The phrase "talk is cheap" never held water for Europeans roaming across countries on their cell phones. But talk is finally getting less expensive. In a landmark move to reform the billing of mobile telephone calls, European Union lawmakers voted to cap roaming fees that mobile operators can charge consumers for minutes used while out of a home market.
European consumers and business executives have long lamented the high rates charged for calls that cross borders of EU member countries, even though the actual distance of a call may be only a few miles. Unlike the free roaming consumers enjoy across the United States, Europeans pay handsomely -- sometimes the equivalent of several U.S. dollars -- to make and receive even brief calls across borders.
European operators such as Vodafone (NYSE: VOD), Telefonica (NYSE: TEF), Deutsche Telekom (NYSE: DT), and France Telecom (NYSE: FTE) slammed the EU initiative in March 2006, when it was formally proposed. The push for reform was seen as a direct attack on the estimated 10% to 18% of revenue that operators receive from roaming calls.
But there is a silver lining in the reforms. In anticipation of the caps, operators have been launching new plans that drop roaming rates. Vodafone has noted that -- surprise, surprise -- millions of people registering for the lower fees are actually talking more, stabilizing roaming revenue instead of reducing it. So much for the "regulations will strangle the industry." U.S. operators Verizon (NYSE: VZ) and AT&T (NYSE: T) have already seen how free roaming propelled a nation of cell phone junkies to yap in abundance, spending more at home and abroad.
In addition to spurring more voice use, the move to cap roaming charges could have even bigger implications. High voice tariffs are partially responsible for the boom in text messaging that has swept Europe, since it was far cheaper to tap out dozens of short messages than make even a quick, one-minute call. Reforms may spur further innovation in wireless data services, encouraging more use there, too.
So while there will be pain and lament in the near term, roaming-fee reform may very well wind up being the best thing that ever happened to mobile operators in Europe -- and their investors.
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Fool contributor Dave Mock prefers quality yapping over quantity yapping -- less is often more. He owns no shares of companies mentioned here. Dave is the author of
The Qualcomm Equation. France Telecom is an Income Investor pick. Vodafone is an Inside Value pick. The Fool's disclosure policy stands as a model policy for customer satisfaction.
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