In part 1 I’ve given an overview of the the draft EU legislation on removing roaming charges in 2017. The draft has been quite heavily criticized in a number of online publications. Unfortunately, those articles gave no particular reasons for their attitude other that the proposal does not go far enough as there should be no roaming charges at all anymore no matter who long people are abroad. Yes, it’s mass media so why over complicate things? Anyway, this is not mass media so I thought I’d share with you my personal thoughts.
First of all a disclaimer. I obviously work in this industry so my opinion is likely to be biased. But this blog entry, like all others, are strictly reflecting my own opinion, this is a private blog.
O.k. so here we go. Most responses to the draft I read were along the lines that the end of roaming charges means that anyone should be able to pick up a SIM card in any EU country and be able to use it indefinitely in any other country of the union. That sounds nice but that doesn’t work in practice for a number of reasons:
Let’s first have a look into any national market in Europe and have a look at how network operators compete nationally before expanding our view. By and large there are two approaches to mobile networks: You either try to build a network as cheaply as possible, outsource just about everything you can to far away countries were labor is cheap and pretty much be a hollow network operator. The aim of such ‘network operators’ is to offer mobile contracts and prepaid SIMs as cheaply as possible by making as many compromises as possible on network deployment, quality and speed they can get away with. This approach appeals to a lot of consumers because they don’t want to or can’t spend more than a few euros a month on their mobile subscription. Fair enough, you pay little and you make concessions knowingly or unknowingly.
An entirely different business model is to invest in research and development, do a lot of things in-house and in country, deploy new features, invest in device and network quality control, improve the speed and capacity of your network so you are appealing to people who are able and willing to spend more to get more. I think it is quite obvious that you can’t expect to use the faster and better network with more capacity and better network coverage in a country if you buy a cheaper subscription for a less capable network. I think few would object to this.
It also think it is important that both approaches exist in practice as customers have different needs and it keeps both business models in the sanity range. Cheap networks have to deliver an acceptable service. If not the pain level rises and people will go to other networks even if they have to pay more. On the other side of the equation, it keeps network operators investing in better networks so people see what they get for their extra money. It’s called competition.
So lets go international now. In addition to all of the above I think few would argue that everything is the same everywhere in Europe. I would really like if the standard of living was the same everywhere in the EU, the world and the galaxy as a whole and that prices and income are on the same playing field. This is one of the goals of the EU but were are not there today. So networks in some countries can and have to be built and operated more cheaply for a variety of reasons, not least because people earn less and can spend less in return. Prices can and have to be lower compared to other countries as a result.
So let’s combine the national and international facts and think about what it means for roaming. Completely removing roaming charges would mean that anyone could pick up the cheapest subscription from anywhere in the EU and then use it anywhere in the EU, even in networks that were built with a totally different business model and cost structure. That won’t work economically. And in the day and age of the Internet it’s not necessary to travel to that country with super-cheap subscriptions or prepaid SIMs, they can be ordered via the Internet.
Even in 2017, EU caps on wholesale prices between network operators are still in place. The cap is proposed to be 0.85 cents/MB to stay on the data side of the discussion. That’s quite a lot (€8.50 per Gigabyte) and I would think that this should cover the cost and a margin even of network operators that have heavily invested in their networks to deliver better quality and reach than others. So I think most network operators will not loose money by making a roaming agreement with another network operator in the EU.
On the other hand, some network operators might have made a price calculation for their home country with much lower prices per MB because their networks are built to a lower standard so prices to consumers are lower. Thus paying roaming charges that are higher than what you have to spend to deliver data in your own network ruins your economic model. Obviously, you can’t be forced to accept a roaming offer from another network operator that is too high for you. And you don’t have to because you don’t have to offer roaming with all network operators of all countries. If you can only afford to have a roaming contract with the cheapest network in another country, well then so be it, there’s nothing wrong with that. It would make sense. And if even that is too expensive you could even have no roaming agreement with a network operator in another EU country at all. I think there is no law against that either but your customers might not be happy about that and your competition might not go this way but the network operator can stay with his business model. Or, as another alternative, you could ask the EU to allow you to have a roaming surcharge beyond what would be allowed if the current draft proposal came into effect. So even hollow network operators have quite a number of options.
Some people argue that they can buy a certain good in one country and take it to another country in the EU where it is more expensive to buy for various reasons and that it should be the same for mobile access as well. But as this post has made clear this doesn’t work as it is not the same. It’s not the same because in the case of buying a product in country A, all resources are also located in country A. In case of roaming you buy a product in country A but resources (i.e. the networks) are used in country B.
So from my point of view those are the reasons why it’s not possible to allow roaming without any restrictions for the lowest price that can be found anywhere in the EU. But obviously network operators with a business model of higher tariffs and better networks can offer such an option. Personally I do have a subscription of such a network operator and I can use my minutes, SMS and mobile data bucket anywhere in the EU without any restrictions. But it’s not the cheapest subscription found in the EU, quite far from it.
So does the EU proposal go far enough? Personally, I find the 90 days too little in many cases as I suspect most network operators have a business model that works well with the proposed wholesale charges that network operators are allowed to charge each other for roaming. Also, the option that network operators can require their customers to register in the home network once a month or otherwise be charged extra for roaming to be too strict based on my expectation above. One might argue that competition will kick in and things will sort themselves out if one network operator in a country does this while others don’t. One might also argue that in the past, competition didn’t work at all when it came to roaming which is why the EU had to step in. That’s why I strongly urge the EU body dealing with this to have another look again and see if things can be improved to the benefit of the consumer before this legislation is approved. In any case I would strongly suggest that this is reviewed and adapted on an annual basis with data that has to be provided by network operators.