Feeds

Mobe operators warn of ruin if regulators set roaming charges

'Woe is us', cry hams

Boost IT visibility and business value

The last thing you want when you get back from a holiday abroad is a £200 hike on your cell phone bill, brought about by what are seemingly invisible roaming charges, and usually because the office phoned you, not the other way around. So the battle between the GSMA, representing cellular operators everywhere, and the European Commission, is being keenly watched.

The GSMA put out an opinion this week which is supposed to tell us that putting caps on roaming charges has already failed and the effect of doing it has reduced investment in Europe’s mobile infrastructure. In other words, black is now apparently white, and white is most clearly black.

It claims that the European Commission argument in favor of roaming price caps was that mobile operators make excessive profits and that lower roaming charges would lead to more overseas calls being placed.

It then proceeds to show that the industry’s return on capital employed (ROCE) is just 9 per cent. But since most European operators move their profits around artificially in order to avoid taxes on profits, and since ROCE is a direct function of profit before tax, this is an annoyingly useless as a piece of data. The best way to consider the success of a cellular operator is as a function of its free cash flow after Capex requirements. Vodafone for instance for many years showed no profits, but many billion dollars in free cash flow (last year it jumped from losing over £2bn to making £9bn).

The GSMA says that other industries such as software and pharmaceuticals throw off 20 per cent ROCE, and cite management consultancy AT Kearney for collecting these figures.

We can tell the GSMA why the lowering of the price caps hasn’t stimulated roaming demand. It’s because there is still no way to predict what the price of an overseas call is likely to be, so people still engage in activities like buying a local SIM card when abroad, to avoid what remain as massive, profiteering tariffs.

This campaign is now being fought on SMS texting, having been lost on the subject of voice roaming. The GSM Association claims voice caps have “done nothing for consumers”, saving average families just a few Euros, but at the same time it has “undermined the profitability and long-term prospects” of European cellcos.

Black, once again, masquerading as white. It cannot cause huge loss of profits, if it has only saved a few pennies. These contradictions are hurting the operator’s case and making the GSMA look amateurish.

European telecoms commissioner Viviane Reding has warned operators that they must convince her this month that they will cut text and data charges voluntarily, or she will take legal action. She claims data costs within the EU are up to 10 times higher than when users are at home (for UK users, texts cost about 21p abroad, compared to 5p at home, and data can be over £4 per megabyte). Danes are even more unlucky, with a nine-times difference when traveling. Reding wants caps set at about 8p per text, though many regulators want the figure to be less than a penny.

As for the claims that the mobile industry’s capital spending has slipped back, from 13 per cent of revenue in 2005 to 12 per cent in 2006 to 11 per cent in 2007, that is all about when operators build out 3G and its HSDPA extensions and has nothing to do with voice or data roaming charges.

"Europe’s mobile industry is in the midst of another major investment cycle to deploy new services, such as mobile broadband, video downloads, mobile television and mobile email, which enhance Europeans’ daily lives and the economic competitiveness of the continent," said Tom Phillips, chief government & regulatory affairs officer of the GSMA. "However, it is clear that the high level of investment required to provide these services across Europe won’t happen if regulators continue to distort the market by setting prices."

Of course the operator’s attitude to investment in Mobile broadband and Mobile TV is legendary - it waits until the very last minute, when some upstart renegade cellco disrupts the market by going ahead and investing, before spending so much as a penny to introduce such services.

Copyright © 2008, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

Secure remote control for conventional and virtual desktops

More from The Register

next story
UK fuzz want PINCODES on ALL mobile phones
Met Police calls for mandatory passwords on all new mobes
Don't call it throttling: Ericsson 'priority' tech gives users their own slice of spectrum
Actually it's a nifty trick - at least you'll pay for what you get
Three floats Jolla in Hong Kong: Says Sailfish is '3rd option'
Network throws hat into ring with Linux-powered handsets
Fifteen zero days found in hacker router comp romp
Four routers rooted in SOHOpelessly Broken challenge
Netflix swallows yet another bitter pill, inks peering deal with TWC
Net neutrality crusader once again pays up for priority access
New Sprint CEO says he will lower axe on staff – but prices come first
'Very disruptive' new rates to be revealed next week
US TV stations bowl sueball directly at FCC's spectrum mega-sale
Broadcasters upset about coverage and cost as they shift up and down the dials
Trans-Pacific: Google spaffs cash on FAST undersea packet-flinging
One of 6 backers for new 60 Tbps cable to hook US to Japan
Tech city types developing 'Google Glass for the blind' app
An app and service where other people 'see' for you
Canadian ISP Shaw falls over with 'routing' sickness
How sure are you of cloud computing now?
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 10 endpoint backup mistakes
Avoid the ten endpoint backup mistakes to ensure that your critical corporate data is protected and end user productivity is improved.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.