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European Commission Proposes A Crackdown On Roaming Rates

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Just as the warm weather and vacation season begin to kick off in Europe, the European Commission has beamed a light on one of the most expensive aspects of summer travel: mobile costs. Neelie Kroes, the European Commission vice president for the Digital Agenda (pictured), today laid out a new set of proposals that would put huge caps on the costs of mobile voice, texts and data. The caps are aimed at both the retail level and the point of wholesale, meaning that it would affect prices at both the multinational mobile operators as well as smaller operators that may not be using their own network for services. She also called on new measures to make it easier for consumers to swap one operator for another, without having to resort to changing their SIMs and calling plans to do it.

In a speech delivered in Brussels earlier today, Kroes noted that although there have been some price reductions in roaming in areas like dongle-based mobile broadband, they have not gone far enough. “Roaming prices should be no higher than what people are paying in local markets,” she noted. The aim is to make the difference between local and roaming rates “approach zero” by 2015.

Prices proposed range from capping mobile data at 50 euro cents ($0.72) per megabyte by 2014 at the retail level (currently there are no caps) to making it as low as 10 euro cents/MB ($0.14) for wholesale by 2014 (it’s currently at 50 euro cents). The full list:

Kroes says that she envisons these caps to stay in place until 2016, when market forces should have evened out and the prices will be low through competition.

The other major area that she seeks to change is in the area of SIMs. Currently, as with all GSM-based networks, users have to physically change the SIM cards in their devices in order to change operators. That has meant it is much more difficult for consumers to swap one provider for another when prices prove to be better elsewhere. “Consumers should have choice, [but the] competitive market is lacking,” Kroes noted today.

Her solution sounds a modified version of the so-called “soft SIM” idea put forward by Apple (NSDQ: AAPL) at one point earlier in the year, which was apparently quashed by operators alarmed at the idea of customers hopping of their service at the slightest offer of a lower price elsewhere. Kroes’ SIM idea aims to let “consumers choose an alternative provider for roaming services, irrespective of their national provider”:

“Each time the customer crossed a border, they would automatically switch to their chosen roaming provider, without any further action on their part, while keeping the same number and subscriber identity module (SIM card). This would enhance transparency and allow customers to shop around for the best roaming offers and encourage operators to offer more competitive roaming deals.”

The high price for roaming has been a bee in Kroes’ bonnet for years already. She had previously already enacted some measures to cap these prices — reductions that the operators immediately saw impacting their balance sheets — but this newest proposal, hitting all three areas of voice, text and data, and at both wholesale and retail, are the most drastic proposals for price reductions yet. We can therefore expect to see a lot of teeth-gnashing from the bigger operators.

Meanwhile, the proposed changes are a potential boost to smaller operators that do not own extensive network footprints and therefore need to rely on wholesale deals with other operators for roaming services, even if they will ultimately limit how much those operators might hope to make from those roaming services. As with services in home markets, caps have helped the bigger operators lock out the smaller players from decent roaming deals.

In an emailed statement, Three’s new CEO David Dyson noted that while he welcomed the start of more price cuts, they do not go far enough:

“We support the European Commission’s objective of bringing the cost of roaming data down to domestic levels, but to achieve that the Commission needs to go further than the proposed caps.

Our customers use their smartphones across the UK without fear of cost but must dramatically change the way they use their phones when they go abroad due to high data roaming charges.

High wholesale data rates are the problem, but the proposed caps will still leave these charges equivalent to €100 a gigabyte of data by 2014, a hundred-times greater than the current rate enjoyed today by UK consumers.

If the Commission wants to deliver on its objectives to provide a consistent experience for Europe’s consumers it should focus on driving the wholesale rates down to 3c a megabyte or less.”