The European Parliament has adopted a new Regulation to dramatically reduce and then abolish mobile phone roaming charges for EU residents travelling within Member States, and to establish clear net neutrality rules, starting in April 2016.

What?

After several years of negotiations, on 27 October 2015 the European Parliament passed a Regulation amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services and amending Regulation 531/2012 which deals with roaming on public mobile communication networks within the EU.

Roaming

From 30 April 2016, the amendments to Regulation 531/2012 impose a significantly reduced cap on “roaming surcharges”, those fees that EU mobile phone network operators add to their customers’ bills for calls, text messages and mobile Internet / data usage on top of their standard charges while the customer is away from their own country but still within the EU. At present, the amount that mobile operators can charge for calls, text messages and mobile data usage in other countries in the EU is capped at certain levels (as set out below).

From 30 April 2016, the current caps will be removed and replaced with a transitional regime under which operators will be able to apply a surcharge in addition to their standard domestic rates (such amount to be in-line with the wholesale charge for the relevant roaming service). However, when these maximum surcharges are added to the relevant domestic charges of the operator, the Regulation states that the total figure should not exceed the current roaming caps. It is intended that from 15 June 2017 such roaming surcharges will be banned altogether, meaning that EU citizens would pay the same to use their phones in any EU state as they do in their home country. However, operators will be able to apply for authorisation to apply a surcharge on top of their domestic rates to enable them to recover their costs of providing such services, provided that such surcharge will need to be in-line with the maximum wholesale charge for the relevant services and information to support its imposition is provided to the relevant regulatory authority every 12 months.

The maximum surcharge that can be imposed from April next year represents a reduction of up to 75% against the current maximum amount operators can charge customers, as shown below:

Click here to view table.

The reasons behind it

The European Parliament noted that the EU mobile communications market remains fragmented, with no single mobile phone network providing coverage across all Member States. This means that mobile phone network operators have to purchase or exchange wholesale roaming services with operators in other Member States, in order to provide seamless services to their own customers who travel within the EU. The original domestic operators then impose additional roaming charges on such customers to be able to use certain services when travelling in the EU.

British newspapers regularly report on holiday horror stories, where holidaymakers have returned from Europe and been confronted with unexpectedly high bills for using their phones during trips. The EU has always been pro-consumer in relation to such charges, but the Parliament’s reasons for acting can been seen as more fundamental and go to the heart of the EU’s overall purpose. Andrus Ansip, European Commission Vice-President with responsibility for the Digital Single Market has been reported as saying:

“This is not only about money; this is about bringing down barriers in the Digital Single Market. Today's achievement is a first step towards a Telecoms Single Market.”

In 2014, the Commission’s own survey of 28,000 EU citizens indicated that 47% of people would never use mobile Internet in another EU country and more than a quarter switch their phones off altogether due to mobile roaming charges. Frequent travellers are even more likely to restrict their usage, despite the fact that data roaming is now up to 91% cheaper than in 2008 when the EU first introduced price caps. In response to the survey, European Commission Vice President Neelie Kroes said:

"It’s not just a fight between holiday-makers and telecoms companies. Millions of businesses face extra costs because of roaming, and companies like app makers lose revenue too. Roaming makes no sense in a single market – it’s economic madness.”

The EU’s central ideal of a single market operating across all Member States is all about the free movement of people, goods and services, and roaming charges are perceived by the Commission as being barriers to these goals and an obstacle to Europe’s digital economy.

Although some operators offer packages which include EU-wide roaming at the same cost as domestic use, the lack of pan-EU network operators and the continued imposition of significant roaming charges has meant that the Commission has felt compelled to regulate to address this situation.

Net neutrality

Currently, Internet service providers are able to manage end-users’ access to the Internet, and to manage traffic across their networks, in a manner that the Commission views as incompatible with the aims of the Digital Single Market. Practices that have been subject to criticism include “throttling”, where certain users’ access is limited – in particular their upload and download rates – in order to limit the effect of a high-data user on other network users, and ‘blocking’ where Internet service providers may block certain sites or services from being accessed by end-users.

In December 2009, the European Commission noted its support of net neutrality, stating:

"The Commission attaches high importance to preserving the open and neutral character of the Internet, taking full account of the will of the co-legislators now to enshrine net neutrality as a policy objective and regulatory principle to be promoted by national regulatory authorities."

This policy objective is reflected in the new Regulation which, by amending Directive 2002/22/EC, protects the right of every European end-user to access Internet content without discrimination or interference. Under the new rules, which come into force on 30 April 2016:

  • every EU citizen must be able to have access to the open Internet, and all content and service providers must be able to provide their services via a high-quality open Internet. Blocking and throttling of the Internet will be illegal, although reasonable day-to-day traffic management, for example to ensure network security, will be permitted; and
  • all traffic will be treated equally, with no paid prioritisation of traffic in the Internet access service.

As a result of these amendments some have argued that the EU will have the strongest and most comprehensive open Internet rules in the world, with strong end-user rights and common rules safeguarding equal and non-discriminatory treatment of traffic in the provision of Internet access services.

So what?

Roaming

At first glance the amendments to the Roaming rules seem like good news for holidaymakers and workers who travel regularly within the EU and the companies that employ them, as well as developers and providers of apps and online services used by travellers. Users and businesses will also appreciate the greater level of predictability and transparency with regard to costs.

However, some commentators have suggested that consumer gains will be off-set because operators may increase their domestic pricing to compensate for the lost roaming revenue, with non-travelling customers effectively subsidising EU citizens who regularly visit other EU countries. Operators might also raise the cost of roaming in non-EU countries to help to make up for the shortfall.

A more optimistic view focuses on the customers who currently restrict their phone usage when travelling in the EU, but who might choose to use their phones normally if there were no financial penalty for doing so; in essence, it makes little sense for operators to discourage customers from using their services. The European Commission’s 2014 survey suggested that telecoms companies may be missing out on as many as 300 million phone users due to prohibitive roaming charges, which could represent a highly significant and sustainable source of additional revenue that would eclipse any losses arising from the removal of these charges.

Finally, the new Regulation does include some protection for mobile network operators. Firstly, the purpose of the Regulation is focused on customers who travel periodically. Roaming providers are able to apply a “fair use policy” to prevent abusive usage by customers, for example “permanent roaming” where a customer signs a cheap contract for mobile phone services in one Member State with the intention of using it mainly in another, more expensive, Member State. Secondly, the surcharge may not have disappeared altogether as mentioned above, with roaming providers being able to request authorisation to apply a surcharge where they are not able to recover their overall actual and projected costs of providing regulated roaming services.

In conclusion, whilst EU mobile phone network operators will see a forced change to their charging models from April next year when roaming charges are reduced and subsequently abolished, there is also an opportunity for them to benefit from a potential dramatic increase in mobile phone usage amongst customers travelling within the EU.

Net neutrality

The introduction of net neutrality legislation will impose common EU-wide Internet rules on Internet service providers, with the aim of avoiding further fragmentation in the Digital Single Market. Until now, there have been no clear rules on net neutrality at an EU level, and a pan-European approach was considered by some to be increasingly necessary, as the practice of differing approaches across 28 Member States would not have been a sustainable solution for the industry.

In a typically pro-consumer approach the new rules will create a positive individual right for end-users to access or distribute Internet content and services of their choice. This right can be enforced by courts as well as by regulatory authorities, increasing consumer choice, competition and consumer’s welfare. It is also intended that net neutrality rules will improve transparency for consumers, as providers will have to provide their customers with more information (for instance informing their subscribers about their Internet speeds). One of the reasons behind such an approach is to address issues relating to discrepancies between the advertised speed and the delivered speed of Internet services, with – on average – it being shown in studies published by the European Commission that consumers only appear to receive 75% of the advertised speeds for which they pay.

However, Internet service providers have argued that (instead of net neutrality legislation) what is required is investment to improve the capacity of the existing infrastructure, which is struggling to cope with increased demand from video downloads and online streaming from sites such as YouTube, iPlayer and 4OD, which can slow the speed of the Internet for all users. Additionally, Internet service providers argue that a greater element of traffic management is required to protect the security and integrity of networks, to deal with temporary or exceptional congestion, and for the continuous delivery of time-sensitive services such as video conferencing that may require prioritisation of traffic for better quality, which the net neutrality rules will interfere with. Such rules can also impact on the commercial offerings that the Internet service providers are able to provide going forward.

Following 30 April 2016, it is likely to become apparent whether the new rules on net neutrality have achieved the right balance between ensuring the openness of the Internet and the reasonable use of traffic management by Internet service providers.