Mobile operators’ rip-off scheme

South African mobile users can pay as much as R500,000 per GB when using international data roaming, but despite a backlash from consumers mobile operators seem unwilling to change the status quo.
High mobile roaming rates are a global problem, and it has become such a prominent issue that the European Commission (EC) has stepped in to lower roaming charges in the European Union (EU).
In its latest announcement the EC said that “from 1 July the European Union’s mobile roaming regulation will be extended to include price caps for data downloads resulting in the cost of downloading data or browsing the internet being capped at 70 cents per megabyte, plus VAT. This is six times lower than 2009 prices”.
“Bill shocks should become a thing of the past for anyone travelling outside the EU. Also from 1 July this year consumers will get a warning text message, e-mail or pop-up window when they are nearing 50 euro of data downloads. They will then have to confirm they are happy to go above this level to continue data roaming. Currently this alert system is only operational within the EU,” said the EC.
“By putting price caps on data we have created a roaming market for the smart phone generation. More than that, we have ended the rip-offs familiar to anyone who has used a mobile phone while travelling abroad,” said the EC Vice President Neelie Kroes.
South African consumers and operators
South African operators blame their international roaming partners for the high roaming bills, pointing out that they merely pass on to their subscribers the bill which they receive from their roaming partners .
This argument may sound acceptable, but what about international travellers using Vodacom, MTN or Cell C’s networks for roaming purposes? The answer is telling.
Orange UK customers using data in South Africa can expect to pay over R100,000 per GB (8 Pounds per MB). Sprint customers from the United States can expect to be billed R167,000 per GB ($0.019/KB) when using data in SA.
The problem
So if international travellers pay exorbitant fees when roaming in South Africa, and local subscribers pay exorbitant roaming fees when travelling internationally, where does the blame lie?
The fact is that mobile operators charge extraordinarily high roaming charges to international visitors – much higher than the fees they charge to their local subscribers.
International roaming involves unique costs such as IOTs (Inter Operator Tariffs), which is the wholesale cost an operator must pay to a foreign network for its customers to roam. The IOT roaming cost accounts for a large part of the overall cost of roaming.
Other costs to operators include financial clearing house, data clearing house, signalling, Global Roaming Exchange, roaming traffic management tool costs, and various other costs which must be considered in providing a roaming service.
However, the IOT roaming costs is where operators coin it. Mobile operators typically have very high IOT rates, which mean that travellers get nailed for using data when roaming internationally.
Vodacom spokesperson Richard Boorman added that the situation is made worse through the regulatory pressure between EU operators.
“European operators who often charge other operators outside of the EU (such as Vodacom) much higher wholesale IOT rates to compensate for the loss of revenue resulting from the intra- EU regulation,” explained Boorman.
When it comes to the high roaming rates in South Africa, Vodacom blames the international operators. “The IOT which Vodacom charges foreign networks is very competitive, although foreign operators usually add an excessive markup, which is then passed onto their customers,” said Boorman.
It takes two to tango
Vodacom and Cell C said that that are actively trying to negotiate lower roaming charges with other operators.
“We are attempting to renegotiate high roaming charges with other operators, including those in South Africa, which are amongst the highest in the world,” said Cell C CEO Alan Knott-Craig. “We are also actively looking at alternative ways to reduce high roaming charges.”
Vodacom said that their strategy is to encourage roaming on their network by offering attractive wholesale roaming rates to foreign operators. “At the same time, we’ve got a group of people whose main job is to negotiate lower roaming rates with foreign operators,” said Boorman.
“The win-win situation is where we end up with better roaming rates for our customers and the other operator ends up with decent rates for its customers. The part that we have no control over is the markup that the other operator adds to our roaming rate,” said Boorman.
One industry player, who asked not to be named, said that high wholesale local roaming rates are also used as a negotiating tactic to encourage international operators to lower the roaming rates it offers to South African customers.
MTN was asked about the high mobile roaming rates and what their position is on the issue, but MTN opted to not answer questions about the issue.
The best thing to do
Knott-Craig has sound advice for international travels. “Most travellers in South Africa use our prepaid products which offer them the same low rates as our own customers, which as you know are the lowest in South Africa,” said Knott-Craig.
South African travellers visiting international destinations will be well advised to do the same. Purchase a prepaid service in the country you are visiting and avoid getting an exorbitant bill from your South African cellular provider.
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