By Bruno Waterfield - 25th July 2004
Two UK mobile network operators face an EU challenge over ‘roaming’ charges set at up to twice the going rate for foreign phone operators.
The European Commission has issued two ‘statements of objections’ to Vodafone and O2 mobile network operators (MNOs).
A probe by Brussels competition watchdogs has charged the pair with billing “unfair and excessive” prices to European phone operators.
Over the five years between 1998 and 2003 Vodafone and O2 set steep wholesale rates for foreign phone operators seeking to allow their subscribers to use their mobiles in the UK.
Wholesale charges for European networks at up to double the rate charged for other UK network operators saw Vodafone and O2 rake in “profits several times higher than other comparable services” – with prices passed on to mobile phone users.
“This situation is known as international roaming. The high roaming fees were detrimental to consumers travelling to the UK,” said a commission statement.
Mobile mobiles
EU competition chief Mario Monti is hoping the Brussels move will serve to push down charges for Europe’s growing number of mobile phone users.
“The number of mobile subscribers in the EU is enormous and 81 per cent of EU citizens now have a mobile telephone… Europeans are travelling more and more each year and mobile subscribers are using their phones abroad as frequently as they do in their own home country,” said Monti.
“But the high level of the international roaming prices has made this very expensive. This high level also contrasts sharply with the much lower tariffs applied for domestic calls. I hope that our action today makes a contribution to rectifying this state of affairs.”
Comparison possible, London central
Commission investigators have focused a three-year probe into British operators because both Vodafone and O2 charge wholesale network access to UK ‘independent service providers’ (ISPs).
Unlike the host of European operators that do not levy equivalent ‘roaming’ charges to other same-country mobile operators a direct comparison can be made between Vodafone and O2’s domestic and international rates.
“The provision of wholesale airtime access to UK subscribers of ISPs bears considerable similarities to the provision of wholesale international roaming services to foreign MNOs, whose subscribers use their mobile phone when roaming in the UK, said the commission.
“The commission therefore questions the enormous price differentials between two fundamentally comparable services.”
Another factor in the commission’s investigation is the UK capital London’s key European role as a centre for financial services.
“London is the trading centre of Europe and many calls are made there and many business people travel to London and use their mobiles to make calls to other member states from there,” said a spokesman.
'Proof' tough
EU officials are sympathetic to consumer perceptions of high or ‘excessive’ ‘roaming’ charges throughout Europe.
But, insisted a commission spokesman, European competition regulators are bound by tight rules and to high standards of proof.
“I think we should differentiate between a situation that is perceived by the consumer to be sub-optimal and not satisfactory and a situation that is a proven, or at least a provable, anti-trust abuse,” he said.
“We focused on the two cases where the margins were the greatest and where we had clear cost data on the ‘comparator’ service which was provided on the same network.”
Commission watchdogs are unable – at present – to investigate consumer concerns that mobile phone operators run price fixing cartels to raise prices and boost profits.
“There’s no way at the moment that the European Commission is able to prove collusion between networks […] We are not in a position to prove collusion but we can prove that [in this case] the networks [are] totally independent of competitive pressure,” said the spokesman.
“Remember, we can not just go – although sometimes we would like to do so – and say this is a scandal for the consumer, the consumer is being ripped off, you have to stop it. If anti-trust was so easy these investigations would be much quicker.”
New technology, lower prices
Both Vodafone and O2 have two months to respond to the commission’s “preliminary” findings before Brussels takes a final decision involving a ‘cease and desist’ order.
Into the future, the commission is confident that new routing technology allowing consumers a choice of international networks – including a new service from Vodafone – will see competitive pressure bring down prices.
Competing network operators are also developing alliances which offer multinational mobile users a range of international roaming services.
EU investigations into German phone operators are expected to continue over the summer.
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