Bloomberg News

Germany Proposes Caps on Mobile-Phone Roaming Prices (Update2)

January 23, 2007

Germany, the current holder of the European Union's six-month presidency, has proposed capping the amount that mobile-phone companies such as Vodafone Group Plc (VOD) can charge customers when they travel.

Operators would have to offer a plan where calls made in another EU nation won't exceed 50 euro cents ($0.65) a minute and calls received outside their home country can't cost more than 25 euro cents, according to the proposal seen by Bloomberg News. The European Commission, the EU's executive arm, had sought a mandatory price cap on retail and wholesale charges.

Viviane Reding, the EU's telecommunications commissioner sponsoring the roaming plan, told European Parliament members yesterday that she's working with the German presidency to have the regulation in place by July. She said she'll accept compromise proposals as long as they ``simplify'' the pricing plan and are ``in the interest of all consumers.''

The EU measure, which must be approved by EU governments and the European Parliament, would cut about 5 billion euros from EU wireless carriers' annual revenue of 8.5 billion euros from such fees, known as roaming charges. Companies including Vodafone, Telefonica SA (TEF) and Deutsche Telekom AG (DTE)'s T-Mobile International have complained that the regulation isn't necessary as they're already reducing prices.

Newbury, England-based Vodafone has said its Passport Plan, where customers pay domestic prices abroad with a connection fee per call, has led to a 50 percent price decrease.

German Plan

Under the German plan, outlined in a Jan. 18 document, existing roaming customers would be given the chance to switch to Germany's proposal, known as the ``consumer protection tariff.'' The switch must be made ``free of charge and may not entail conditions and restrictions,'' according to the proposal.

``We'll discuss the proposal with the European Commission,'' German Economy Minister Michael Glos told reporters in Berlin today. ``Roaming fees are unjustly high.''

For new roaming clients, the tariff plan would be offered ``automatically,'' unless customers decide to opt for another fee plan.

``This is clearly an interesting suggestion and useful,'' Fabio Colasanti, director general of the commission's telecom department, told European Parliament members during a debate on roaming fees today in Brussels. ``One would have to look at the fine print.''

Franco-British Plan

Several EU governments, led by France and the U.K., are concerned Reding's plan doesn't give companies the opportunity to provide their own special offers.

During a telecommunication ministers' meeting in December, the two countries called for a single price cap that would be based on the average wholesale tariff for receiving or making a call. The average would be set by dividing operators' total revenue by total minutes used to come up with an average cost per minute.

Reding said yesterday she opposes the Franco-British plan. Setting a price ceiling based on an average would benefit frequent business travelers, who would see a reduction in their roaming bills, while tourists and students may see an increase, she said.

Average Rates

Jim Niblett, an official at the European Regulators Group, an independent body that advises the commission on telecom issues, said an average price isn't difficult to calculate and would cut prices for more than business travelers.

``Ordinary consumers account for the great majority of the roaming traffic and the prices they pay dominate the average,'' Niblett said at the European Parliament hearing. ``We think that an average rate can be an effective method.''

He said the tariff should be set ``a little above'' the average rate ``to have room for better deals'' for frequent travelers.

Richard Feasey, public policy director for Vodafone, said that the idea that pricing plans benefit only corporate customers is ``unfounded'' because these clients are a small part of the overall customer base.

``Averaging rather than absolute caps are important for flexibility,'' he said.

To contact the reporter on this story: Matthew Newman in Brussels at mnewman6@bloomberg.net.

To contact the editor responsible for this story: Eamonn Sullivan at esullivan@bloomberg.net


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus