European mobile operators are facing a storm over roaming charges which has been brewing for years. The situation is simple: operators charge excessively for roaming services because there is little competitive pressure to do otherwise.

One of the key objectives of the GSM initiative was to ensure Europe benefited from the economies of scale and technological convenience of a single mobile telecoms standard. This has not been reflected in the cost of roaming and charges remain too high, extremely confusing and unnecessary. The EU enjoys free trade across borders, yet mobile customers pay a premium whenever they travel outside their home country.

Everyone knows the charges are too high, yet the issue has avoided regulation for many years because the users exposed to it most often were usually frequently travelling business customers who did not pay their own bills. With mobile penetration exceeding 100% in several Western European markets, users from all market segments expect to be able to use their handsets when they travel and the EU can no longer ignore the increasingly vocal complaints from customers.

The industry has shot itself in the foot. Claims from Vodafone and other operators represented by the GSM Association that competition is working and roaming charges are falling are disengenous – the cost of roaming remains extremely high and bears no relation to the actual cost of delivering roaming services.

I have already talked about some of the effects of pricing on the mobile user experience in my article ‘Smart buys‘. Roaming charges provide an additional example of how user behaviour is governed by pricing. Users hesitate to make calls or even leave their phones switched on when they are travelling because they are concerned by the cost of roaming. Much of this has to do with the uncertaintity surrounding the charges – no one knows how much they are going to be billed and most have had the unpleasant experience of returning home from holiday to find a monthly statement several times the usual amount.

If the Competition Commissions proposals are accepted, wholesale roaming charges will be reduced from around 70 – 80 euro cents to about 30 euro cents. As a result, the EU expects the cost to the consumer to fall by as much as 50 percent.

Vodafone, which has about 100 million customers in Europe, has been particularly vocal in its opposition to the EU’s proposal. T-Mobile, Orange and Telefonica will also be hard hit, with some investment banks estimating the industry could lose 15 percent of annual revenues overnight if roaming charges were scrapped altogether.

This actually provides an opportunity for major operators such as Vodafone, which has networks in many European countries, to seize the initiative and change the model for roaming in a way which would appeal to consumers and potentially grow revenues. Vodafone and others should go further than the EU proposal and completely abolish roaming charges when users roam on their preferred partner networks in each country. The result would be significantly increased minutes of usage, texting and mobile internet access – not to mention a significant marketing advantage for attracting new, frequently travelling customers and improving relations with existing subscribers.

A truly effective regulatory solution would be for the EU to require operators to open their networks to MVNOs for roaming at a standard cost. A move such as this would enable pan-European MVNOs to emerge, targeting high-spending business customers with a genuinely transparent roaming tariff for voice and data.