*Mobile Phone Roaming: Easier but Not Cheaper
iht.com
Thursday, March 18, 1999, page 10
By Eoin Licken International Herald Tribune
PARIS - When digital mobile phone networks were first introduced in the early
1990s, one of the most exciting aspects of the new technology was the ability to
roam, to make and receive calls using the same phone in different countries.
Roaming far and wide gets easier every year. There are more than 135 million users
of the most popular digital mobile network type, GSM (Global System for Mobile
Communications), with networks in 129 countries. But while roaming may be easy,
it is not cheap.
The first decade of mobile roaming has been characterized by operators adding up
to 50 percent onto the cost of roaming calls, while in some instances value-added
tax has had to be paid twice on the same call, meaning calls made while roaming
may cost up to 70 percent more than calls made on the same phone at home.
Meanwhile, roaming is becoming more and more popular. A study of nearly 300
roaming users last year by the London-based consultancy Philips Tarifica found that
convenience, ease of use and security rated higher than cost when companies were
choosing their communications methods while abroad.
Before analyzing the components of roaming costs, it is important to realize that
there are two categories of roaming charges when a mobile phone is used outside
its home network. The first is a charge for receiving calls. Normally within Europe,
the person calling a GSM number pays for the call, unlike in the United States and
parts of Asia where the mobile user generally pays a portion of the cost of calls
received. But if the mobile is roaming - using another network - the mobile user
pays the bulk of the call charge: the cost of transferring the call from the home
network to the visited network. This is to ensure that callers only pay the usual rate
for a call to a local mobile.
But what if the person who makes the call is also abroad, perhaps in the same
country as the person being called? In this case, both end up paying for international
calls. Imagine, for example, that a French mobile phone user travels to Rome. If a
colleague in Rome calls her, he pays for a call to France, while she pays to transfer
the call from France back to Rome. They might be next door to each other, but the
operators are charging for two international calls.
The second additional roaming cost applies when making calls. Besides paying the
appropriate call rate determined by the visited network, that network's operator
frequently adds a roaming markup per call, known as a visiting public land mobile
network (VPLMN) charge. This is billed via the home network, which may also
charge the user an additional roaming markup per call, known as a home public
land mobile network (HPLMN) charge.
The GSM operators' body, called the GSM Association, has a gentleman's
agreement that visiting network charges are limited to 15 percent, while home
network charges are left up to operators. However, some operators, for example in
China, charge 50 percent visiting network and zero home network markups, while
British operators Cellnet, Vodafone and One 2 One charge 35 percent home
network and 15 percent visiting network.
Small wonder then that recent Vodafone results showed roaming calls contributed
25 percent of the outgoing airtime and access revenues. Adding insult to injury, if
the home network and visited network are in countries between which value-added
tax is not recoverable, then users are likely to pay tax in both the countries for the
same roaming call. This does not apply, for example, when roaming between EU
countries.
Thus, with most countries' value-added tax rates around 20 percent, users making
roaming calls may pay 15 percent to 70 percent extra per call.
An end to this complex series of charges is in sight. The network operators say they
are changing the way roaming calls are charged, meaning users will better
understand the charges involved, and prices may fall. The 323 operators who are
members of the GSM Association have agreed to decouple roaming charges from
local tariffs charged by visited networks. Instead, a system of network operators
charging each other wholesale rates for roaming calls will apply, known as an
inter-operator tariff (IOT) scheme. This is due to be introduced by the end of April.
By charging each other at wholesale rates, operators may be able to benefit from
bulk discounts, while roaming call charges will be independent of fluctuations in the
costs of non-roaming calls in visited networks.
Pietro Cotino, who chairs the GSM Association's billing and accounting rapporteur
group, said the IOT scheme will simplify the charges for international roaming.
Though careful not to promise price reductions, he nevertheless said operators
would be freer to charge what they like, and home operators may decide to offer
new roaming tariff plans. ''More innovation is expected,'' he forecast, citing possible
examples such as cheaper roaming charges for high users, or a single charge for all
roaming calls within Europe.
But industry watchers are skeptical. Julian Herbert, research manager at English
mobile research firm EMC, said the IOT plan was first announced in September
1997, but ''little has been heard from individual operators about progress since the
GSM Association's Warsaw plenary in April 1998.'' The lack of any prominent
IOT announcements from operators fuels suspicions that the new plan will not lead
to price reductions.
Whatever the prospects of simpler roaming charges, there is no immediate prospect
of smarter call routing to avoid sending all calls via the home network. One solution,
called optimal routing, is being evaluated by operators. In the example given above,
this would allow the telephone switch in Rome to realize that the called mobile was
also in Rome, and hence it wouldn't route the call via France.
But Mr. Cotino said operators were not convinced that the required investment
would be justified given that international call rates were falling.
The presence of a business case is a big if. At last month's GSM World Congress in
Cannes, industry representatives who preferred not to be named felt the technology
already existed to implement optimal routing, but said the operators were slow to
install technology that would reduce their revenues.
So, while roaming continues to get easier, with more networks to choose from, the
prospects for it getting cheaper are not too bright, in the short term at least.
EOIN LICKEN is a free-lance journalist based in Paris.
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