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

Viviane Redings drive for more competitive mobile service tariffs
continues following last years 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
Commissioners 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!

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