Regulation, competition for roaming fees can have unintended consequences, analyst says

A study last month on roaming fees by the Organisation for Economic Co-operation and Development (OECD) has sparked a pointed debate in Canada about whether increased regulation can help lower international roaming rates. On May 30, the OECD released a report on wireless data roaming that ranked Canada last among 34 fellow OECD countries when it came to average pricing for a session that consumes 1 MB of data while roaming in another country. The study used roaming prices from Bell Canada and Rogers Communications Inc., the country’s two largest mobile service providers, to evaluate how much Canadians were paying when roaming abroad. Following the study’s release, Canadian media widely reported that Canada had the worst data roaming rates in the OECD. The industry fired back, saying the report’s methodology was flawed. The report noted that roaming prices were lower depending on the destination; roaming in the U.S. and Mexico is cheaper than exotic destinations for Canadian travellers because those are the most visited countries. Canada ranked last on a 1 MB data session, but it fared a little better, ranking 13, for downloading 5 MB over a week in the least expensive countries. Wireless services are not regulated by the CRTC, making it difficult to determine whether prices are high for Canadians because foreign carriers charge Canadian telcos high fees for the service or because our Canadian companies simply charge consumers more. When Canadians leave the country, their phones connect to the local provider that offers a compatible network. The same happens for travellers to Canada. Canadian and foreign providers sign bilateral agreements to compensate each other for the service. Prior to 2009, Rogers was the only Canadian carrier that offered GSM-compatible phones, the network used throughout most of the world. That means most foreign carriers only negotiated bilateral roaming arrangements with Rogers. Bell and Telus Corp. entered the international roaming market in November 2009. Prices also vary depending on the provider and the destination. For example, downloading 1 MB in France would cost a Rogers customer about $30.72, a Bell customer $25.60, a Telus customer $10 (Telus announced lower international roaming prices Monday) and a Wind Mobile customer $5. But Rogers and Bell customers can purchase discount packages before travelling, resulting in lower prices. Data roaming with Wind is also bumped up to $20 per megabyte for destinations outside the European Union. Rogers spokeswoman Carly Suppa said via email that affordable roaming is critical. “The most they would pay for a Travel Pack is $5 per MB and the lowest is $3 per MB,” she said. “The OECD report does not reflect the reality of what the Canadian consumer pays … We’ve introduced a number of innovative options to help our customers manage their roaming costs and we’re continually introducing new plans and pricing as we aggressively negotiate with roaming partners around the world.” Bell spokeswoman Jacqueline Michelis said via email that the OECD study ignored the fact that most Canadian customers are on postpaid plans that include “significantly less expensive” data roaming fees. “The OECD report uses an average data roaming rate for Canada for international roaming that does not include US data roaming, where Canadians travel to the most,” she said, adding that roaming in the United States with Bell costs $6 per MB or less with a purchased travel package. But Agustin Diaz-Pines, the report’s author and a telecommunications economist and policy analyst with the OECD’s directorate for science, technology and industry, stood by the report’s findings in an email to The Wire Report. “If a market is dysfunctional, and can’t achieve competitive outcomes by itself (that is, with no regulation), then policy makers should put in place what is necessary to address these inefficiencies. And this is called regulation,” Diaz-Pines wrote. “Put simply, the lack of regulation is the cause of poor performance in the sense that policy makers and regulators haven’t implemented the right measures to tackle these problems (ineffective competition, high prices, etc.)” Diaz-Pines added that the issue should be a concern to all regulators given that prices are high in every country. The report suggested carriers implement “cut-off limits” that prevent unsuspecting travellers from returning home to an $800 phone bill. The European Union recently introduced regulation to prevent such situations. Since March 2010, European providers are required to “cut off” customers who travel within the EU at the default limit of $65 US per month, tax included. European operators must also send customers notifications when 80 and 100 per cent of this threshold has been reached. The EU also set a maximum wholesale rate of $1.16 US for data roaming and lower prices for voice. John Lawford, a research analyst and counsel at Canadian consumer group the Public Interest Advocacy Centre (PIAC), said in an interview that requiring cut offs could be a short-term solution for high roaming prices. Lawford also called for clearer warnings for users once they reach a new destination. Notifying a customer that downloading 1 KB will cost $0.03, which is what it would cost a Rogers customer in France, can be misleading for those who are not tech-savvy. At that price, sending 10 pictures, which uses about 1 MB, would cost $30.72. Following the OECD report’s release, Michael Geist, the Canada research chair in Internet and e-commerce law at the University of Ottawa, wrote on his blog that high prices for Canadians illustrate a “desperate” need for a more competitive marketplace. Brownlee Thomas, principal analyst with Forrester Research Inc., said in an interview that regulation in the EU is contributing to higher prices for Canadians. Thomas said that prior to the regulations being enforced, many European carriers derived 10 to 15 per cent of their revenues from roaming fees, given that Europeans are more likely to travel outside of their countries. To recoup those losses, European carriers are now turning to countries outside of the EU to negotiate agreements for higher roaming prices. “It’s basically making your money back in another way … The service providers want them to be as absolutely high as possible,” Thomas said. “The result of the European Union making that decision means Canadians are paying more overseas than they did three or four years ago.” Thomas said additional competition in the roaming market also means that each carrier can approach European providers and say that they can afford to pay more for the service, which can result in higher prices for consumers outside of Europe. “The reality is that if you travel to Europe now you’re going to pay more,” she said. Telus announced this week that it is lowering its data roaming prices by 60 per cent. Brent Johnson, Telus’ vice-president of mobility marketing, said in an interview that Telus has been in negotiations with providers since 2009 to lower its prices, and that the announcement is not related to the OECD study. “We’ve been spending the last two years … signing new bilateral roaming agreements with carriers around the globe. Before those agreements were in place our prices were much higher than they are today,” he said. “Now that we’ve signed all the agreements, the roaming rates that we’re charged are much lower and we’re passing those savings along to Canadians.” Johnson said that while Telus agreed with the OECD findings that data roaming prices are too high, the company disagrees with the methodology. Johnson also took issue with the report’s proposal to increase regulation. “You don’t need regulation when you have competition and you don’t need safeguards when you have transparency,” he said. news@thewirereport.ca

Regulation, competition for roaming fees can have unintended consequences, analyst says

News | 06/16/2011 12:52 pm EDT

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