Exactly why are roaming charges so high?

Over the past few months we have seen significant rise in media attention around international roaming fees (1 2 3 4 and many more). There are innumerable (often frightening) accounts of customers experiencing bill shock after they’ve used their phones abroad, but it is only now that the media are really looking at alternative solutions to the traditional networks and that finally people are asking the question; “why is it so darned expensive?”

There are three things to consider in the argument.

 

1. Lack of awareness of the cost of roaming

Part of the problem is that the cost of roaming is only an afterthought. We are all used to comparing how many minutes, texts and megabytes we get on our monthly contracts  (and bragging about what handsets get thrown into the deal), but how many times do you think about what operator you will be working on when you land in a different country? Our guess is rarely, if ever.

The issue here, is that if no one checks roaming charges then there is no competitive advantage to dropping the cost.  This means that operators are in no hurry to relinquish their hold on such a cherished revenue stream. It’s not just consumers that forget to take roaming charges into account when they chose a network provider – our research last year showed that despite being under pressure to reduce their organisation's mobile spend, over a third of IT decision makers were unaware of the cost of roaming in their package.

With this lack of awareness on roaming charges, it’s no surprise that the operators have been raising the price and pocketing the cash – “while the regulating body cat’s away”...!

 

2. No regulation

Another key factor is the absence of over-arching regulation on pricing meaning that operators are having a field day. A recent article in ZDNet UK highlighted the fact that in order to allow customers to roam abroad, operators negotiate with other operators across the world to set a price to allow roaming on their services, spectrum and billing. For this, the foreign operator charges a premium (with the network operators then adding a hefty premium on top) which is landed on the end user as an extra revenue stream leading right from Consumer County into a gold mine right in the middle of Mobile (Operator) Mountain. 

A call for tighter regulation on roaming charges is needed to bring an end to this extortion, and help allay some of the tension and frustration growing in the consumer space.

 

3. Decreasing domestic margins

Over the past few years data hungry smartphone usage has skyrocketed beyond anyone’s expectations. Leading operators introduced unlimited all you can eat data plans and shortly after everyone else followed. As a result of this, margins on usage at home have reduced and operators are openly admitting that roaming is the easiest way to recoup losses (at least they’re being honest and upfront about this). The ZDnet article quotes many operators saying, as plain as day, that they charge over the odds for roaming in order to recoup from falling margins at home due to all you can eat voice, SMS and data packages.

But how long can this go on for? The answer; not much longer.

 

What makes it expensive?

1. Roaming costs aren’t a competitive advantage
2. Decreasing margins on voice and text and data at home
3. No regulation

Solution?

The European Commission is trying to regulate the European market, with only moderate success – Neelie Kroes, Europe's digital agenda commissioner, has said that she wants mobile operators to cut their prices for data roaming. This is great news for the consumer but many operators are fighting the EU regulations saying that any drop in margin on roaming fees will be negative for the industry as it will mean less money available to invest in the networks. This obstruction means that the cost of data roaming will remain high and that it will likely be a long time until we see a noticeable change in prices.

But here at Tru, we are the only company that is fighting the injustice of sky high mobile roaming charges and we are dedicated to bringing an end to it. Thanks to our patented technology and infrastructure, our customers aren’t subjected to operator connecting fees, and as we strike up partnerships with local operators across the world, and link them together with our unique technology, we can provide our customers with the fair pricing they should expect across the world. It’s unique and that’s what makes the real difference.

 

UPDATE: ZDNet is also running an online petition to gather support against unnecessarily high roaming charges levied by the big operators – you can sign up here.

Comments

[Mark Broughton]

The other thing to remember about roaming charges is that although that the same provider might exist in different countries they are a separate business entity and have to make a profit within that business unit.

Additionally there is also the administration element of processing roaming charges between different countries, and although these days these are processed through specialist clearing houses and the overhead is reduced there is still a charge incurred which is part of the roaming charge

[David Meyer]

Those charges are absolutely minuscule, though, and do not justify the mark-ups in the slightest.

As for the separate business units, you're still talking about a company negotiating tariffs with itself. Again, no justification whatsoever.

[Ayo Fimusanmi]

I have read your article and think you might like this epetition. Please pass it on. Might not get a ban but something might come of it.

Regards

Ayo Fimusanmi

http://epetitions.direct.gov.uk/petitions/3963

[Lavanay]

Thanks to truphone for being dedicated to bring an end to high roaming cost! That's the reason why I love The Tru App.