The cost of using a mobile phone abroad in the European Union will be halved next year under proposals outlined on Tuesday, in a move set to hit the earnings of operators hard.
The European Commission said it had given industry plenty of time to cut prices but that it had failed to listen. "It's unacceptable that consumers are punished on their telephone bill simply for crossing a border," EU Information Society and Media Commissioner Viviane Reding told a news briefing. "This regulation I intend to propose will end international roaming charges as we know them today," Reding said.
The add-on or "roaming" charge of using a mobile phone on holiday or business trips has become the bane of travellers, but operators say it helps keep down the cost of other services.
Telecoms shares fell in Europe, with mobile phone leader Vodafone down 3 percent by 1345 GMT. J.P. Morgan bank said in a research note that up to 10 percent of Vodafone's earnings were at risk if roaming rates fell by 80 percent.
The EU executive estimates that revenues from international roaming charges total 10 billion euros ($12 billion), and that regulation would save the consumer between 40 and 60 percent on mobile calls abroad.
Roaming charges per four-minute call vary from 0.20 euro cent to 13 euros across the 25-nation bloc, with the profit on receiving calls abroad at between 90 and 100 percent for operators, the EU executive said.
"Operators will lose the excessive profits they are making," Peter Rodford, a senior Commission official, said. Analysts said the short timetable was a shock for the industry.
"I think people would have assumed a 50 percent cut in roaming charges over three years. If they did it by the end of 2007 - a year quicker - then it's a little bit negative," said John Davies, an analyst at Dresdner Kleinwort Wasserstein bank.
Operators seen suffering the most are those in popular south European holiday destinations, and the Spanish regulator has refused to back the common stance among its EU peers.
Reding said the proposed regulation would scrap roaming charges on receiving calls abroad, while consumers would pay for local and international calls made abroad at the same rate as if they were making the calls back home.
A price cap on wholesale roaming charges on mobile phone calls made within the EU will be considered. Competition in domestic markets and vigilance by national watchdogs will ensure that operators do not bump up national charges to make up for lost roaming revenues, Reding said.
The European Regulators Group (ERG), which advises the Commission on telecoms issues, said wholesale roaming charges between operators should be cut to around 30 euro cents a minute from around 70 to 80 euro cents at present. "The cost of international roaming is completely disproportionate," ERG Chairman Kip Meek told the briefing.
The Commission said the new regulation would be proposed in June and would need approval from member states and the European Parliament to become law, possibly by the summer of 2007.
EU lawmakers welcomed moves to end what some called rip-off roaming costs and EU leaders agreed last week that lower roaming charges would improve competitiveness. The Commission wants to regulate wholesale roaming charges and retail roaming charges, or the cost the consumer has to pay.
Meek said national watchdogs backed Reding's moves on the wholesale side, and would do likewise on the retail side if operators failed to pass on savings to customers.
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