African mobile roaming charges – one of the last forms of legal daylight robbery

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Last week the European Commission announced that it will force mobile companies to lower their excessively high international roaming charges and scrap all roaming charges for receiving calls abroad. A fortnight ago the annual meeting of the Arab ICT Regulators Network heard a presentation of a study of Middle East roaming charges that covered parts of North Africa. It also concluded that in the field of roaming that there was an absence of real competition and this was a strong disincentive to operators to negotiate lower prices. Sub-Saharan Africa’s solution? An expensive African Telecommunications Study to develop a single SIM card that can be used across the continent. Russell Southwood looks at the findings of the Egyptian study and asks whether Africa’s regulators can work with the European Commission to address the rates charged by the international mobile operators.

Evidence provided by the European Commission showed that roaming rates vary from US6 cents to US$3.94 a minute on the basis of a four minute call and that one unnamed UK operator had increased the price of calling the UK within the EU from US$1.04 a minute to US$1.48 per minute again on the basis of a four minute call.

So how does this compare with international calls from North Africa to other North African destinations? If we take Egypt as an example, there is no clear rhyme or reason to the pattern of charging. One mobile operator Mobinil charges across a very broad range: just below US50 cents a minute to phone Tunisia via Tunicell; about US$1.65 a minute to phone Algeria via Djezzy; and almost US$2 a minute to phone Morocco via Meditel.

Vodafone Egypt has a similarly wide range of charges, again without any clear rationale to the pattern: the lowest is about US60 cents a minute to Morocco via Maroc Telecom; US70 cents a minute to Tunisia on Tunicell; about US$1.70 per minute to Morocco on Meditel; and about US$2.40 to Algeria via Djezzy. Just to show what is really possible MTC from Kuwait will charge you only about 10 cents a minute to call Mauritel in Mauritania.

The study also looked at the high costs of making local calls while roaming: a local roamed call is a call made by a subscriber roaming on a visited network to another person in the country of the visited network. For example, let’s say you phone someone with you have an appointment to say you’re going to be late from your roaming phone to either a fixed or mobile subscriber.

So if you were dialling a local call in Morocco using Maroc Telecom, it would be US18 cents a minute. But if you’re a visiting Egyptian on either the Mobinil or Vodafone network, the charge is a staggering 50 cents a minute. But really pity the poor Kuwaiti visiting Egypt using the Wataniya Kuwait network who would be paying US$1.10 a minute. Indeed Wataniya Kuwait is the most expensive network for local roamed calls in almost all of the countries surveyed, with prices way above those of its competitors.

Mobitel Sudan charges US8 cents a minute for local calls. But if you are a visting Egyptian and you’re on the Mobinil network you will pay US50 cents a minute and US55 cents a minute if you’re on the Vodafone network. The highest charge in that country would be US63 cents a minute for a visiting Lebanese using Alpha Lebanon.

How are these charges made up? At the retail level, prices are composed of what is called the Inter-Operator Tariff plus some level of handling charge. In most instances, the caller pays but there are operators who also charge the called party for the roaming part of the call. It is this practice that has stoked up the high levels of resentment felt against roaming charges in Europe: someone is on holiday and decides only to answer his or her phone but discovers that they have accumulated a substantial phone bill subsequently simply by accepting a call when they return home.

The Egyptian regulators study found that from the consumers’ perspective, roaming charges are also annoying because no-one really knows what they are and information is often hard to obtain. Furthermore operators change roaming tariffs frequently. The price differences between different networks are vast, even within the same country. It concluded that there was a real absence of competition that means that there is no incentive to lower prices and that it is hard for new entrants to do other than follow existing practices.

So what were the solutions? The study suggested a variety of different approaches based on a steadily increasing slope of implementation difficulty. At the bottom of the slope was the suggestion that a consumer awareness campaign could be run on the ARNET website, providing pricing information to consumers. Each regulator could review their national Inter Operator Tariffs (IOTs) “to ensure fairness and consumer welfare”.

However its main solutions were three carefully weighted but different approaches:

Regulation-driven: Arab regulators could use price controls to set an inter-Arab IOT rate.

Competition-driven: Through creating Volume-Rate trade-off deals using the OTA technology.

Fairness-driven: Enabling the Optimized Routing and billing users accordingly

Discussion of the study provided the most animated debate of the whole Arab Regulators Network event. For this is not just about well-heeled international travellers but the millions of pilgrims who make the Hadj to Mecca every year. The latter come from all walks of life and want to phone home.

Many of the Arab regulators present seemed reluctant to address the issue through price controls: one even said that it was not possible to regulate the operators in this way. The speaker from the Arab Telecoms Forum, representing telco operators in the region said that the loss of this revenue would impact on the economies of the countries affected because operators would stop investing at current levels. In any other circumstance, this could probably be described as a threat. If roaming rates come down, usage will almost certainly go up but then the question is whether income will rise as well?

The more thoughtful speakers pointed to the existence of the European Commission investigation and that it was about to issue guidelines to companies. One said that any initiative to address the issue would need to be internationally co-ordinated to prevent market distortions. What is more likely is that the pattern will follow what happened with international wholesale rates when competition was introduced. European roaming rates will become cheaper and this will exert a downward pressure on those parts of the world where European countries exchange large mobile call volumes. Remember the call-back arbitrage?

How operators will react can probably best be seen by the launch of a Vodafone scheme for calling in Europe called Passport. Aimed at post-paid users, the subscriber pays a flat fee of US1.30 per call and then can use their inclusive minutes that they are already paying for in their country of origin. The price offered may still be high but it could easily be moved downwards.

Unfortunately this is not an issue on which Sub-Saharan regulators and policy-makers have covered themselves in glory. We all smirk knowingly when we buy local SIM cards to avoid roaming charges when visiting countries in Africa but this surely cannot be a sensible way to organise things. (Any more than having 2-3 mobile phones because interconnect prices have not been properly sorted out.) Some mobile operators are now offering both pre- and post-paid roaming but rates remain high so take-up does not yet show any sign of displacing the “buy-a-local SIM” workaround.

For seekers after the holy grail, there is the African Telecommunications Union project to develop a single SIM-card usable “usable right across the African continent”. Announced in February 2005 and costing US$800,000, this study was meant to be delivered in 12 months but no outcomes have yet been announced. Indeed the ATU went to the recent ITU Doha meeting with a document calling for further studies on the subject.

A simpler approach would surely be for the regulators’ associations of the continent to approach the EU and work with it on reducing roaming rates between Europe and Africa. Also following the excellent example set by the Arab Regulators Network and Egypt’s NTRA, a country regulator in a key region like Southern Africa could take on the task of compiling some data. With information available in the clear light of day, it would then be possible to start the discussion about dismantling this example of legal daylight robbery.

If you think roaming charges are justified or have had a bad experience with roaming charges, write an e-mail to: info@balancingact-africa.com

To download the findings of the roaming charges study conducted by the Egyptian regulator NTRA, go to:
http://www.ntra.gov.eg/presentations/
Mobile%20Roaming%20in%20Arab%20countries.ppt