The Traps Hidden Behind the End of Roaming

Starting June 15, 2017, we'll no longer have to pay for roaming fees when we call from a EU country other than our own. Thus that hated surcharge that keeps us from using our cell phone when we are abroad but within the EU should disappear.

Roaming had been in the EU's line of sight for quite a while. It's true that when we roam abroad we are using the network of a different telecom operator with respect to the one for which we have signed a contract. But the fee requested was out of proportion with the costs sustained by the mobile phone company that hosted our call on its network and interconnect it with other transnational networks. The political will to do away with this source of extra-profits had run into hurdles.

But the EU telecommunication liberalization framework did not allow national regulatory authorities (e.g. Agcom in Italy) to set the price for roaming, as it conversely does for domestic service, such as the use by other phone operators of the so-called last mile in fixed telephony. Faced with the apparent ineffectiveness of national regulators to address the issue, the European Commission found it hard to prove there was a cartel between telcos to keep the price of roaming high. However, the threat of exemplary antitrust sanctions, had evidence of price collusion been found, eventually forced operators to accept the Commission's intervention. Since 2007, the Commission has gradually reduced the price ceiling for roaming of voice, text, and data traffic. If calling Italy from another EU country cost us an extra 49 cents per minute in the summer of 2007, today it costs an extra 19 cents per minute (a -61% decrease). The new regulation calls for this surcharge to drop to zero by mid-June 2017. But under the banner of consumer welfare, there are thorny details that still need to be explored. I hereby highlight a couple of them.

First of all, the surcharge will be zero with respect to what? The EU regulation makes reference to a "per unit national retail charge", or lacking this, the unit price of a call made when we exceed the limit set by popular bundle offers (such as, say, 500 minutes, 200 SMS and 2 GB for €15 a month). Thus, when we are in another EU country, under the majority of existing contracts we will be unable to benefit from the free minutes included in our offer, but we will have to pay a yet unknown fee (operators could well introduce that mysterious national unit retail fee before the middle of June 2017).

Secondly, couldn't retail prices for calling, messaging and surfing change either in Italy or abroad over the next year and a half? With the new regulation, our phone company will no longer be able to charge us for roaming, but it still will have to pay the foreign operator for our use of its network while we travel (for our operator, there won't be a substitution effect, since the current wholesale roaming charge is higher than the costs it sustains to provide us with the same service in Italy). Considered that there are low profit margins in the industry due to fierce competition, the so-called waterbed effect could well occur: wholesale roaming costs, no longer shouldered by the users abroad which generated them, will have to be spread on all users, with a possible generalized increase of cell phone fees.

Paradoxically, reducing the phone bill for frequent-flyers users could well come at the expense of users who cannot afford (or do not want) to travel. The fact that the new EU regulation was passed is just a formal victory. Before the summer of 2017, these and other substantial matters will have to be addressed.