Total misunderstanding of how the mobile sector works
Here at GoMo Towers we have long thought that although EU commissioner’s – Neelie Kroes’ motives are well meaning, her team basically fails to understand how the cellular/mobile industry actually works. So it is great to find someone who fleshes out how Kroes’ attack on the whole concept of ‘roaming’ within the European Union (EU) is flawed and could even spell disaster. That person is John Strand from Denmark’s Strand Consult. We think that Strand might be going a little over the top by suggesting the measures could “put an end to investment in mobile infrastructure including deployment 4G/LTE deployment”. However, we do feel that Kroes’ team don’t appreciate the different kinds of business models which mobile operators have put in place in different EU territories.
Now Strand argues that the “new EU roaming rules are created to sound good in voters’ ears, but unfortunately, Neelie Kroes and her team have not thought through the economic consequences for the telecom industry.”
“Each European country has a unique mobile industry cost structure based on geography, technology, and regulation, and has a different set of mobile operators.”
We feel that Kroes is actually chasing the dream of a single EU market for mobile telephony rather than merely trying to win consumer gravitas.
The problem is that the mobile network operators (MNOs) have to live in the real world and as Strand says it is the actual infrastructure providers who will suffer most.
The measures Kroes is proposing would probably benefit the smaller, ‘virtual’ operators (MVNOs) the most.
The principle behind Kroes’ ‘Rome like home’ proposal is that EU citizens can choose the EU country they from which want to obtain a SIM card and then use that SIM card anywhere in the EU.
The problem is that consumers will naturally seek out the cheapest offering and this will probably involve obtaining such a SIM from new entrant countries such as Lithuania where costs are generally lower.
Additionally, they might obtain their SIM card from Luxembourg where the tax regime is very different from the rest of the EU.
As Strand points out, Neelie Kroes’ team seems to think that consumers will continue to take out contracts with one specific MNO.
The reality is that they’ll almost certainly switch over to pre-paid (PAYG) and purchase their ‘roam anywhere’ SIM card online.
In a nutshell, the EU Commissioner doesn’t appreciate that MNOs have very complex business models which differ massively from country to country.
And depriving MNOs totally of any income from roaming inside the EU will make massive holes in their budgets.
Let’s hope some kind of compromise can be reached. Cheaper calls within the EU without putting the mainstay MNOs out of business.
We’ve printed John Strand’s arguments in full here. he takes a massively pessimistic view but his reasoning is intriguing and highly informative. Well worth reading.