Roaming is set to be the next big frontier for European mobile operators, whether they like it or not.
With mobile services still very much produced and promoted at a national level, there is very little cross-border competition.
For example, considering Europe is a geographical area roughly the size of the USA, it has a strikingly higher number of operators.
Compared to the US’s four operators, Europe has somewhere in the region of 70, which has led to high roaming prices. This has not escaped the attention of regulators. Since 2007, the EU has been gradually decreasing roaming prices in the EU.
Charges in the EU are now set to end completely on 15 June 2017, thanks to an agreement between the European Commission and the European Parliament and Council. As it stands, customers of one operator travelling to another and using the local network would have to pay a fee to this local operator. This charge is set to disappear.
Phasing out of the charges will begin in April 2016, with operators only able to add €0.05 per minute on mobile calls, €0.02 per SMS and €0.05 per MB of data. This charge will be 75 percent cheaper than current caps.
The question is whether this is a challenge or an opportunity for the telecoms companies. On the one hand, the lower prices will bring down the historically high revenue margins for European telcos.
However, according to European Commission estimates, telcos are missing out on a market of around 300 million mobile users because of current prices.
The amount of data required by the average consumer is growing exponentially, as travel between EU countries also trends upwards. It is easy enough to put two and two together – the data-equipped traveller will be a swelling consumer group in coming years.
Figures from the United Nations World Tourism Organisation show that international tourist arrivals reached 1.13 billion in 2014, a 4.3 percent increase from the previous year.
International travellers are less likely to have wi-fi, which at home carries most of their smartphone data usage: two-thirds, according to Ovum.
According to an EC survey, 28 percent of mobile phone users turn off their mobile phones while travelling abroad. Among the rest, the survey found that 30 percent of the respondents don’t use voice services, 25 percent never text and 47 percent don’t use data while abroad.
In addition, a March 2015 Pyramid Research survey of over 2000 UK mobile users found that 22 percent of mobile users preferred to use over-the-top (OTT) apps such as WhatsApp to call or text internationally while 86 percent turned off roaming while travelling in the EU.
Currently, according to a survey of 2000 people conducted by Three with money-saving company Miss Moneypenny, currently more than a fifth of users check emails, social media and messages on mobile apps only when free wi-fi is available.
The competition in international roaming has so far been skewed in favour of those with the most extensive international presence. Many operators are owned by firms that own operators in other markets.
"Larger companies with greater scale are clearly in a stronger position to establish/negotiate roaming deals in different markets," says Kester Mann, Principal Analyst at CCS Insight. "Certainly a pan-regional player would be able to benefit from allowing/encouraging its customers to roam on partner networks."
Virgin Mobile is one MVNO that has made an effort to capitalise on its international presence. Through its owner Liberty Global, Virgin Mobile can access the Belgacom International network and Telenor, with the resulting low wholesale prices allowing them to provide a lower cost offering to customers. It can thus increase its margins. It offers 30-day data travel passes lasting for 30 days.
Another operator in the UK that has decided to get a head start on the competition in roaming is Three. Its Feel at Home offering allows customers to use their UK allowances in 18 popular holiday destinations, such as Spain, France, Australia and the US.
Three also benefits from direct access to several other European markets: Austria, Denmark, Ireland and Sweden.
The heavy regulation of prices may however lessen the advantages of international operators.
So when roaming simply becomes a given rather than something that adds value, the question is how operators can differentiate.
Another element of providing a comprehensive roaming bundle to consumers will be making use of non-cellular infrastructure, such as wi-fi. This provides a cheaper way of offloading the extra traffic, which can be passed onto the consumer.
For example, companies such as iPass and DeviceScape are working on providing a wi-fi service that is as intuitive and convenient as cellular networks.
DeviceScape has built what it calls a ‘curated wi-fi network’, combining free public hotspots into a seamless network, while iPass has a global network of 50 million hotspots worldwide. The latter offers access to all of them for a membership fee; operators that use iPass include Deutsche Telekom, Telstra, Reliance, Melita and Etisalat.
Gary Griffiths, CEO at iPass, told CBR: "In a world that is rapidly becoming ‘wi-fi first’, wi-fi will certainly play a critical role when it comes to international data roaming. Cellular data offload to wi-fi has been a hot topic for years, but only recently has it started to see real traction.
"In the past, the slow uptake could be attributed to technological and cost arbitration factors, and a lack of global wi-fi. Now many of these barriers are being overcome and the growth of wi-fi shows no sign of slowing down with hundreds of millions of wi-fi hotspots available globally.
"For operators, offering global wi-fi is a great way to differentiate their customer offering in a competitive telecoms market."
Alongside the benefits such as the greater convenience and value for customers, it is possible that there will be unintended consequences to the abolishing of fees.
Mark Newman, Chief Research Officer of Ovum’s telecoms research business, says that one damaging side effect could be a collapse in investment.
"Until now it has been in the interests of an operator managing large volumes of inbound traffic to build out the capacity to manage that traffic because wholesale roaming is highly profitable.
"Tourist areas are often some of the first in a country to roll out a new network technology. But when roaming charges disappear, how does the inbound roaming operator get paid?
"As things stand, there would be little or no incentive to build out additional capacity (or to maintain existing capacity) for inbound roamers because the wholesale charging mechanism for roaming – the so-called mobile inter-operator tariff – would have to be either reduced dramatically or eliminated altogether."
Newman also notes that there could be considerable problems for operators if the European digital single market idea is taken to its natural conclusion; what if Europe really does become like the United States?
"In the future, there would be nothing to stop an EU citizen in one member state buying a mobile subscription from an operator in another member state and using it in their home market (although there is provision in the rules to prevent "permanent roaming").
"There are big price variations across Europe and an operator in a low-cost European market could, for example, start selling their SIM cards to EU citizens in other countries."
These roaming rules could therefore fundamentally alter the way that consumers use data, not just abroad, but at home as well.