Telefonica Hits Out At EU Roaming Reform Plan

A potential kink in the European Union (EU) plans to reduce mobile roaming charges has emerged after a major European operator said that the proposals were too strict and could reduce competition.

In an European Parliament debate on Tuesday at the Industry Research and Energy Committee hearing, Telefonica, the owner of British operator O2, reportedly made clear its concerns about the EU proposals to reduce roaming charges.

European Proposals

In July, the European Commission proposed that operators must allow users to separate their national and international contracts, but keep their number, by 1 July 2014 in order to access cheaper mobile services when travelling around Europe. Until then, the EU proposal included introducing progressively lower retail price caps on voice and texting services, and proposed a new retail price cap for mobile data services.

The amount operators charge for using each other’s network data services is currently capped at 50 €cents (45p) per megabyte. However, the Commission found that roaming consumers pay an average of €2.23 (£2) per megabyte for data downloads on other mobile groups’ networks and, in some cases, as much as €12 (£10.75). The Commission proposes capping data charges at 90 cents (80p) per 50MB from the 1 July 2012 as the first step.

The proposal aims to introduce more competition and eliminate these ‘outrageous’ prices by giving mobile operators the right to use other operators’ networks in the EU at regulated wholesale prices. It would also open up access for virtual mobile operators, who do not have their own network.

Operator Concerns

In the debate on Tuesday, it was clear that some operators have concerns about the proposals. These centre around the “excessively low” retail caps, which would make it unprofitable for new investors to enter the European mobile sector, and potentially throttle competition in the sector.

This was position taken by Telefonica’s regulatory chief Robert Mourik, according to ZDnet UK.

“Don’t prescribe a structural solution if you don’t think it will work in the first place,” Mourik was quoted as saying.

“When we look at the latest proposals … my impression is you actually think that the structural solution won’t work and you need price caps that are extremely severe. Those are bare-bone prices. Most [smaller operators] won’t be able to make any money or even break even at any stage. Those price caps are not really conducive to attracting new investors,” he reportedly said.

Jacques Bonifay, of Transatel, also warned that setting roaming price caps too low would reduce competition.

Tougher Proposals

It seems that Telefonica is on something of a collision course with certain members of the European Parliament who seem determined to drive through much lower roaming prices.

“The situation is disappointing. The high level of voice, SMS and data roaming prices payable by users is a matter of concern,” said Angelika Niebler, the MEP who will steer the new legislation through Parliament. “Operators have respected price caps set in the current regulation which will expire in June 2012. However, today’s prices are not those that would prevail in fully competitive markets.”

Niebler apparently backs the two-track approach proposed by the European Commission in July 2011, which is to set new caps on retail prices (charged to clients) and wholesale prices (split between operators) as of 1 July 2012 on one hand, and to introduce structural measures to boost competition on the other. However, she has also proposed amendments that would significantly lower the wholesale and retail price caps.