New EU roaming regulations must force operators to innovate on tariffs
Yesterday’s vote by the European Parliament, which was overwhelmingly in favour of new roaming rules, has both reduced the cost of roaming services for consumers and also paved the way for greater competition among operators for roaming customers. The near unanimous vote (578-10 in favour) for the new consumer-friendly regulations means not only that EU travellers will save money on voice, SMS and data roaming, but also that companies will soon be able to sell roaming services directly to users – who will be able to keep the same number they have for home mobile services.
While it’s difficult to gauge how much competition the new structural changes will bring to the market, what’s certain is that operators will have to innovate much more than in the past to try and increase the amount their subscribers use their mobiles while travelling in the EU, and also to ensure they don’t churn to rivals for roaming services.
The problem for operators is not that they haven’t innovated at all on roaming tariffs, it’s that they haven’t innovated enough. There have been relatively bold moves by operators to both reduce the amount they charge for roaming services and to innovate on how they price them. Each of the major pan-European operators have reduced some of their roaming prices below the regulated rates in recent years, and some, such as Orange, have introduced innovative applications that allow users to monitor their usage while abroad – a move designed to increase transparency on roaming behaviour to encourage greater use. Most recently (a day after the European Parliament vote), Telefonica announced that all its European subscribers will be able to use 25MB of data while roaming in the EU for as little as €2 a day – significantly less than the new initial €0.70/ MB regulated price.
What’s now clear is that operators need to be more bold and creative in the way they approach roaming. They need to build on the steps they have already taken and price services more compellingly and in new user-friendly ways to stimulate usage to offset reductions in prices. While hard facts on the elasticity of roaming are sketchy and to a degree inconsistent, there is nonetheless sufficient evidence to suggest that reducing prices in the right ways and effectively communicating these reductions does lead to an increase in roaming usage.
It’s sometimes the case the operators’ roaming departments innovate on pricing and tariff structures but organisational impediments prevent these innovations from being put into practice. Where this is the case operators need to remove these barriers to allow innovation on roaming tariffs to take effect – for the simple reason that revenues are now more than ever at stake.
Operators now face a choice – either price roaming services at or just below the new regulated rates, or, like Telefonica today, take bold steps to align their pricing with consumers’ expectations. Operators have for too long held on to the view that roaming is a premium service and so should be priced accordingly. They have lost this battle. New roaming service providers will come to the market as a result of the structural changes – and they will price services significantly below the new regulated ceiling and in new user-friendly ways. It’s time for operators to move forward with compelling and innovative roaming tariffs and applications – before rivals seize their opportunity and do it for them.