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Mobile Phone Charges: EUC Report

My Lords, this has been a very useful, constructive and informative debate. If only the whole issue had been treated in this thoughtful way, we might well have ended up with better regulation earlier. I thank the noble Lord, Lord Freeman, other members of the European Union Committee and the internal market sub-committee in particular for their work on this thorough and considered report before your Lordships' House. I am pleased to say that the Government agree with virtually all the report’s conclusions and that the committee’s views have provided a welcome and valuable insight into this topic, which has been the subject of protracted and complex negotiations during the past year. I thank the noble Lord, Lord Dykes, for his kind words on the work done by Her Majesty's Government in this area. The noble Lord, Lord Dykes, mentioned concerns about transparency. I certainly agree that it is important that people know the costs of their calls when they travel and the regulation ensures that such prices are delivered by SMS as soon as a foreign country is entered. A wide range of points and questions has been raised today, but before addressing them individually, it might be useful if I outlined where we now are in the process. As the noble Lord, Lord Freeman, said—I thank him for his elucidation of this matter, which I am sure has helped all noble Lords—the regulation is almost taking final shape. As my noble friend Lord Mitchell and the noble Lord, Lord Freeman, mentioned, the European Parliament yesterday concluded its first reading of the relevant dossier. The text will be presented for endorsement by Ministers at the Telecoms Council on 7 June. Unless the council took a radically different approach from that previously taken during the discussions last week, the regulation will be agreed. Indeed, if there was not an agreement, the regulation would have to be sent back to the Parliament for a Second Reading, so we would not be seeing cheaper roaming calls until next Easter at the earliest. Obviously, we want to avoid that. So-called first reading agreements are not that common and involve an enormous commitment between the institutions to find a compromise. This dossier was certainly no exception in that regard; and involved no fewer than four long and detailed negotiations between the council, represented by the presidency, the Commission and representatives of the European Parliament. The fact that an agreement was reached says a lot about the skills of the German presidency. I take this opportunity to thank ministerial colleagues in France, Italy and Spain who worked tirelessly with my right honourable friend Margaret Hodge to secure a solution that did not damage the competitiveness of this important sector for Europe. The European Union has agreed at this stage that the Euro tariff will be the same as a safety net, as noble Lords themselves wanted in their report. That allows for innovation, as other tariffs can be offered. A variety of figures have been quoted in the press purporting to be the new mobile roaming prices. It may be worth restating them at this point. The Euro tariff will be available to all roaming customers. Under it, outbound calls made to other member states under the tariff will be charged at 49 eurocents—that is, 33.5p per minute. Calls received from other member states will be charged at 24 eurocents, or 16.5p per minute. Those rates will fall in the next two years of the regulations to 31.5 and 15p in year 2 and 29.5 and 13p in year 3. All users will not automatically be transferred on to the Euro tariff. Those already on more favourable tariffs, perhaps by virtue of using bundle services, will be offered the Euro tariff but will not be obliged to take it and will not be put on it unless they ask. That is an important point of principle for the UK. The new roaming customer or one who moves to another network can be offered a variety of tariffs but will be put on the Euro tariff if a choice is not made. When moving from one network to another, users will be entitled to receive information about the new tariffs that they will be charged. At the wholesale level, prices will be capped at30 eurocents per minute, equating to 20.5p for the first year, which will drop to 19p in year 2 and 17.5p in year 3. These rates, which we believe are an adequate reflection of costs, should not, despite what one reads in the media, cause increased prices in the domestic market. On the other hand, the initial proposals made by the Commission would have had this effect. As for the introduction of price caps, I am pleased to confirm that the wholesale cap will be introduced two months after the regulation is published, which will probably be in September, with the Euro tariff taking effect a month later. That will mean that by October all subscribers should have the choice of adopting the new tariff. The regulation contains a sunset clause, as the noble Lord, Lord Dykes, said, which means that unless its continued existence proves necessary the regulation will cease to operate after three years. The noble Lord, Lord Freeman, also mentioned this. The need for an extension of the lifespan of the regulation will be determined by means of a review, which will be carried out after the regulation has been in force for18 months. It is not automatic and any extension over the three years must be voted on again by the European Parliament and Council. I believe that that answers the noble Lord’s point on that matter. The regulation has attracted a great deal of interest, for obvious reasons. Mobile phones have become an integral part of many people’s lives and working practices, as my noble friend Lord Mitchell graphically illustrated to your Lordships' House. Nobody enjoys paying high prices for something they have come to regard as a necessity. There was general agreement from the very start that the objectivesof this regulation were good. As a well-known advertising slogan said, ““It’s good to talk””—but not at £1, or more, per minute. As noble Lords said, lower prices for international mobile phone calls make sense. Clear information about charges for roaming calls also makes sense. Lower wholesale prices between mobile operators are also to be welcomed. The main objective of this regulation is to encourage business people and leisure travellers to use their phones in the knowledge that they will not face a hefty phone bill later. It is also intended to encourage smaller mobile operators to enter the market. Competition drives innovation and gives rise to a better deal for the consumer. The noble Lord, Lord Lee of Trafford, referred to charges being raised in national markets. We do not think that will happen. We agree that competition should prevent that happening. We have taken action to ensure that rates are not set below operators’ costs. There have been many calls—if noble Lords will forgive the pun—on mobile operators to lower prices, especially from the European Commission, but up until now they have been to no avail. Furthermore, the national telecoms regulators across Europe stated through the European Regulators Group—the noble Lord, Lord Lee of Trafford, made this point—that they were unable to take effective action individually and had asked the European Commission to intervene. I agree with the noble Lord that the role of the regulators should be enhanced and that they should remain vigilant. I support his call for vigilance on the part of the regulators. Finally, in July last year, the Commission, with a fanfare, issued a draft regulation which aimed to address this problem. Like other noble Lords, I commend Commissioner Viviane Reding for her heroic efforts in this sphere. We believe that we have now agreed a good and pragmatic solution which will deliver the desired results. Importantly, in relation to this debate, it is almost entirely consistent with the form of regulation called for by the committee. It balances the objectives of lower prices, innovation in the marketplace and sustained competition. It ensures that subscribers are not forced on to tariffs that might be less favourable to them and secures enhanced levels of transparency for all citizens using their phones abroad. It has a ““sunset”” clause limiting the life of the regulation to three years, unless it is decided that an extension is needed. Importantly, the regulation—after some debate in the European Parliament—applies only to voice calls; the price of text messages and data downloads are not controlled. A number of noble Lords made that point, including the noble Lord, Lord Freeman, my noble friend Lord Mitchell and the noble Baroness, Lady Wilcox. However, it contains a provision that the price of such services should be made available to subscribers when they are roaming and that information about these should be collected by the national regulatory authorities. If these prices remain at an unacceptably high level, they may also be regulated in the future. Clearly, it would be preferable if this did not prove to be necessary, but the Commission has already said that it will monitor the situation, and Commissioner Viviane Reding has been reported as confirming that. The Commission will also review data and SMS costs in its report after 18 months. As I have noted, the UK has worked closely with other member states to put forward constructive suggestions throughout these negotiations. The noble Baroness, Lady Wilcox, referred to sufficiency of data for formulating the regulation. The data used to derive the wholesale price cap levels were based primarily on detailed cost calculations and analysis undertaken by national regulatory authorities and were consulted on with mobile operators in order to set mobile termination rates. We believe that these are a reasonable proxy for the most costly parts of providing international roaming services. Further analysis and data will always improve the accuracy of any measure. However, the need for further detailed analysis should be weighed against any resulting benefit. At this stage we believe that the additional burden incurred by a delay in implementing the regulation would outweigh any benefit gained by a more accurate understanding of underlying costs. As regards the cap on mobile phone charges, I should point out that the Euro tariff is not a cap but a tariff with regulated rates available to all. Our aim has always been to ensure that the proposed regulation would deliver a better deal for the consumer without unnecessary damage to the telecommunications industry. I suggest that, in the light of the regulation agreed by the European Parliament yesterday and our debate this afternoon, that has been achieved. In conclusion, I thank all noble Lords who have taken part in the debate, and I commend the committee on its excellent work.