Beyond Bill Shock

A few weeks ago, The European Commission presented proposals to offer further protection for consumers from huge charges when they use their mobile phone abroad.

The proposals aim to increase competition in the roaming market, by allowing customers to sign up for a cheaper roaming contract, separate from their contract for national mobile services, whilst using the same phone number. They would also give mobile operators (including MVNOs) the right to use other operators networks in other Member States at regulated wholesale prices, and so encourage more operators to compete on the roaming market.

To cover the period until structural measures become fully effective and competition drives retail prices down, the proposal would progressively lower current retail price caps on voice and SMS services, and introduce a new retail price cap for mobile data services. By 1 July 2014, roaming consumers would pay no more than €0.24 cents (£0.21) per minute to make a call (compared to 35 cents now); a maximum 10 cents per minute to receive a call (11 cents); a maximum 10 cents to send a text message; and a maximum 50 cents per MB to download data or browse the internet whilst travelling abroad (charged per KB used). This is the first time the Commission has proposed a retail data roaming cap.

New approach

The proposals show the Commission’s determination to clamp down on the “bill shock” issue which continues to grow, as market smartphone uptake accelerates. Consumers will undoubtedly benefit from the introduction of this new regulation, but they are not the only ones: from the perspective of revenue-generation, operators too could benefit from a renewed roaming approach.

Recent research conducted by MACH and YouGov found that more than one-third (38 per cent) of consumers do not use their mobile phone at all while abroad, with 54 per cent of these identifying the cost of usage as the reason why. Furthermore, operators’ own statistics indicate that more than 40 per cent of travellers switch off their data connection when abroad, preferring to use wi-fi or local SIM alternatives to avoid potential bill shock.

What these findings illustrate is that consumers are significantly under-utilising their mobile devices when outside of their home-zone and consequently, operators are missing out on realising the full revenue potential of roaming. As operators are faced with an increasingly saturated market and declining ARPU, stimulating mobile data roaming on both their own networks, as well as those of their partners, actually presents them with the opportunity to capitalise on a still largely untapped revenue stream.

Customer behaviour

Fundamental to generating revenue from roaming is gaining a more intimate understanding of customer behaviour, and in turn, developing bespoke roaming tariffs that are tailored to complement individual subscribers’ needs and usage patterns. Solutions such as MACH’s Data Roaming Engine enable a granular approach to billing, which gives customers control over costs, facilitating the creation of roaming packages targeted at a particular end-user group.

In this way, operators are able to define data day or hour packs, based on the requirements of the end-user, with additional capabilities allowing users to define the services they use abroad. In practice, this means that business users, for example, can subscribe to an email package, giving them access to their inbox at an economy rate, while additional services such as web surfing would carry a higher cost.

In addition, operators also need to look towards providing greater transparency around the roaming costs themselves. Instead of just lowering the price, they need to seek to ensure that there is a greater level of predictability, simplicity and consistency in their pricing structures, which in turn will help to foster a better understanding and awareness among consumers of the actual cost of the services they are accessing.

International data roaming

This is particularly important in the context of the explosion in domestic mobile data consumption, which has been exacerbated by the rise of smartphones, and more recently, tablet devices. The majority of existing roaming tariffs were originally designed for basic feature phones which do not consume much data. With an ever-growing number of subscribers using their mobile devices for an ever-broader range of activities, from social networking, to shopping, to banking, it is evident that these existing models are incompatible with the new age of international data roaming that such sophisticated devices are now ushering in.

Such changes alone will not necessarily transform the current roaming market for consumers or operators. Indeed, in order to maximise the effectiveness of regulation, its scope needs to be broadened out to incorporate the wider value chain.

The mobile industry has been transformed by the entry of ‘OTT’ (Over the Top) service providers, and this needs to be considered and reflected in the implementation of all new regulation. The development of this more holistic regulatory approach will help to create a more equitable business infrastructure, which should stimulate additional revenue streams, while also supporting and complementing the wider EU digital agenda.

Users want more reasonable and simpler data roaming rates, and greater visibility and control over their roaming packages. Furthermore, the growing prominence of mobile as a platform for an increasing number of day-to-day tasks reinforces the importance of developing tariffs which will allow subscribers to replicate their normal usage habits while outside of their home-zone, without the fear of bill shock.
In an industry which is being infiltrated by an ever-growing number of diverse players, the movement towards more flexible business roaming models, coupled with regulatory change, could provide operators with the strong revenue stream required to maintain competitive advantage in the years to come.

Lokdeep Singh is vice president, technology & innovation at MACH