming will be Capped

The wholesale charge that a "visited" operator can levy on the "home" operator for providing roaming will be capped at 0.30 euros ($0.40) a minute.

The European Commission, the bloc's executive arm, has long argued operators are reaping massive, unjustified profits from high roaming charges. The caps will force them to slash the prices they charge consumers for making and receiving calls outside their home markets by up to 70%.

"The compromise we have today is necessary in terms of consumer protection. There was no way around this particular failure of the market," Wuermeling said.

"Crossing the borders was used as leverage to generate higher prices, which was unacceptable. All of us agree the market requires rules and competition must be fair, and that wasn't the case of roaming, because the consumer had no choice between the various offerings," he said.

Reding said the EU would also look into the possibility of regulating the price of mobile phone data, such as text and audiovisual messages, if prices do not fall.

"I hope today is a wake-up call for the operators, also for data roaming, I hope they will bring down the prices so that we don't have to (regulate)," she said.

Mobile operators draw between 10% and 18% of their revenues from international roaming charges, according to a 2006 study by research firm Evalueserve.

Communist-Style

The telecom industry has likened it to a communist-style planned economy regulation and has said it may increase the cost of local calls to make up for the losses of revenue from roaming.

"We're concerned about this measure. It's a very populist approach," said David Pringle, spokesman for the GSM Association of Europe's mobile phone operators.

"These price caps leave very little room for competition, for innovation, they will harm this market. Also, it'll be difficult to implement the changes in the time frame they're envisioning," he said.

Some 150 million cell phone customers in the EU use roaming to make calls outside their home nation every year.

The roaming caps represent one of the most significant pieces of EU regulation in recent years. The legislative procedure in the European Parliament has taken just several months, much less than usual. Some EU laws are debated for years.

"It is very rare to bring about an agreement on legislative action in just 10 months," Reding said.

Roaming Phone Charge Vote
European parliament members are set to vote on mobile phone roaming charges, which could cap the amount charged for international calls. David Pringle, Spokesman at GSM Association, has analysis with CNBC's Geoff Cutmore.

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