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EC to outline slash in roaming rate
To combat "bill shock"

By Reuters

Published: Tuesday 15 July 2008

The cost of sending a text message when mobile-phone users are outside their home state in the European Union will drop 70 per cent under new plans, an EU source said.

EU telecoms commissioner Viviane Reding will outline plans today that include extending price caps on roamed voice calls for another three years, the source added.

A formal legislative proposal will be made in the autumn and could come into force by the summer of 2009.

As the European summer holiday season gets under way, Reding's proposal for extending the legislation to cap the price of texts will also help cut bills landing on doormats back home.

Some 2.5 billion roamed text messages are sent each year.

National telecoms watchdogs in the EU say the average retail price of sending a text when roaming in the bloc is 29 euro cents and a retail 'eurotariff' of 11 to 15 cents would allow for full recovery of costs and give operators a reasonable return.

Reding gave operators a retail target of 12 cents per text but a study for the Danish government recommended 4.2 cents. The retail cap would be around the 12 cents level and a wholesale cap probably between four and eight cents, a Commission source said.

In data, operators will get more time over the summer to cut prices further otherwise caps may be included in the autumn proposal, the source said.

Reding will also call for greater transparency in data-roaming tariffs to avoid "bill shock".

The text market is mature but data roaming is still in its infancy. Telecoms regulators and operators have insisted that price caps would not be appropriate.

Mobile-phone industry officials said the price of roamed data and texts was falling fast, while the voice-roaming regulation introduced last year "has given consumers little benefit and stifled market growth".

The measures will need approval from EU governments and the European Parliament to come into force.

Reding warned mobile-phone giants such as O2, Orange, T-Mobile and Vodafone in February that she would propose price caps unless they slashed the cost of roamed texts and data transfer.

Operators say they could not introduce co-ordinated price cuts to similar levels for fear of triggering antitrust probes. Many have cut the price of data roaming and say they offer free texts as part of packages in some cases.

"European mobile operators are improving transparency around data-roaming prices and reducing the likelihood of unexpected bills," a mobile-phone industry official said.

Reding is set to say a three-year extension on roamed voice caps to 2013 is needed as operators have cut prices to just below the ceiling, a sign Reding and telecoms regulators say shows a lack of vigorous competition.

Commission officials have indicated that the cap on making a roamed call could fall from 46 cents this year to 32 cents by 2013.

For a big operator such as Vodafone, texts and data roaming represent about one per cent each of revenues, and Reding's proposals will have a minor impact compared with voice caps.

A senior operator official said: "It makes great headlines in the short term but the consequences won't be seen for some time. It's naive to think companies can keep taking it on the chin."

The biggest hit operators face comes from separate proposals Reding is due to finalise in the autumn to cut by 70 per cent termination fees operators charge each other for handling calls.

This sector is five times the size of roamed services.

Vodafone has said slashing termination fees would inevitably make it more expensive for customers to own a mobile phone as costs are recouped through introducing an effective fee.