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China’s Low Roaming Fees Won’t Be Matched Soon

When Su Xiaoqin, a Chinese translator living in Düsseldorf, calls family and friends back in Shanghai, she does not use the mobile network of her German operator, O2. She pops in the SIM card for China Mobile.

AP

As a result, Ms. Su’s calls home cost as little as 2.86 renminbi, or 44 cents, a minute, a small fraction of what a call using the German SIM card would run. That is because China Mobile , the world’s largest operator, with 617 million customers, recently cut its international roaming rates, following similar cuts by its domestic rivals, China Unicom and China Telecom .

“The word has gotten around that the Chinese operators now have the best rates to China,” Ms. Su said.

While Europeans and Americans traveling abroad still face steep roaming charges, travelers from mainland China can call home for as little as it costs to make a local call in that market.

In part, that reflects the growing global clout of the Chinese mobile phone industry, where the three big operators, with a combined 889 million customers, are able to negotiate less expensive roaming deals for their users with international operators.

As a result, one should not expect the lower roaming prices paid by travelers from the mainland to come soon to consumers in Europe, the United States or other parts of the world. In part, that is because European and U.S. operators do not compete directly with their counterparts in China for mobile customers, so they have little financial incentive to match the lower prices.

David Dyson, the chief executive of Three U.K., a British mobile phone operator owned by Hutchison Whampoa, the Hong Kong company, cited another reason. He said that high roaming prices in Europe, especially for downloading data, reflected the operators’ profit expectations, not the true costs of service.

Mr. Dyson said that smaller operators, especially, could not lower roaming rates because of what it costs them to connect calls using the networks of larger operators, whose rates are driven by those profit demands.

In 2007, the European Union stepped in to limit the price of mobile roaming charges in the 27-nation bloc, but those retail price caps — 35 euro cents, or 50 U.S. cents, a minute for making a call — are higher than those paid by consumers from mainland China. In the United States, the level of roaming charges is not regulated by the government but set by American and international operators through private agreements on the costs of using each other’s networks to connect calls.

For travelers from the United States, the roaming charges can still be startlingly high.

In May, Paul O’Brien, the general legal counsel of an international maker of industrial sealants based near Philadelphia, returned home after a business trip to Milan and Rome to a $2,300 roaming bill, which he had incurred in two days of normal calling and surfing.

Mr. O’Brien described his iPhone activity during his Italy trip as moderate — making and receiving calls to the United States through Telecom Italia, and downloading and reading e-mail.

Just two days into what was a four-day trip, his U.S. operator, which he declined to name, shut off his service, citing his company’s policy.

“I was blindsided,” Mr. O’Brien said, adding that he did not know what the limit was that he had exceeded.

Local operators — in Mr. O’Brien’s case, Telecom Italia — tend to reap the most profit from roaming charges, said Deep Basu, the vice president for product strategies and consumer products at Roamware, a software maker in San Jose, California, that helps operators manage roaming traffic. But the U.S. operator, which has more customers than Telecom Italia and thus more clout in negotiating deals on roaming rates, would have received a sizable slice as well.

How China Unicom makes low rates possible

Customers of China Unicom, the country’s No.2 operator after China Mobile, with 182 million mobile users, pay about 2.8 renminbi, or 44 cents, a minute to call China from most countries in Europe, and as little as 1.5 renminbi from the United States.

The operator makes its low rates possible by running a huge phone callback program, called **100 Program, which assigns local land line phone numbers to its mobile customers while they are abroad and then has a company computer in China call them back over less-expensive land lines to complete their long-distance calls.

China Unicom introduced the service in May, effectively cutting its roaming rates as much as 90 percent. Sophia Tso, a spokeswoman for China Unicom in Hong Kong, said the decision to reduce roaming prices drastically had been made to serve the company’s customers, who are among the 100 million Chinese citizens who travel abroad each year.

“Decreasing the price is not merely marketing, it is to meet the user’s needs and to meet business development and the inherent requirement for developing the telecom industry,” Ms. Tso said. She added that despite the price cuts, China Unicom was still covering its costs.

China Unicom’s low international roaming charges, she said, were “able to cover all the cost that is agreed between China Unicom and the international operators.”

Sam Paltridge, a communications analyst in Paris at the Organization for Economic Cooperation and Development, the association of free market democracies, said the availability of inexpensive Chinese roaming prices raised an obvious question: Why can mobile operators in O.E.C.D. countries not negotiate similar rates and offer similar prices?

Daniel Yu, an analyst in Hong Kong at Pyramid Research, said American and European operators, largely protected from outside competitors, had no incentive to reduce their roaming profits.

“I don’t think it will do much damage in Europe,” Mr. Yu said, referring to the Chinese price cuts. “E.U. operators can adopt the same technique, but with the E.U. commission continuing to reduce roaming rates across the Continent, the incentive to provide the service will be minimized.”

Mr. Dyson, the Three U.K. chief, has urged the European Commission, which is considering a proposal to impose the first retail roaming caps on mobile data, instead to cut the existing wholesale price cap, which limits the prices that operators can charge each other, from 50 euro cents to just 3 euro cents per megabyte. The commission is considering imposing a retail data roaming cap, which would limit what consumers pay, of 90 euro cents per megabyte starting July 1.

But that cap would still make the cost of using roaming data 100 times as much as downloading data in a home market, Mr. Dyson said.

“High wholesale data rates are the problem,” he said.

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