How to make the new European mobile price caps really count

The following is a guest post by TC2 managing director Ben Fox, who is based in London.

By now you may have seen press updates concerning the latest round of European regulatory announcements regarding the capping of the charges that European mobile operators can impose. These include caps on charges for users making and receiving calls or text messages, plus charges for using mobile data services whilst roaming outside of their home country. Here is a re-cap (no pun intended) of the upcoming changes:

ª Outbound voice calls, currently capped at 46 Eurocents per minute, already going down to 43 cents per minute on July 1st this year, will drop again on July 1st 2010 to 39 cents per minute, and again on July 1st 2011 to 35 cents per minute.

ª Incoming voice calls, currently capped at 22 Eurocents per minute, already going down to 19 cents per minute on July 1st this year, will drop again on July 1st 2010 to 15 cents per minute, and again on July 1st 2011 to 11 cents per minute.

ª Text messages will be capped at 11 cents per message from July 1st this year.

The much-lauded roaming data usage price caps are actually being applied at the wholesale, not the retail level. So we'll need to wait and see what impact these caps (1 Euro per MB initially, reducing to 0.80 Euro on July 1st 2010, and 0.50 Euro on July 1st 2011) will have on end-user pricing.

It should also be noted that all of the above needs to be ratified by the full European parliament and the 27 member states, but no one seems to expect that to cause problems at this stage.

So what impact does this have on US based users? That depends on the nature of your global business.

The caps will have little direct impact when US users are travelling to Europe, because the EU does not have any jurisdiction to impose caps on US wireless carriers. But we do expect to see an indirect impact -- price decreases in Europe are likely to flow through to US based users eventually, and indeed for large enterprise deals we are now starting to see a greater willingness by the US carriers to negotiate lower, custom unit pricing for international roaming calls.

Of course, those with truly global operations should see an immediate reduction in local European supplier costs for their European end-users. But check with your carrier to make sure the caps actually flow through to your enterprise contract -- you can't just assume they automatically will.

There's another European wireless industry development that could be seen as a direct result of the pricing pressures that the EU is imposing. Various European mobile carriers have announced that they are extending their initiatives to share infrastructure with their competitors in order to reduce costs -- whether simply sharing masts and cell locations, or even sharing infrastructure to the extent that T-Mobile and 3 are planning for their 3G infrastructure in the UK. Interestingly, in addition to reducing costs, the T-Mobile and 3 initiative will result in their 3G network coverage being identical.

This could be construed as an unexpected benefit of the European regulatory pricing caps -- pricing pressures lead to new infrastructure sharing initiatives in order to reduce costs, which in turn result in more ubiquitous and consistent coverage across suppliers. European users, and in particular the principal U.K. users' group, the Communication Managers Association (CMA) -- no relation to the defunct U.S. users' group of the same name -- have been pressing for carriers to implement domestic roaming for some time (similar to in the situation in the US, where a user of one carrier can roam onto an alternative carrier's network in order to improve coverage).

The European carriers have been immovable on this front to date, but the infrastructure sharing plan between T-Mobile and 3 essentially provides exactly the same results as domestic roaming would -- improved coverage for users of those two networks. If, and as, this trend continues coverage will become less and less of an issue for users when choosing a wireless carrier, which can only be a good thing for astute telecom sourcing professionals looking to leverage marketplace competition.