Mobile Rates: Carrot and Stick

Under a proposed EC plan to limit roaming charges, if operators show willingness to cut prices enough, regulations may be lifted

Holidaymakers and business travellers could soon see a maximum price on their mobile calls while roaming abroad.

The European parliament met yesterday to discuss the European Commission's proposed action on roaming and came out in favour of regulating prices. Mobile operators could now see the amount they charge for mobile phone calls made abroad capped on a price-per-minute basis, an amount that will be worked out by taking a European average price and multiplying by an as yet undetermined factor.

The parliament is also proposing a single 'Euro-tariff' to govern the per-minute tariff of all calls made within the European Union. Consumers would automatically be signed up for the tariff unless they opted out. Consumers will also be informed of roaming rates when they arrive in a different country in Europe.

The plan to legislate on both wholesale (what carriers charge each other) and retail (what carriers charge the consumers) roaming rates has attracted controversy and has unsurprisingly been unpopular with the operators themselves.

However, the plan is being backed by Margaret Hodge, Minister of State for Industry and the Regions, who gave evidence in front of the Lords sub-committee on roaming yesterday. "There is a strong case for legislation in this area... Our view is having an average wholesale and retail cap is crucial so competition and therefore differences in pricing emerge."

However, Hodge warned that the cap itself must be carefully worked out or risk seeing mobile operators try to recoup their lost revenue by introducing new charges elsewhere.

She told the committee: "Having the right level, the right calculation of wholesale caps and the right calculation and flexibility of an average retail tariff will provide sufficient comfort to industry and there will be incentive for them to invest and compete.

"Which is why the way in which we calculate the wholesale average price and way in which we place the consumer protection tariff and average retail price matters. Otherwise that's [price increases] been one of our great concerns, people who would suffer most are those that don't actually roam and they're the least able to pay more."

The UK is championing a carrot and stick approach to get the operators to cut roaming costs. Blighty is backing the idea of a sunset clause, whereby if the operators have shown willingness and cut their prices enough within three years the regulation will be lifted. There is also a punishment for anyone failing to impress: a punitive tariff, which will see any operator flouting the legislation compelled to introduce roaming charges lower than their competitors'.

It's hoped the roaming legislation will be concluded within the present presidency of the EC, currently held by Germany.

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