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15 June 2017
| James Pearce
After years of preparation, debating and consideration, the European Union’s “Roam Like Home” initiative has came into force. But what is the impact on the industry?
After years of preparation, debating and consideration, the European Union’s “Roam Like Home” initiative is set to come into force.
The new roaming regulations, which aim to make roaming free for all users across the EU’s 28 member states, were set out in 2015.
From a consumer level, it aims to cut out “bill shock” – higher bills caused by roaming charges. For telecoms operators, it is expected to become another squeeze on revenues.
GfK technology director Imran Choudhary has said: “The universal impact on all operators could definitely reach the millions in terms of revenue.”
“Roaming generates a lot of turnover and it’ll definitely hit a lot of people within those businesses who are responsible for those areas. Operators may well generate different pricing structures for non-EU roaming to account for the losses.”
Research from financial consultancy firm Oxera estimated the caps could cost UK operators up to £500 million per year, for example.
However, there could be an opportunity, the European Commission claims, driven by increased use of data while abroad. Research from the EC in 2014 found that 94% of European mobile phone owners limit their usage while in another European state in order to avoid cost. This, according to the EC, could translate to as many as 300 million citizens.
If those 300 million people aren’t using data, calls or texts while abroad anyway, this means usage is likely to rise when it is less costly, possibly leading to overspend.
Adrian Baschnonga, global lead telecommunications analyst at EY said: “As the final step in a decade long process, the abolition of roaming surcharges is great news for consumers. The era of ‘bill shock’ for phone users travelling in the EU is drawing to a close.
“However, the prospect of usage caps on unlimited data plans could create some measure of confusion for users. As a result, operators must ensure they communicate clearly with their customers to help build trust in the new system.”
For wholesale, the challenges are slightly different. The wholesale mobile roaming caps will inevitably bring down prices wholesalers can charge their clients, and roaming has traditionally been a huge money spinner.
Ciena claims that unifying the European market could prove beneficial because it will encourage end-users to utilise services more often.
Ciena CTO EMEA Joe Marsella said: "A unified European telecoms market, working from a single pricing approach and similar cost base, is also better placed to encourage end-users to use services more often. Networks will ultimately need to invest in more cost-effective infrastructure in the short term to support the increased use that the abolition of roaming charges will trigger. Yet free-flowing use across the region will replace lost roaming revenue in the medium to long term."
Figures from Juniper Research appears to back this up. Mobile phone operator revenues from mobile data roaming will hit $42 billion by 2018, or 47% of global mobile roaming revenues. This compares to 36% in 2013. Marsella added: "The abolition of roaming charges has a very significant personal benefit for the general public. [Juniper's figures] shows that ending punitive charges will encourage roaming, and more than replace any of the lost revenue."
Some mobile operators have welcomed the change. Dave Dyson, the CEO of CK Hutchison's UK mobile arm, Three, said: "“Three is the global leader in removing unfair international roaming charges and has been since we first introduced the ability to use your phone abroad at no extra cost, back in 2013. Since then we’ve continually added destinations to our offering year on year, not just in the EU but across the world in places such as the USA, Australia and Singapore. We are the only network that has done this proactively for the benefit of our customers and not because the regulators are forcing us to do it and we’re committed to eradicating these excessive charges regardless of Brexit negotiations.
"Our ambition is to ultimately move towards the goal of 100 per cent. So customers can truly enjoy their travels and the freedom of using their phones to stay in touch and share their experiences without any concerns whatsoever.”
Across markets, the impact will vary greatly depending on how many people travel there, how large the market is, and what the typical prices are there.
EY’s Baschnonga added: ““Fair usage policies designed to prevent commercial or consumer abuse of the new rules are unavoidably complex. Although they offer operators some flexibility, monitoring travellers and their phone usage will no doubt be burdensome for operators.
“The fact that mobile prices, service usage and travel patterns vary significantly across European countries means that the impact on operators will also vary. Smaller mobile providers, or those hosting a large number of travellers, may face a greater challenge than their competitors.”
A long running dispute that was carried out in the European Parliament in the build-up to the adoption of the regulations was around wholesale caps. Sources suggested that carriers in countries with huge incoming roaming traffic such as Spain and France wanted higher rates while carriers in the Baltic and eastern European countries argued that removing retail roaming rates – without first lowering wholesale prices – will force them to increase domestic prices.
In April, an informal agreement was struck between the European Parliament and the European Council on wholesale price caps which defines how much telecoms operators can charge each other for using their networks to carry cross-border roaming calls. Wholesale roaming prices indirectly affect consumers’ final bills.
The long-term status of roaming in the UK still hangs in the balance. For now, UK operators have to adopt the roaming caps, with most already offering free roaming packages to customers ahead of the 15 June adoption.
The question arises from last year’s EU Referendum vote, which saw a UK majority vote to leave the EU. The so-called “Brexit” is set to take place in 2019, meaning UK policymakers will no longer be bound by European laws and regulations. It could see UK mobile operators lobby to axe Roam Like Home.
Vittorio Colao, chief executive of Vodafone, said in February that Britons were unlikely to face steep charges after Brexit.
“We treat Switzerland, which is not part of the EU, as part of it so why would we not treat the UK that way?” he said.
Though the roaming charges will come into force on 15 June, the long-term impact on operators is still to be revealed.