Falls in roaming rates demonstrate power of competitive forces
15 May 2006
The GSMA believes roaming tariffs will continue to fall as mobile operators respond to moves by competitors
15th May 2006 - London - The downward trend in roaming tariffs is likely to accelerate this year as individual mobile operators respond to price cuts by their competitors, according to the GSM Association (GSMA). The price cuts announced in the past few weeks alone will benefit more than 94 million roamers and will directly impact two-thirds of European roaming calls.
The GSMA, the global trade association for mobile phone operators, believes that competitive forces should be left to determine how much people pay to use their mobiles abroad rather than the European Commission's proposed regulation, which could leave many Europeans worse off. European regulators and members of the European parliament have also raised concerns that the Commission's proposals could have serious unintended consequences.
"Whilst the Commission had intended to fast track this regulation, our analysis indicates that its proposals are unworkable and impractical. There seems little value in pursuing a course of action which could ultimately penalise the majority of mobile users," said Rob Conway, CEO of the GSMA. "The proposed regulation undermines the Commission's vision of simple, seamless communications across the EU and would destabilise a competitive and healthy market."
In a formal response to the Commission's second consultation process, the GSMA says the proposed regulation would lead to either higher domestic tariffs or greater inconvenience for Europeans who wish to continue to make and receive mobile calls outside their home country. The GSMA estimates that implementation of the Commission's home pricing principle* could see operators facing a situation where they are offering outbound roaming services at up to 19% below cost.
In addition, the European Commission's proposal to abolish the charges a roamer pays to receive a call would mean that mobile operators wouldn't be able to recoup the additional costs involved in connecting calls to customers who are roaming, such as international transmission fees and termination charges, and could again expect to make a loss on the provision of this service.
To recover losses resulting from the proposed regulation, the GSMA estimates operators would have to raise domestic prices by more than 7% on tariff plans that continue to allow roaming. As a result, only the small minority of mobile users that make large volumes of roaming calls - primarily business travellers - would benefit, at the expense of those who travel less frequently.
"The European Commission's draconian proposals run the risk of limiting access to roaming and reversing the steady and significant declines in the price of domestic and international voice calls that have occurred over the past decade," added Mr. Conway. "Roaming tariffs are falling rapidly. Competition, not regulation, is the way to deliver lower retail prices."
Without an increase in the price of domestic calls, the GSMA envisages that the direct impact of the Commission's proposals would be to wipe 4.3 billion euros from the European mobile industry's collective revenues and 2.3 billion euros from the industry's profits. In turn, this would threaten investment in new mobile services and could make some base stations in tourist regions, which exist primarily to serve roamers, unviable.
Operators with the lowest domestic rates or operators who are only marginally profitable would be hardest hit by implementation of the European Commission's proposals - some operators could see their profits fall by as much as 20%.
Notes for editors
*The home pricing principle is designed to regulate the retail price of roaming services so they do not exceed the retail price of comparable domestic services.
About the GSM Association
The GSM Association (GSMA) is the global trade association representing more than 690 GSM mobile phone operators across 213 countries of the world. In addition, more than 150 manufacturers and suppliers support the Association's initiatives as key partners The primary goals of the GSMA are to ensure mobile phones and wireless services work globally and are easily accessible, enhancing their value to individual customers and national economies, while creating new business opportunities for operators and their suppliers. The Association's members serve more than 1.7 billion customers - 78% of the world's mobile phone users.
For further information contact:
Mark Smith
GSM Association
Tel. +44 (0)20 7759 2300
Fax. +44 (0)20 7759 2301
Email:press@gsm.org
or
David Pringle
GSM Association
Tel: +44 795 755 6069
Email:dpringle@gsm.org
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