Right path for roaming?

Plans to reduce roaming rates are laudable, but regulators must exercise caution
Roger Field is editor of CommsMEA.
Roger Field is editor of CommsMEA.

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With operators making solid progress to improve roaming services in the MENA region, the GSMA warns regulators against taking a similar approach to Europe and imposing a one-size-fits-all set of regulations on operators.

The GCC issued a statement in January calling on Gulf telecoms operatorsto slash mobile phone roaming charges to consumers by at least 50% from Feb 1. At first sight, the statement, which was made by Abdullah al-Shibli, GCC assistant secretary general for economic affairs, appeared to make sense – particularly from the point of view of consumers. Roaming rates in the Gulf are significantly higher than other regions, including Europe.

But what enthusiasts of such regulation often forget is the reasoning behind the roaming tariffs as they are. Operators in the region have invested heavily in their networks in recent years and in most Gulf countries, competition has also been encouraged. Roaming revenues account for a significant proportion of overall revenues for many telcos, and a sudden forced reduction in tariffs at this stage may well simply lead to price rises in others, or less investment in other areas.

Of course, this is not to say that the GCC’s aim to see roaming tariffs in the Gulf fall in line with those in other countries and regions is inherently wrong. It is just that regulation can sometimes have unintended consequences. And on top of this, there is much evidence that Gulf operators are already moving in the right direction.

As Peter Lyons, director of spectrum policy, Africa & Middle East at the GSM Association, stated at last month’s Roaming MENA Conference in Dubai, the region’s operators are making progress. Indeed, the cost of outgoing roaming calls from UAE to Egypt from 2007 to 2011 fell by 48%, while the same service from KSA to Kuwait decreased by 82% in the same timeframe.

“Operators are responding to competition in the market and are driving prices down across the region,” he said.

Moreover, operators have also been making solid e_orts to increase transparency of roaming rates. Operators including Du and Etisalat simplified their roaming tariffs in 2009 and 2010 respectively. International outbound roamers with Etisalat are charged one of three rates according to their location, while Du launched its “One World, One Rate” to remove any confusion from the cost of roaming for its subscribers.

While market forces and competition appear to be pushing operators in the right direction with respect to roaming, any unduly heavy-handed regulation could potentially cause more harm than good. One of the main challenges with drafting any pan-GCC regulation is that each of the countries has different economies, with their own inflation rates and GDPs, so a one-size- fits all approach can be more of a burden for some operators than others. It can also lead to what Lyon’s refers to as the “waterbed” effect, where pushing down prices in one area will simply lead to a rise in another.

“Introducing regulation at this point could distort the market and we really think it’s best to leave a good thing alone. If it’s not broken, don’t try to fix it,” Lyons said. But not everybody agreed with the view that regulators should keep out of roaming. One speaker at the roaming event pointed out that regulation is also sometimes needed to protect against distortions in the market that can be created by dominant players. He cited the example of Zain Group, which launched its “One Network” initiative, which offered roaming at local rates across many of its operations, as an example. He questioned how other smaller operators would have been able to compete with this type of initiative.

But most speakers at the event seemed to tow the operator line that regulation at this stage is more likely to slow down, rather than speed up, a fall in roaming rates. Lyons also revealed that Europe offers an example of how regulation can sometimes have the opposite effect from what was intended by its architects. When roaming regulations were first implemented in Europe in 2007, the cost of roaming was already falling rapidly. This rate slowed following the regulation. Regulators may be well advised to study the lessons from Europe before following a similar path in the Gulf.

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