There’s a problem with what the EU is trying here

The new laws are designed to create a single market for telecoms services across Europe and block what Brussels officials called “arbitrary profits” on international calls.

Ownership of spectrum is national. Thus the people who have leased this, in each different nation, need to get a cut of the revenues from a call that crosses a boundary.

Current fees might well be “too high”. Although it’s also true that for businesses at least there’s plenty of choice out there, with international mobile plans being made available at very reasonable prices.

My best guess, and it is a guess, is that the EU would like to prise that spectrum away from the national governments and make it a shared European resource. Or, more importantly, a direct source of funding for the EU.

6 thoughts on “There’s a problem with what the EU is trying here”

  1. Not sure what the problem is. Make a mobile call in-country and you have a connection to a tower, the callee has a connection and there is some infrastructure in-between. Any or all of those things might not be owned by the company that provides your mobile services, yet they seem to manage OK.

    There’s no reason this becomes so vastly more complicated because the customer’s phone connects to a different tower in a different country that vast extra fees are justified. Sure there are extra (trivial) costs sorting out the billing for the connection to tower and some of the on-land connection, but then the company is spared the cost of making its own tower time available. The cost differential is noise, not signal.

    Besides, we have the ultimate demonstration of market failure here – almost without exception the mobile providers charge the maximum allowable (a few ultra-high-end tariffs excepted). That they still provide roaming services at all demonstrates this is still profitable for all of them. Therefore: market failure.

  2. Jeez this blade is expensive – I had no idea this was coming when I got given a free razor.
    Network operators as a group do not recover their cost of capital. They massively subsidise £500 handheld computers and try to cross subsidise, but on balance they achieve 7pc returns against a 9pc cost of capital.
    If on balance they were making off like bandits then I could see the case, but messing about with a cross subsidy that benefits the consumer already is just changing where the cross subsidy will happen.

  3. JamesV;

    and mercedes probably makes higher margins on their s-klass than on their a-klass. So what? Prices on free markets are set by demand vs. supply curves not by bureaucrat’s view of what the underlying production costs are.

    the point is that if the buraucrats bring down the rates for roaming the operators are likely to a) make less profits b) invest less and c) increase prices for national calls somewhat. Most likely a combination of the three

    a) above is not nice for the operators but not really a huge concern for the rest of us. b) and c) are somewhat more problematic.

    for b) the EC is trying to persuade operators to spend more on their network deployment and on buying licences while at the same time reducing the incentives and means to invest

    for c) Roaming is mainly used by business people and other affluent people who travel lots whereas national calls are also to a large extent made by the less affluent. So these rules are going to result in a value transfer from the poor to the affluent… [partly made up by price elasticity effects]

  4. The problem is much more complex than most commentators think. James V is wrong, but he can’t be blamed for that given the lack of information.

    When an international call is made the network in the foreign country does not provide it’s services for free, it charges a lot for them. It’s also necessary to pay for the networking that connects to the foreign networks.

    The way cellphone protocols work doesn’t make a great deal of sense in this area too. If a phone comes from Vodafone UK (for example) then it must always be controlled by one of Vodafone’s a mobile switching centres. Even if you’re in Germany phoning Italy on a Vodafone UK phone there’s a lot of data that has to go from UK->Germany and UK-> Italy to make that happen. Then there’s billing, which is another large source of complexity.

    It’s not surprising that roaming is expensive. If the EU cap the fees then I expect roaming will be subsidized by normal calls in most cases. I also wonder if a few small carriers will stop offering roaming altogether.

  5. So now it’s up to the telecoms firms to bring down their prices to ones they can justify before Europe cuts into their profits. With their wallets threatened, I think board members will act quickly.

  6. Current,

    You have a point, except that this all dates back to when loads of different networks were being founded in different countries. But then they all took each other over and merged, and now, if I’m with Vodafone UK and I make a call in Germany on Vodafone DE or in Italy on Vodafone IT or in France on Vodafone FR, I have to pay through the nose for these completely different companies to somehow coordinate their efforts.

    Then there’s data roaming. When you make a call, sure, you need to connect one person’s phone to another person’s phone, which can be a bit complicated, but data? The Internet’s the same everywhere (totalitarian censorship aside). Why should I pay so much to connect to the data stream in a different country? No reason.

    Yes, billing is complex. It’s also automated now.

    And Three apparently don’t need legislation from the EU to simply abolish roaming all by themselves. Five countries, I think, so far.

    When it comes to roaming, the operators are running a cartel. I object to EU rule in principle, but that doesn’t mean everyone in the EC is wrong about everything all the time in practice. Neelie’s right on this one: she’s spotted price-fixing, and she’s giving them an ultimatum to stop it. Good.

Leave a Reply

Your email address will not be published. Required fields are marked *