Clash of the Titans

Saverio Romeo, Research Analyst with Frost & Sullivan’s ICT Europe practice, looks at the implications of the European Commission’s ongoing efforts to force operators to reduce SMS and data roaming charges within the European Union

Viviane Reding's drive for more competitive mobile service tariffs continues following last year's roaming directive. On 12 June, speaking at the EU Telecoms Council in Luxembourg, the European Commissioner for Information Society and Media made clear her disappointment over SMS and data roaming charges in the EU. Last February, during the GSMA Mobile World Congress in Barcelona, the Commissioner asked European mobile operators to drop their data and SMS roaming prices stating that “the real breakthrough for data roaming will only come when the inter operator tariffs start to fall to a substantial level”.
In April 2008, the GSM Association claimed that EU average SMS roaming tariffs fell by 18%, while average data roaming tariffs fell by 25% between April 2007 and April 2008. This does not appear to have met the Commissioner's expectations.
Currently, the average SMS roaming tariff stands at €0.28, compared to national SMS tariffs ranging from €0.05 to €0.10 cents. This creates a large imbalance across the EU market. Sending an SMS from Naples to Milan (about 950 km apart) is less expensive than sending a message from Milan to Vienna (about 560 km apart).
The Commissioner aims to reduce the gap between SMS roaming and national charges to €0.03 and is very likely to act promptly on this, despite objections from mobile operators. It is not clear whether this approach will be used for data roaming tariffs.
Frost & Sullivan believes that forcing down data roaming charges at this stage in Europe may be somewhat premature. Competition in both Western and Eastern Europe is seeing operators heavily investing in diverse new opportunities related to the mobile Internet. Imposing drastic tariff reductions immediately will hamper the development of innovative and more dynamic services.
The reduction of SMS and data roaming charges is another milestone towards the creation of a standard mobile tariff scheme for the Single European Information Space. The next step could be on interconnection costs. It is likely that the Commissioner has strong intentions to drastically reduce them. This will prove to be a further blow for mobile operators, as interconnection costs represent a substantial part of their revenues. Operators will have the recourse of introducing receiving party charges to recover losses, and this means that European consumers will pay. Issues surrounding end-user education and cost transparency will also have to be addressed.
The wrath among mobile operators towards the European Commission may very well reach greater heights over the coming years. Alas, progress in the European mobile industry may be at stake if drastic measures are taken. Greater effort for collaborative engagement between market players and the EC would perhaps be a much more constructive way forward, in avoiding a clash of the titans!

For more information on European mobile trends, send an e-mail to: joanna.lewandowska@frost.com  with your full name, company name, title, telephone number, e-mail address, city, state and country.