Data roaming

This story is actually an ‘old’ one:

While on vacation in Mexico, Alberto downloaded Wall-E over his wireless carrier’s network, only to be slapped with an insane $62,000 bill.

After explaining to the carrier how outrageous that is, he was made an offer: They’d knock the bill down to what it cost them in bandwidth. Unfortunately for Alberto, they claimed their cost was still $17,000.

There are many stories of huge data charges while outside of your home country and accessing data. The only exception is on Blackberries. The issue (I think) is that mobile carriers charge the carriers of international visitors excessive roaming charges. And by excessive I mean clearly above the marginal (or any other cost) of providing such services. How do we know this? Because they don’t charge their local customers those amounts.

It is amazingly universal but also highly damaging to a clear reason to have a data-enabled mobile — being able to get information on the fly while traveling. The ability of RIM to get around this with Blackberries indicates that deals are possible. The question is why haven’t they been done. Why is it so difficult? Moreover, at these prices, it is not like many, other than the occasionally unwitting soul, are actually giving the international carriers any revenue. Could it be that the transaction costs associated with charging are so high that they don’t want the revenue? If that is the case, why not a ton of reciprocal deals that allow the data to be freely used and only kick in when there is excessive use? Something is seriously amiss here.

4 thoughts on “Data roaming”

  1. Na, they just don’t understand what their demand curve looks like.  They think its like 20 years ago, when someone having a mobile internationally was quite likely to have arrived on a private jet. Being a status good, the demand was extremely inelastic.

    Now even lowly academics find such a facility of practical use – its not about prestige.  They are missing out on profits here just through lack of vision.

    Like

  2. The EU has tried to encourage data providers to cut roaming costs within Europe. But the providers didn’t really respond and they now are producing legislation that will regulate roaming costs within Europe from July this year. It is interesting how hard this has been to get working even within “one market”. (An article I found on a quick google search on this is at http://www.theregister.co.uk/2008/09/23/eu_reding_sms_data_roaming_caps/)

    Like

  3. Joshua, there are maybe 400 mobile networks globally (perhaps 800-1000 including MVNOs). With roaming, each has to do deals with each other, so telcos do not negotiate each bilateral very often. The real money is in inbound roaming (which only the physical networks, not the MVNOs, can get), as consumers (travellers) are not very price-sensitive (when travelling internationally – many are corporate so don’t even pay their own bill), and generally don’t know how to switch to a different network (find the network settings menu, scan for available networks, select one…). Even if they do that, they generally don’t even know which is the cheaper network (assuming their Australian network differential-prices – Telstra and [somewhat] Vodafone are the only ones that do).

    End result, demand is extremely price-inelastic. If you were a foreign mobile network going into a bilateral roaming pricing negotiation with an Australian network under such circumstances, what would you do? (Answer – mutually put up prices yet again – unless there was a significant segment of price-sensitive/savvy travellers on that bilateral route).

    The only real hope for better roaming data pricing is for one carrier (maybe a minor telco in a minor country) to break ranks and offer global flat-rate (or low-rate) data pricing, as data users are not locked in by their contact number. May happen one day…

    Like

Comments are closed.