Happy consumers, but are mobile operators going to suffer as a result?
The European Union has cut price caps for data downloads across Europe by more than half as of today, taking prices down from Euro 0.45 per megabyte to Euro 0.20 per megabyte. Additionally, the EU intends to cut roaming charges in the EU altogether by the end of 2014.
With downloading data and browsing reduced by 55.5% before VAT, data roaming is now 25 times cheaper in Europe than it was in 2010, the EU stated. From today, before VAT, making a call while in Europe is dropping 21% to Euro 0.19 per minute, from Euro 0.24 per minute previously. Receiving a call is going down by 28.5 % to Euro 0.05 per minute from Euro 0.07 per minute. Also, sending a text message is down 25% to Euro 0.06, from Euro 0.08.
Also as of today, mobile providers in Europe can offer users a specific roaming deal before people travel and, where available, allow users to choose a local mobile provider for data services such as emailing, reading the news online, uploading photos and watching videos online, in the country they are visiting. Users can now compare roaming offers, and benefit from more attractive offers and prices while away.
The EU is working on new rules to eliminate roaming charges altogether, it stated. The Commission's Connected Continent regulation would see the end of roaming charges, as well as a guaranteed open and neutral internet, and better consumer protection for mobile and broadband users.
Vice President of the European Commission, Neelie Kroes, responsible for the Digital Agenda, said in June when the price cut was announced: "This huge drop in data roaming prices will make a big difference to all of us this summer. But it is not enough. Why should we have roaming charges at all in a single market? By the end of this year I hope we see the complete end of roaming charges agreed – the Parliament has done their part, now it is up to Member States to seal the deal!"
However, Mark Windle, head of marketing at OpenCloud, a provider of open, extendable products for the telecoms industry, said the reduced charges in Europe are adding pressure to mobile operators: “EU roaming premiums are on their way out and taking a further 5% of mobile operator’s revenues with them. And this on top of the fiercely competitive market conditions that have arisen over the last few years that have already squeezed the operators’ revenue streams.
“In order to shore-up revenues and to compete effectively in the marketplace, operators need to offer consumers something new, something they value, and something unique to, and owned by, the operator’s brand. Internet brands, such as Google, already take this approach to add value for their users so they keep coming back,” continued Windle.
He added: “Operators must replicate this model and routinely offer customers new services, which will add value and strengthen customer loyalty to their 4G networks. Network and service innovation has been stifled for many years. Due to the deployment of closed, proprietary solutions, operators have become dependent on vendors to deliver technological innovation. The operators need to regain the ability to innovate and leverage it, rather than continue the current path of relying on others to do it for them. It’s actually not that difficult, but it requires a significant change of mind-set. If [mobile operators] want to just become bit-pipe providers, then carry on! If, however, the operators want to continue to be regarded as the gold standard for communication services then they need to start innovating and they need to do it fast.”
The EU has achieved retail price reductions across calls, SMS and data of over 80% since 2007 when it began looking into this area. As a result, data roaming is now up to 91% cheaper compared to 2007, while the volume of the data roaming market has grown by 630% since 2007.
Smart Chimps thinks: This is an incredibly strong move by the EU on behalf of consumers travelling around Europe, and one that many never thought they would see; prices tend to go up, but rarely down, and rarely down by this much! However, as OpenCloud’s Windle points out, the pressure is now on the mobile operators to make up this lost revenue, while they are already being squeezed significantly. Look at the numerous mergers going on amongst operators throughout the region, from Telefónica’s bid to take over and KPN’s E-Plus in Germany, which is potentially the largest telecoms takeover deal to be proposed in the last 10 years, to Hutchinson Whampoa in Ireland that has received European Commission permission for the acquisition of Telefónica Ireland. Tough times ahead for the mobile operators of Europe, especially if roaming charges are eliminated completely.