EC targets structural change to boost roaming

OvumOn July 1, the final planned reduction in the cost of making and receiving calls when roaming within the EU came into force, ahead of the regulation’s expiry in 2012. Shortly afterwards, the EC proposed that the regulation should continue and be extended in scope.
To address the high cost of using data the EC has proposed a retail price cap (from July 2012), and a longer-term structural solution (from July 2014) that will see roaming services separated from a standard contract. This move is set to shake up the market for international roaming and gives new entrants an opportunity to offer pan-European services to the benefit of consumers.
Since 2007 the average cost of making a call while roaming within Europe has fallen by almost 75%, which is very unlikely to have happened in the absence of regulatory intervention. The regulation of data roaming has so far only been levied at the wholesale level through a series of price caps, and a €50 monthly cap to prevent so-called ‘bill shock’.
Despite these arrangements, the price for data remains stubbornly above what consumers pay at home and have become used to.
The problem facing the Commission is that without maintaining a retail price cap for voice and introducing one for data, the market is unlikely to tend towards competition. That matters because the EC has made it a Digital Agenda item to reduce the differential between national and roaming tariffs to zero by 2015. As things stand, it is hard to see how this will be achieved.
Evidence so far suggests that operators have gravitated towards the price cap but not offered prices below these, thus rendering them blunt regulatory instruments. With this in mind, the EC has rightly acknowledged that the only long-term solution to the lack of competition is structural, which should result in prices below the caps. While Wi-Fi was initially touted as a possible structural alternative, we are yet to see providers enter this space.
The EC will continue with retail price caps for voice and will for the first time introduce a retail price cap for data. From July 1 2012 the cap is set to be 90 euro cents per MB falling to 70 euro cents on July 1 2013, and to 50 euro cents by July 1 2014.
Further caps are likely to be introduced until June 30, 2016. These are considered temporary and a safety net until a structural solution becomes fully effective.
What’s on the table attempts to structurally deal with the underlying problem – essentially a lack of competition. As customers, we are currently reliant on how well our host operator has negotiated with partners in the countries we visit. The EC is proposing that operators allow customers to separate roaming services from their contract, allowing them to pre-select a cheaper roaming contract.
The move should see the emergence of pan-European roaming operators competing on price. To achieve this, the EC is mandating wholesale national roaming access to facilitate entry of competitors (in particular MVNOs).
While the rules require approval from the European Council and Parliament, they are unlikely to face any significant hurdles. The cost of using your phone abroad is very close to the key decision makers and is politically an attractive initiative to get behind. Operators have tried to legally challenge the current regulation and failed.
It is not clear whether they will try again, but given the competitive potential of the new structural solution they would do better to focus their efforts on attracting new customers who roam and exploiting the pent-up demand in data that clearly exists.

Original article: EC attempts to structurally change the market for international roaming