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Mobile Phone Charges: EUC Report

My Lords, the noble Lord, Lord Mitchell, says that he is a capitalist and entrepreneur. We pay tribute to his work in those fields over many years, but for him to say what he has just said really spells it out: one has to have regulation when there is clear abuse of the market whereby customers have no chance of making proper calculations about real prices. We thank him for what he has said. Above all, I want to add my congratulations to the noble Lord, Lord Freeman, on the truly outstanding way in which he has husbanded this important investigation through our committee proceedings. There was a danger that we would miss the momentous developments in this saga, understandably and through no one’s fault, and yet we did not and I am grateful to him and to our Clerk, officials and advisers for what was done to make sure that we were kept up to speed on this extremely complicated matter for those who are not experts in mobile phones, particularly in their use when overseas. Our celerity was especially noticeable in the expeditious treatment of a very rapidly unfolding scene once the mobile phone companies realised that the old game of excessive charging in an imperfectly informed marketplace was finished, or at least beginning to be finished. It was necessary for Sub-Committee B to move very fast indeed on this one. Everyone co-operated and the Government also acted rapidly—I thank the noble Lord, Lord Truscott, and Mrs Margaret Hodge for what they have done—to keep some control of the situation, bearing in mind that it is an international and very complex matter. The speed and decisiveness of our chairman and the members of the committee were especially needed as co-ordination between them and the members of the Government and officials at Ofcom dealing with the inquiry was going to be overtaken by the hugely energetic work of the German presidency, Commissioner Reding and Members of the European Parliament who are particularly expert on this subject. It was gratifying to see in the opening stages of this exercise that even hints of future action by the European Commission had the industry responding with charmingly hasty cuts in some roaming and related charges, once again showing how super-normal the profit-making already had been for far too long. This is yet another example of where the Commission’s energetic battling to secure genuinely open and transparent single market conditions in many different fields is gradually bearing fruit. It is a slow and painful process, and one where often the national press in different countries, particularly in this country, writes articles resisting the process. The resistance and the cartel antics of the companies in many sectors have to be fought very hard indeed, particularly in this sector. I sense the same mistakes are made by often understandably ignorant consumers—not through their own fault but through the nature of the market and the complexities of all kinds of services—in blindly accepting monopolistic, imperfect overcharging markets in areas such as bank charges and credit charges. How many holidaymakers calculate the costs—particularly if they are paying their credit card over a month, which is always very unwise—when they change from sterling into the euro? The cost would shake them if they sat down and did the figures, but it is amazing how few people do so. This happens with mortgage charges, too, particularly in this country which is not a member of the eurozone. Mortgages here are much more expensive than they are in the leading countries of the eurozone. It remains sadly true that if customers really took the meticulous trouble to work out precisely how much they are paying in some of these market places, they would be truly outraged. All too often they have only a vague idea or they shrug their shoulders and say, ““Well, it is an overseas market””. But it is supposed to be the developing single European market, not an overseas market in the conventional sense. Not all consumers of roaming services, however, were so supine. In the evidence we accumulated in February, representatives from companies such as Hutchinson, for example, admitted that they, the public, "““coming back from holidays are often horrified at … the charges that have been made””." It has always been the case that business users might pay more attention to these excess costs if they were roaming frequently abroad. Most roaming is done by business users, particularly by small and medium-sized companies, but in reality that could be offset—it sounds cynical, I know—if the costs were being borne not by the person personally but by the company’s treasurer’s department. For private consumers the situation is much starker. Naturally, we in the committee were primarily concerned with the plight of private self-paying users. Although they remain a minority, the figure goes up when the summer holiday comes along throughout Europe, mainly in Mediterranean areas. In the mean time, retail roaming prices had begun to come down a little in recent years as competition began to exert more effect and other parts of the packages offset, to some degree, the heavy incidence of the roaming net cost to customers. Some of us were surprised—the noble Lord, Lord Mitchell, alluded to some of the comments made by the companies—that Orange, part of the worldwide France Telecom group, felt that no regulation of wholesale or retail charges was needed at all; that everything could be done by competition. It also felt strongly that Article 95 of the Treaty of Rome was inappropriate as a way to impose regulation of maximum charges. I would love to hear from any noble Lord who has experience of trying to cancel a mobile phone contract. It is an exceedingly difficult process and takes a long time. You have to insist or threaten with lawyers before you get out of it. Market 17, the one for international roaming charges, was already being scrutinised under the new regulatory framework procedure, of course, but I feel strongly that the Commissioner was fully justified in seizing the reins quickly and accelerating the inquiry processes by the subsequent decision on what was effectively severe market abuse and excessive market cartelisation, notwithstanding Vodafone’s repeated claims that it had launched more competitive roaming rates as far back as 2001, described eloquently by the noble Lord, Lord Mitchell. The distinguished MEP, Dr Paul Rubig from Austria, reminded the committee in his testimony that it was bad enough facing excessive charges and profiteering in the UK, but at least it was across the water. Psychologically it seemed a little more remote and perhaps was understandable as the wires were a long way away—not that they have wires. He asked about considering the question of the psychological stress on our continental neighbours. He cited in his testimony a five cents charge for domestic calls through 1,000 kilometres of his own country, but someone on the border of Austria with Germany calling a nearby German neighbour would pay up to €2 because it was over a national frontier. Moreover, the charges were always so vague and complicated to calculate, with rebates on accounts afterwards to make it even more obscure. As he stated, it was like being in a restaurant where the waiter would give you the wine and work out the price afterwards. The committee also benefited from the written evidence given by the Bureau Européen des Unions de Consommateurs, reminding us starkly that the Commission had started action way back in 2000, but that this had not stopped the rise in unfair roaming charges and that the national regulatory agencies—even the excellent Ofcom in Britain—could not solve these problems across national frontiers. Only the Commission, once again showing the validity of its work in the single market, had that intrinsic capacity. That will be shown in many other fields in future, as the public in different member states begin to accept this, even in Britain. The British Minister in charge, Mrs Hodge, assured us that the UK Government were going all out to support the EU-wide solution because of self-evident market failure, as I said earlier. I therefore enthusiastically support the committee’s recommendations, and am glad to have been involved in an inquiry that will be of great help to mobile phone customers in years to come. However, to be fair to the companies, we also proposed a sunset clause, and some kind of review is necessary to see the changes in the marketplace over time. I welcome our references to the crucial field of data roaming services—I imagine they will outstrip individual calls in due course, as my noble friendLord Mitchell has suggested. Our conclusions also underscored the reality that high roaming prices were adversely affecting SME personnel trying to do legitimate business in what is supposed to be a single market. If wholesale regulation is the right approach, however, the consumer protection tariff, or the EU tariff, is the way forward. We understand why the MEPs have reached that decision, which will be finalised on 7 June. We have thus almost reached, last week and this week, the end stage of a complicated scene, with the agreement between the member states and the EP to fix the maximums and the caps. I believe the Council telecom Ministers will now be fully engaged in discussing properly and accepting—not just rubber-stamping by the member states—the European Parliament debate suggestions. This has been a very good example of strong work co-ordination between the national parliaments, national Governments, the European Parliament and the member states. Some people regard that as an international conspiracy. I think it is a very good thing.