European Commission regulation covering the region’s data-roaming market is conceptually sound but ultimately out of step with the way roamers actually use data on their smartphones and, even more crucially when it comes to pricing, how smartphones interact with the network.
The EC regulation for wholesale data roaming rates states that operators have to charge each other no more than €0.50 per megabyte of data consumed while travelling in the EU. [The price] is intended to encourage operators to not just charge each other no more than €0.50 per megabyte of EU roaming data but to actually compete with each other below this ceiling so they can offer consumers per-megabyte rates that are lower... And this is in the hope that competition below the €0.50 wholesale megabyte rate will lead more EU mobile users to access the mobile Internet while travelling in the region.
In effect, then, EC regulation guides operators to charge the device – the number of kilobytes it consumes – rather than actual usage; that is, the way people interact with their devices while travelling. On the face of it this sounds fair enough – you pay for what you use –, but the reality is not that straightforward. Many smartphones, in particular those powered by the Android OS, consume data in the background by constantly interacting with the network to pull down data applications they need in order to stay up to date, even when they are not being accessed by the user.
This is much more of a crucial issue when people with these types of smartphones roam than when they are at home, because they are typically allowed to consume much less data while roaming than while in their home markets. The effect of charging the device rather than usage is that smartphone users can unwittingly consume data allowances much faster while abroad, leading to the perception that data roaming is still high. For example, Vodafone UK’s smartphone plans (which start at £26 [€30] a month) include 500MB of data for use in the UK, compared with £2 a day for 25MB while traveling in the EU on its special EC regulation opt-out rate, and £1 per megabyte for up to 5MB, then £5 for every 5MB after that on its standard rate.
Although, within the regulation, operators are free to price data in ways that are more in keeping with the way consumers use the mobile Internet, operators have proved reluctant to step out of the per-kilobyte framework. But until either the Commission or operators themselves better match data-roaming rates to the way people actually use the Internet on their mobile devices while traveling, usage will continue to lag behind its potential, with users turning off their device’s data-roaming capabilities while traveling. Although operators are beginning to reduce the price of using data while abroad, they need to make more focused and aggressive changes to how they price data-roaming services.
Alternative price models
One option would be to offer access to specific applications – with fair-use guidelines, of course – and in less-data-heavy ways while they travel. For instance, operators could offer consumer travelers access to e-mail whereby large-megabyte attachments don’t get pulled from the network by the device; access to social networks without access to video/audio content; access to data-heavy sites, such as YouTube, only for those prepared to pay a premium to do so.
These are just some of the ways operators could encourage mobile data usage while traveling: offer access to specific services, priced in ways commensurate with how much data is being consumed without forcing users to think in terms of kilobytes and megabytes, because it’s patently clear that few people think in these terms. They are essentially meaningless because they’re so intangible, and because they’re so intangible it’s hard to quantify what it will cost people to use something measured by them. As a result, too many people who would be willing to “use data” while abroad switch off the data-roaming capability of their phones for fear of bill shock. It would be much better to offer, for example, one day of Facebook and Twitter access for, say, €3, or one day’s e-mail without attachments for the same. And how about a smartphone application that enables users to easily access these services, on a whim, and keep up to date with how much they’ve spent on them?
Pricing per kilobyte/megabyte is a function of the capabilities of roaming-charging technology – a few years ago. Technology has moved on to enable operators to stimulate demand for data while traveling by offering prices that reflect the way consumers think about their devices and reflect their billing expectations, rather than the capabilities of the technology.
Determining how to charge for mobile data is an important issue for the industry, because if operators can encourage their customers to not switch off the data-roaming capability of their devices when they travel in the EU, they will be able to at least partially offset the decline in mobile roaming revenues brought about by the EC’s policy of …narrowing the gap between voice calls and roaming calls made while traveling in the region.
It’s up to operators, not regulators, to take the lead and move in step with the way their customers think about and use their devices, especially smartphones.
Paul Lambert is editor of Global Mobile and the Mobile Operator Intelligence Centre.