The European Union' s ruling on roaming charges probably had millions of mobile subscribers, especially those travelling frequently across Europe, reeling with excitement. From 2017 onwards, subscribers across EU's 28 member countries will see voice minutes, SMSs and data used abroad being drawn from their mobile packages at home, significantly reducing the charges paid for mobile services consumed abroad.
Similar enthusiasm though is hardly visible across Mobile Operator circles. The ruling, despite being the inevitable end to a series of preceding regulations that saw roaming charges across the region declining since 2007, spells tougher times ahead for the entire industry. It makes commoditization within the telecoms sector a lot of more obvious, and forces Mobile Operators to think that, with such pressure on pricing and the fact that product differentiation (albeit differentiation here referring to extended availability of voice, SMS and data services) can fail miserably in delivering the expected premiums, maybe successful monetization will be a long shot after all.
What the industry will be focusing on in the immediate term however, is the implication of the ruling on the overall pricing of mobile services, specifically data. If Mobile Operators can only charge customers roaming abroad what they charge at home, perhaps by increasing local charges, it will make it easier for them to recover the costs of making those roaming arrangements and providing seamless roaming services for their subscribers. If this happens, a lot of subscribers will be incurring social costs from the action of a small fraction of those who can afford to travel, and who therefore travel frequently and consume a fair amount of voice and data abroad.
Moreover, if subscribers travel from a country where data charges are inherently low, to countries where data charges are much higher - either due to local pricing mechanisms, exchange rates(not applicable in the EU) or cost structures - they will now be consuming a far more expensive product, akin to taking a cab in Auckland or Tokyo. With the new regulation in place, the traveler still pays his lower home rate and will hence be making real savings. The real savings made by the consumer however comes at an opportunity cost for the Mobile Operator of the host country who could have otherwise sold his data at the higher prevailing local rate. This we expect, will lead to many re-agreements between Mobile Operators and roaming intermediaries, such that these costs are fully recovered.
Tariff differentials that arise due to organic factors such as inherent cost structures and economies of scale will hence determine if other regions around the globe will follow in Europe's footsteps in doing away with roaming charges. It is an enticing proposition for many regulators around the globe, and will probably score very high on various social and political agendas with the increasing dependence on mobile data and the rising incidences of bill shocks and ensuing general dissatisfaction over Mobile Operators.
Meanwhile, Mobile Operators in Europe have until the 30th of April next year before interim tariff limits kick in, which will see subscribers paying four time less when roaming within the UE. From that date, voice calls will be capped at 5 euro cents per minute (down from current 19 euro cents retail cap), whereas text messages will cost only an additional 2 euro cents (down from 6 euro cents retail cap today) and data at 5 euro cents per megabyte (20 euro cents retail cap today), according to a statement by the European Union. These charges will be abolished completely in June 2017.
