Editorial

The European Commission has set an example on how regulators should deal with service providers that enjoy a dominant position in markets but do not care much about consumers' interests. As from July 1, it imposed price caps on the roaming charges applied by mobile phone operators across Europe.

Neelie Kroes, the European Commissioner for Telecommunications, justified the new price controls when she said: "Three years since the rules (on caps on roaming charges) came in, most operators propose retail prices that hover around the maximum legal caps. More competition on the EU roaming market would provide better choice and better rates to consumers."

The mobile phone industry has grown exponentially in the last few years with ever increasing facilities now made available not just to business users but to ordinary people who are getting used to even transferring data via their mobile phones.

According to a recent report by the EU, mobile phone operators in Malta charged rates "that hovered around the maximum cap set by the EU in 2007". This is clearly not in the interest of consumers who need to be protected from the excessive zeal of operators to boost profits instead of engaging in healthy price cutting competition to win market share.

The savings that are expected to be gained by consumers as a result of this capping of fees are very impressive. Since 2005 cross-border mobile roaming fees have gone down by about 73 per cent and the cost of a text message by 60 per cent. Despite the appeal of the Commission to operators to reduce charges even further than the maximum caps set in 2007, most operators kept rates close to the legal limit of 43c per minute for making a call, 19c to receive one, and 11c per SMS.

The Commission considered these charges as not in the consumers' best interest and did not hesitate to impose new lower caps for this year and even lower ones for next year. Data roaming charges have also been capped at significantly lower levels than those applicable at present. Other changes include a mandatory system whereby mobile phone operators have to advise consumers when they reach pre-agreed limits of phone use to access the internet on the mobile phone when they are abroad.

The EU remains a free market where private operators are at liberty to set their own prices for the services that they provide. The dynamics of competition should in theory ensure that the consumer will always get the best deal. Unfortunately, this does not always happen in the real world. A high threshold for new operators to enter into this lucrative market often gives rise to formal or informal cartels that do not favour the consumers.

It is for this reason that Ms Kroes, who was formerly a much respected Commissioner for Competition, did not hesitate to impose caps on the charges made by operators who have a dominant position in the European market. It is being reported that when these caps come up for revision in June 2011, the Commission will recommend that they stay in place for a further period rather than be scrapped - something operators have been lobbying for in Brussels.

While the free market should be left to operate without undue interference from regulators, when the operators give a raw deal to consumers, no regulator should hesitate to protect users' rights for better and less expensive services.