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Mobile Phone Charges: EUC Report

My Lords, if ever there was a timely debate, this is it, because just for once the European Commission has shown its mettle and resisted ferocious pressure. Yesterday the European Parliament voted to cap mobile phone charges. I thank the chairman of the EU Select Committee, the noble Lord, Lord Freeman, for the efficient and inclusive way in which he led this investigation. In a short time, we took evidence and produced an excellent, hard-hitting report. The noble Lord has set an example to us all. There are two heroes of the hour: Mr Rod Baber and Commissioner Viviane Reding. Mr Baber’s name might not be known to noble Lords, but he became the first person ever to make a mobile phone call from the summit of Mount Everest. He is a hero because he had to remove his face covering and oxygen mask to make this epic call. I thank him, because at least it reminded me of the fact that the mobile phone has become ubiquitous. Very few places on Earth are out of reach, except, predictably, Hampstead, where I live and where reception is zero. When I think ofMr Baber, I also think of roaming charges. What does it take to link up a phone call from the top of Everest, via China Telecom directly to the UK? The cost per minute must have been enormous. Luckily forMr Baber, it was too cold to speak for long. The mobile phone industry has been a huge success. In 20 years, it has grown from almost nothing to become one of the largest industries on the planet. Once it was the preserve of well heeled business types, who carted their massive handsets around like suitcases—I know; I was one of them—and today the pocket-sized cheap mobile is everywhere, even in poor villages in Africa. For all its curses, it offers us communications that were undreamt of just a few years ago, from the City types who are virtually welded to their BlackBerries to worried parents who can now be secure in the knowledge that their children are safe. As a parent of teenage children, I confess that there is no sound more wonderful than the text bleep telling me that they have arrived at their destination. It has revolutionised our lives. I am going to say some fairly critical things about the mobile phone industry, which is why I have prefaced my speech by saying what a great job the industry has done. It has taken risks and invested massive amounts of money, and it deserves its rewards, or at least some of them. I must start with a quote from a Mr Tom Phillips of the GSM Association, a global trade association representing 700 GSM mobile phone operators in218 countries. It claims that its members represent2 billion mobile phone users, which is equivalent to80 per cent of all mobile users. Mr Phillips said: "““Mobile phone operators price their services to a broad range of customers … our members operate in a highly competitive market””." That is a nice try, Mr Phillips, but you are half right and half wrong. You are right when you look at domestic tariffs. Here in the UK, for example, you can walk from shop to shop comparing what is on offer. On a contract where the charge is £30 a month you get so many minutes free of charge and so many hundreds of free SMS text messages. It is highly competitive and each operator offers special goodies to entice new customers. That is the competitive environment that gives capitalism a good name. However, Mr Phillips is wrong in regard to market sectors where operators relentlessly exploit sub-markets not located on the high street and where price cartel is the order of the day. Roaming within the EU has been one such cartel. Last night at the Champions League final in Athens, tens of thousands of football fans must have been calling home to Liverpool or Milan. The cost of such calls would have been as high as 85p per minute. No wonder Vodafone was the major sponsor of the event. It must have got its money back from the football fans alone. Why has super-pricing on roaming charges continued for so long and why has the market not encouraged competition to do what the European Union has stepped in to do this August? I think I know the answer. Until last July I was gainfully employed and my company paid my mobile phone bills. I never looked at them. Now I pay the charges myself and I am staggered by what I have seen. I would bet that most business people are just like I was—totally oblivious. Someone else picks up the tab and roaming charges become just another cost of doing business. As for the man on the street—or should I say, as the noble Lord, Lord Freeman, said, the man on the beach in France or Spain—a few pricey phone calls a year from there to here hardly warrants a major investigation. Complacency has ruled and the operators have profited from consumer inertia. It is calculated that €5.8 billion per annum is spent on inter-EU country roaming charges. It is true that the operators have made some half-hearted attempts to lower roaming charges. I shall pick on Vodafone for no reason except that I use it, but what I shall say could be true of any other operator. Vodafone has come up with a great wheeze called Passport. Basically, if you make a call from abroad and you are signed up to the Passport programme, you pay a 75p fixed charge per call and then you pay the standard domestic tariff. But there is an awful lot that you are not told about this programme. It does not tell you that it works only if you use a Vodafone network operator overseas. I am fairly good on technology—probably better than most—and I know how to set my phone abroad to use a specific network, but I wonder how many other people know how to do that. It also does not tell you who its operators are. In Italy, where I spend a lot of my time, I think that I can draw the conclusion that VodafoneIT is part of the Vodafone network, but who would know that it is SFR in France? However, it is a total roulette to select your operator in Italy. You can face one way one day and you get one operator: you can face the other way on another day and get another operator. In addition, you are not told that SMS texts are not included. Vodafone also fails to mention that if you are called from a landline within the EU that does not count. If you call another user in a third country, that too does not count, even if that user is on the Vodafone network. That has now ended, and we must thank the real heroine of the hour, Commissioner Viviane Reding. Despite heavy lobbying by the industry, which is out to protect its nice little €6 billion earner, she has persevered in getting these price caps in place. Roaming charges are about to be reduced by 70 per cent, and the commissioner did it. This summer many glasses of champagne or prosecco ought to be raised to thank her. She will be saving phone users in Europe €4.2 billion a year. I call that a real result. It would be wonderful if that were the end of the story, but sadly it is not. The operators still have other sub-markets where they use their oligopolistic powers to continue to rip off consumers. SMS texting is not covered by the new European arrangement, and neither is data. The text messaging business is huge and a licence to print money. I do not understand why this sector has not been capped. Then there is data. Next month there will be a revolution in mobile phones. Apple Computer is about to launch its iPhone. Apart from being a phone, it is also a multimedia device. Users will be able to download or transfer photos, movies, podcasts and music. It is like an iPod with a high-speed mobile phone connection. The demand for data is going to explode. Imagine the very same European citizens on the beaches in Europe next year, this time sending multimedia data across the continent on their iPhones. Data pricing is uncapped and the operators are going to have a field day. This debate centres on the EU, but outside it are huge markets which are further cartel sub-markets for the operators. Many of our citizens go to the United States for their holidays or for business. Roaming charges from America are astronomical, as they are from Asia, Russia and Australia. I would like to see moves to cap these sector prices as well. The thrust of the industry criticism is that the natural forces of competition should rule pricing policy and that the EU should stay out. Well, they are bound to say that. Last Tuesday, there was a withering editorial in the Wall Street Journal accusing Ms Reding of being a ““Soviet era central planner””. What utter nonsense. I am not a politician, I am an entrepreneur by background. In my bones I understand full well the balance between risk and reward. I might have been expected to be sympathetic to the operators, but I absolutely am not. When consumers are the victims of monopoly power and when producers conspire to maintain artificial prices, the moment comes for such power to be contained. That is what the EU has done. It has taken the first step and it deserves all our thanks.