Photo: John T. Heffernan
The European Union will enact more caps on roaming charges for cellular devices throughout Europe from July 1st in what it describes as a step toward a “connected continent.” Consumers will benefit, but mobile suppliers may struggle.
The exact effect that the proposed changes
will have on the European cell phone market is unknown, says T-Mobile Austria Spokesperson Helmut Spudich. The only thing that is certain is that customers will rejoice while mobile providers will struggle to sustain profits.
“It is obvious that this will increase cell phone - and tablet and data stick - usage through Europe,” Spudich said. “How much and how fast is difficult to say. One would have to look at the number of tourists in different parts of Europe in relation to residents to make an estimated guess.”
If recent history is any indication, the results of these price reductions could be enormous for both customers and mobile providers.
The EU has gradually decreased prices on roaming tariffs throughout the continent since 2007, resulting in an 80 percent price reduction for mobile phone users.
Since a similar price cut last year, savings have risen 36 percent. These savings have made using a cellular device while traveling throughout Europe much more affordable for residents within the EU.
Roaming data, specifically, has become far less expensive. A 91 percent plummet in prices since 2007 has led to a 630 percent spike in roaming data in the past seven years.
With Austria's heavy tourism and highly competitive cell phone market, which drives down prices, providers within the country have been hit hard. T-Mobile, specifically, has lost 5.5 to 6 percent of its revenue in the past year.
“For tourism-heavy Austria, it will definitely increase traffic load on our networks -- adding to immense data growth (100 percent in T-Mobile's network 2013), with no income to compensate for this,” Spudich said.
By the end of 2015, the EU hopes to combine its 28 phone markets throughout the continent into one, which would wipe out all roaming charges. This would allow a person who lives in England, for instance, to call or text someone in Italy at the same rate as calling their neighbour. Additionally, that person can travel to Italy and use data on his or her mobile device at no additional cost.
Spudich wonders if this would entice Europeans to flock to countries such as Austria for “rock bottom prices”.
“That would actually be havoc for the whole industry in Europe, since it means that the EU has simply wiped out billions of revenues (and capital for investment in mobile networks and returns to states and pension funds who are major stakeholders in telecoms throughout the EU) with the stroke of one law,” Spudich said.
In the coming years, most Europeans will look forward to easier travel, while certain companies may struggle to make their expected profits.
Reducing cost barriers for telecommunications between EU member states is a key ambition of the European Commission, the EU's executive, according to a report from AFP.
In April, the European Parliament endorsed a sweeping package of telecommunications reforms introduced by the Commission including a move to scrap roaming fees altogether.
"By the end of this year I hope we see the complete end of roaming charges agreed," Commissioner for the digital agenda Neelie Kroes said in a statement announcing the July 1 price cut.
"The Parliament has done their part, now it is up to Member States to seal the deal," she said.
Here's a video which explains the vision of the telecom single market: