High roaming revenues and profitability may come under threat — so what can operators do to fight back? Here and over the page Mobile Europe examines the threat and opportunities.
Roaming services have come on a bundle since the early days of receiving a text welcoming you to a host operator when you touched down at the airport. Now, operators are realising the vast sums to be made by keeping their users on the preferred network when they are abroad, pushing through all the services users are used to at home, and also by offering similar services to inbound roamers.
The big known fact about roaming is that it is incredibly profitable for operators. The second is that that situation cannot last. First, a big threat will come from regulation. In December 2004 the European Regulators Group (ERG) launched an initiative looking into the wholesale prices of international roaming. This included the National Regulatory Authorities (NRAs) in the EU Member States sending questionnaires on international roaming to the mobile network operators in their respective jurisdictions.As part of this initiative the NRAs decided to intensify their efforts to find a harmonised approach to regulation of mobile international roaming services and have adopted a ‘common position’ on the matter which will be published for consultation. The ERG notes the following findings on international roaming following the joint work of the NRAs to date, some of which will give everyone involved in roaming pause for concern:
l Retail charges are currently very high without clear justification
l This appears to result both from high wholesale charges levied by the foreign host network operator and also, in many cases, from high retail mark-ups charged by the customer’s own network operator
l Reductions in wholesale charges are often not passed through to the retails customer
l Consumers often lack clear information on the charges for roaming
l There are strong linkages between the markets in the different member states
This list of concerns appears to have been listened to by the operators, which are beginning to respond with clearer information on roaming prices. Vodafone, for example, recently (July 2005) launched its Vodafone Passport service, which it modestly described as a revolutionary new way to pay for calls abroad.
Vodafone Passport customers will pay a one-off connection fee of 75p for each call they make. After that, they will pay the same rates as they would at home – if they have inclusive or voice pack minutes, the call could cost nothing more. For example, someone on an Anytime 200 price plan, could call home from Rome and chat for 30 minutes paying just 75p using their bundled minutes.
Tim Yates, chief marketing officer of Vodafone UK explained: “Customers told us they were nervous about using their mobile abroad because they were worried about the costs. Vodafone Passport does several things: it gives customers a clear idea of what their calls are going to cost and it also gives them much better value when calling from abroad. Now customers won’t have to seek out alternative options to keep in touch..”
That last point, “alternative options” may be more of a pointer to Vodafone’s motivation than regulatory pressure. One option is simply not to use a mobile, another is to buy a different SIM purely for travel. Textbay is one company that is offering pay-as-you-go SIMs for unlocked phones. Incoming calls are free. Outgoing calls are still expensive but cheaper than a normal contract roaming tarrif.
Textbay Managing Director Alain Bywaters, says, “Phone companies do not need to charge so much for these calls. They make enough from us throughout the rest of the year and as soon as we go on holiday they get a heavy cash bonus. One day this will all have to change but until this happens Textbay is offering a genuine alternative to over 60 worldwide destinations.” One way “all this may have to change” would be the growing threat of VoIP. Granted, it seems an unlikely replacement for the kind of worried holiday maker market Bywaters is after, but in the business and frequent traveller sector, this is a real coming threat to mobile operators.
Bobby Srinivasan is chief operating officer of Roamware, one of the dominant providers of value added roaming services to operators. He points out that you can already see Starbucks customers using a Skype client over the WLAN to bypass the mobile network. Of course, this model is limited by WLAN coverage and a user having the time and location to whip out a laptop, or something else that can support a VoIP client and WLAN access. But for how long will that be limited to a laptop?
As is the way in the mobile industry, Srinivisan says operators need to see such developments as an opportunity.
“Voice over IP is going to the biggest threat or enemy, but it is much better they embrace it fully. Operators need to look at how they can integrate VoIP and GSM to provide one experience, leveraging the power of IP to their advantage. Operators could look at Skype and say, ‘OK, we’ll let you Skype incoming calls as well as outbound.’ This is exactly the kind of solution we’re working on right now.”
Srinivisan says that although revenues may be forced down by regulation or competition, it is therefore imperative that operators come up with smarter roaming solutions that drive revenues in other ways.
“I think in a developed market like Europe I don’t see revenues remaining as they are now. Regulators will force reductions in revenues and the only way to combat that is to keep rolling out value added services to retain revenue levels. Then there is the whole area of data roaming, and what operators can provide in that area.”
Data roaming value added services is the next level for operators, allowing users to take their favourite content services with them when they travel, in a manner they are used to. Onwards then, to the next roaming frontier.
