Will the end of free EU roaming make the UK mobile market fairer? Don’t bet on it, writes Zach Meyers, of the Centre for European Reform.
British consumers have become accustomed to using their mobile phones without incurring any additional charges while visiting the EU.
Prominent Brexiters, such as British justice secretary Dominic Raab, promised that free roaming in the EU for UK consumers would continue after Brexit.
But three of the four major UK mobile network operators have recently announced the return of mobile roaming charges. The proposed charges are modest, and the Economist argues they will actually make the UK mobile market fairer – because consumers who do not roam will no longer have to cover the costs of those who do.
But it is wishful thinking to expect the UK market to become fairer overall. More likely, price-sensitive consumers will simply give up the convenience of roaming, and UK consumers who still roam will be lumped with high charges.
The UK cannot solve this problem unilaterally: any solution needs an agreement between the UK and the EU.
In order to understand how Brexit affected roaming charges, it is necessary to understand that there are two distinct markets that influence how much consumers pay when roaming.
The first is the wholesale market, which determines how much roaming costs a mobile operator. In this market, mobile operators negotiate roaming agreements with their counterparts in other countries. Under these agreements, a mobile operator pays the foreign operator a fee (called the ‘wholesale charge’) when their customer uses that foreign operator’s network to make phone calls, send messages, download films or browse the internet.
The second is the retail market, which determines how much a customer pays their mobile phone operator to roam when abroad. Historically, as Figure 1 shows, mobile operators usually charged their customers specific fees for roaming (called the ‘retail charge’).
The home operator historically set the retail charge at a level that recovered the associated wholesale charge and earned an additional profit margin. Before the EU regulated these charges in 2007, the retail profit margin in Europe could be as high as 35 percent.
The Author, Zach Meyers, is a Research Fellow with the Centre for European Reform
