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A reply to Neelie Kroes on her talk in Barcelona at the 2011 MWC. February 18, 2011

Posted by themobilephoneconnoisseur in Uncategorized.

This is a quick reply to Neelie Kroes, Vice-President of the European Commission responsible for the Digital Agenda, on her speech partly about EU roaming regulations in Barcelona at the 2011 Mobile World Congress a few days ago.

The mobile market is surprisingly complex in comparison to the ease of making a phone call. The roaming services are even more complex to build, but just as simple to use. So to address the problem of cutting roaming costs is not as simple as enforcing a price regulation.

I see the cap on price as a temporary mean of limiting rip offs, but in the long run, it reminds me more of old Soviet economic planning. There needs to be a fundamental change to the core of the market structure to reach a situation where national charges are comparable to European roaming charges.

Neelie, as a last remark, mentions the proposal of MVNOs gaining access to the different markets. This is the key to success.

The EU visionaries do not always want to admit it explicitly, but the vision is to create an inner European market which works just as well as between the US states. And looking at the USA roaming situation it was really a mess 15 years ago, but today, “national roaming” in the US (equivalent to European roaming) has very fair and reasonable pricing, and the state borders are erased.

Although the situation of mobile data in the US is painfully behind Europe in terms of infrastructure, the US long term national competitiveness among the network operators is way ahead of Europe, and US state (equivalent to national in Europe) pricing is already par with US national (equivalent to European).

How did the US get there from such a horrible mess in the 90s with loads of incompatible standards? Well, many things contributed, but a couple of things stand out.

The period of national (equivalent to European) buyouts in the US of local mobile networks is in the past. For Europe it will be a painful process to eliminate the “small” players in many markets, because inevitably, if we want the national prices to be the same as European roaming prices, we as subscribers to the services cannot have hundreds of companies to choose from with any reasonable way of knowing what is the best offer. We need bigger European players.

A missing factor in Europe’s mobile network regulation is allowing carriers to access each other’s networks at a reasonable rate. If a mobile operator has a spectrum license and one single base station in the US, it can gain access to the entire national network, at a very reasonable cost. This reduces the establishment cost, yet still allows the investment of the physical mobile network to pay off long term.

What the European Commission perhaps has not grasped is that the VC-firms willing to invest in startups focused on anti-roaming companies have disappeared. So the entrepreneurs that Neelie Kroes eagerly spoke about last summer, have been left in the cold. So a really great ambition has actually worked against the idea of creating pan-European market players, who can compete locally as well as on a European basis.

So, what to do? If you look at where national prices within the EU already apply across an invisible border, for example 3 in Sweden and Denmark, you will see that they are only offered on-net. The conclusion must be that we need a couple of pan-European players who can act in all European markets in order for competition to flourish properly. However I do not believe that in the near future more than perhaps max 5% of consumers will choose their price plan based on the roaming tariffs, so clearly an MVNO choice to fill that gap is needed to get this process started. But these entrepreneurs need to be actively supported with regulations, not the vice versa.



1. Kurt Sussman - February 18, 2011

Very interesting insights. I have been told that the spread of roaming agreements in the US began at the request of Canadian mobile carriers whose customers wwanted continuous cellular coverage as they drove to Florida for the winter. After the path from Toronto to Miami was opened up by roaming agreements, the carriers recognized the benefits of painless roaming.

What would be the equivalent of the Canadians’ migration in Europe? It seems like some kind of catalyst is required.

themobilephoneconnoisseur - February 18, 2011

I think Rasool (http://ca.linkedin.com/in/rasoolverjee) may have the historic view on Canada roaming. One thing is for sure, the financial incentive is there for the mobile operators, as they charge Canadians a minor fortune for those trips to Florida.

I think roaming was actually built into GSM long before the Canadians gave the US operators a hint that there was money to be made, but again, I am not sure.

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