European Union cuts roaming rates

From June this year wholesale roaming rates are set to be capped across all of the European Union. We look at how this will affect wholesale service and prices.

Wholesale mobile data rates are being capped across the 28 nations of the European Union from June, and then will drop to less than one third of the initial rate in five years.

The rate will be capped at €7.70 per gigabyte in June but by January 2022 the cap will be only €2.50. The caps will come into force after the European Commission struck a provisional deal with the European Parliament. The agreement will bring the European Union a step closer to achieving its plans to end higher charges for using a phone across the EU. 

Last piece of the puzzle

Andrus Ansip, the Commission’s vice president for the digital single market, welcomed the agreement, adding: “This was the last piece of the puzzle. As of 15 June, Europeans will be able to travel in the EU without roaming charges.”

The deal determines what operators will pay each other when a customer uses their network. The full European Parliament – and all EU member states – have to approve the deal. The Commission, the executive body of the 28-member EU, had long promised to enact the policy by June, but it hit a roadblock as member states and the parliament struggled to agree on the new caps. The wholesale rates will be €032 per minute for voice calls and €0.01 per text message.

Ansip said: “We have also made sure that operators can continue competing to provide the most attractive offers to their home markets.”

It is not clear yet what the UK’s position will be on the wholesale caps. The UK voted by a narrow majority to leave the EU in a 2016 referendum, and legislation is now going through the UK Parliament to make a formal leave declaration. 

The UK was one of four countries – the others being Italy, Greece and Spain – that were unhappy with the low wholesale caps that now appear to be going into force. All of these are countries that benefit heavily from tourism. 

Chris Haddock, head of marketing for OpenCloud, said operators will now need to add tangible value to their services to make up for the potential lost revenue from the roaming charges. “EU roaming premiums are on their way out and reducing mobile operators’ revenues with them. This is on top of the fiercely competitive market conditions that have arisen over the last few years that have squeezed the operators’ revenue streams.”

Haddock added: “Internet companies and OTT players like WhatsApp and Facebook have been offering free, value-added services to their customers continuously, providing incremental updates at no extra cost. Operators must replicate this model and put more effort into innovation to increase and strengthen customer loyalty. Adding further value to their communication services could be the differentiator that operators need to win market share and offset the loss of their roaming charges.”

The decision to cap wholesale charges follows December’s approval of a fair usage policy on the retail prices for roaming. That earlier decision mean that consumers or businesses with unlimited data packages will face restrictions on how much data they can use while travelling within the EU. It was a key concern raised by figures within the industry.

This was one of the major sources of disagreement, with member states divided over how the caps should be set. Countries which have higher levels of tourism pushed for higher caps following pressure from their operators. 

The key sticking point

One of the key sticking points over the policy was around wholesale charges for data, with fears among EU members that failure to lower the cap on these charges could lead to some operators refusing to offer roaming, or attempting to recoup lost revenue by increasing prices. 

There was also concern that people would acquire mobile phone accounts in low-cost countries in the EU mainly for use in high-cost member states to get around the new rules.

The final negotiations 

The latest deal on prices is a compromise between the European Parliament, which wanted an initial cap of €4/GB, falling to €1/GB by 2021, and the Council of Ministers – representing government ministers of member states – which wanted to start at €10/GB and cut the rate to €5/GB by 2021.

Slovakia, which held the rotating presidency of the Council of the EU for the last six months of 2016, had suggested the cap should start at €8.50/GB. The final negotiation was done under the presidency of Malta. Ansip thanked the Maltese presidency “and all those involved in achieving this milestone. Their efforts made it happen.”