European Union Wants More Mobile Roaming Revenue Cuts

By Gary Kim February 29, 2012

European Union lawmakers voted for steeper cuts to mobile phone roaming charges on Feb. 28, 2012, in a move that could lower the cost of making phone calls when abroad by up to two thirds within two years.

By some estimates such roaming revenue represents seven percent of EU service provider revenue.

The legislature will now have to try to convince the European Commission, the EU's executive arm, and 27 EU governments to approve the lower caps before June, when current roaming regulations expire. The rules might lower inter-EU roaming charges to 0.25 euro ($0.33) per minute by June 2012, from a maximum 0.35 euro in February 2012.

That cap would fall to 0.15 euro in 2014 if the parliament's proposals win the support of EU governments. There also is much sentiment to drive the cost to zero by 2016 or so.

Those sorts of efficiencies and benefits (lower costs, for example) apparently are driving thinking about other ways to reduce friction in EU communications markets.

If you can bear to wade through it, a study by the European Commission suggests there are scores of billions of euros worth of potential benefits if there is more communications competition within the EC community.

The study estimates benefits in the amount of about €110 ($147.99/£93.27) billion a year in new digital business could result if the EC telecom market were to operate as a single “national” market.

Service providers might greet the study with anything from indifference (it is only a study) to concern (what is good for “society” might not be good for particular suppliers). In fact, the study clearly suggests that clearing away “national” obstacles would create more competition and increased economies of scale for telecom operators.

In other words, the more-powerful, well-capitalized firms would beat the smaller, higher-cost suppliers. Some would like that; others would not.

Also, much of the predicted benefit would flow to third party application providers. A bigger internal market also would allow content and applications to be used more widely, across national borders, as well, according to the EC.

But much of that activity would consist of over the top services and apps being used by people who today might not be able to do so. Music, games and video are some of the obvious apps the study suggests would benefit from a rationalized internal market.

The study also suggests there would be benefits from scale in all e-health, e-learning and business-to-business applications and services as well.

The study quantifies the potential annual efficiency gains at a level of 27 billion euros to 55 billion euros. Those benefits would include lower retail prices and higher network investment.

Of course, gains for buyers of communication services simultaneously represent lost revenues for suppliers of those services. Also, it is uncertain whether higher network investment needed to support new services is necessarily a positive for the firms making those investments.

Efficient markets are better for consumers, but worse for some suppliers. One wonders whether many within the EU will ultimately be happy with what results, were such plans to become market realities.

Edited by Rich Steeves

Contributing Editor

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