How I Learned to Stop Worrying and Love Roaming Charges

Roaming charges – additional charges for using your phone abroad – are one of those first-world problems that sting due to the usual ubiquity of modern technology. Why shouldn’t I be able to use my phone anywhere in the world, just as I do at home, for no extra charge? But does this automatically mean they’re a bad thing?

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For a long time I certainly thought they were. I’d have been willing to cite ‘no roaming charges’ as one of the benefits of being in the EU that I’d be happy to acknowledge – and as a frequent traveller, they certainly were for me. I wasn’t alone in this. They are so directly visible to the man or woman in the street that, in 2018, the government – and several major mobile networks – pledged that they would not return. Clearly this has not come to pass, with three of the four major networks restoring them for travel within Europe.

Why hasn’t the government stepped in to ban this? To be clear: this would be within their power. The UK is a large enough market that Vodafone, EE and the rest aren’t going to stop operating here if roaming charges are banned – they’d simply recalibrate their tariff schedules accordingly. It’s clearly possible to do that and remain profitable, given that this was the status quo just a few years ago. And it would almost certainly be popular. So why not do it?

It turns out that in a competitive market, market forces do actually deliver the best result.

Let’s think a little about what would happen if roaming charges were banned – and, indeed, must have happened prior to 2019. The phone networks still need to make money – so whatever money they would be losing by not being able to charge roaming charges, they will make up some other way, either by charging a slightly higher tariff for any given same service, or alternatively by reducing other services (such as amount of data) for the same tariff. This won’t impact all tariffs equally – tariff structures are complex – but it will play out across the full range of products available.

Importantly, this holds true whether or not it genuinely costs more to offer the phone service abroad, or whether or not the company is ‘over-charging’ (i.e. charging a higher price than cost) for it. Supermarkets, restaurants and pubs all make more profit on some items than others – and that’s not a problem, provided the market is competitive. Regardless of the underlying cost structure, roaming charges mean lower fees elsewhere (for any given product); no roaming charges mean higher fees.

For this to be true in practice, as well as in theory, we’d need two things to be true:

  1. The mobile phone market to be genuinely competitive.
  2. Roaming charges to be something that networks compete on.

We can see quite clearly that both are true. Anyone who’s ever got a mobile phone contract will have seen clearly the wide array of choices available, offering many different services at many different price points. There are four major networks and a large number of smaller ones. Switching network is also easy, thanks to good regulation which makes this extremely easy(1): over 80% of UK phone users have switched networks, and over 50% have done so in the last five years.

Networks actively compete on roaming charges, also. One of the big four, O2, has no roaming charges, and plenty of the smaller ones also do not apply them. This is a competitive advantage that is actively marketed – I recently saw an ad on the tube for Tesco Mobile, hardly a fly-by-night operator, that was advertising this as its major selling factor.

In other words, you choose the service you want – and pay for it.

Still, I hear you say, roaming charges are so annoying! Why should I have to pay for this extra service I used to get for free? And p for many readers of this blog, just as for me, it is a bit of a bummer.

But here’s the rub: in any given year, at least a third of Brits don’t go on holiday abroad. In addition, of course, some of those 63% (in the peak year before the pandemic) may go abroad but not to Europe – meaning that the actual number of people who wouldn’t benefit at all from free roaming charges is going to be somewhat higher than a third.

Of those third of people who don’t take a holiday abroad, do you think they’re – in general – going to be from the richer or the poorer half of the population? That’s right, they’re going to be in the poorer half(2). And remember what happens when roaming charges are outlawed? The price of every other phone service goes up.

In other words, asking for roaming charges to be banned is effectively asking for the poorer part of the population – those who don’t travel to Europe, or who travel once a year – to subsidies the richer part of the population – those who do travel to Europe, particularly those who do so regularly. This is neither fair, nor progressive, and one would generally hope public policy measures should meet at least one of those criteria(3).

As it is, you have a choice. If you’re not going to travel to Europe, feel free to choose a network with roaming charges. They’ll almost certainly be offering better value in some other area of the service. If you only go once, make a choice about how much using your phone there is worth to you and decide accordingly(4). And if you travel to Europe a lot and don’t want to pay roaming charges – well, that may be a good reason to consider O2, Tesco Mobile or one of the many other reputable companies that offer this service you value.

Of course, I do agree that roaming charges should be transparent and well-communicated, the same as with any charges for any service. There may or may not be room for improvement here. But more broadly, nice as it is to get a free lunch, I can’t in good conscience say that roaming charges should be banned against – because there ain’t no such thing as a free lunch.

In a competitive market, when the service in question is readily available, let the consumer decide whether they want to pay for it – or not.

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(1) Some regulation is necessary for a well-functioning market.

(2) Yes, there will be exceptions. No, this does not invalidate the generalisation.

(3) Ideally both, but quite often one has to make a choice.

(4) Personally, in Europe and out of it, I almost exclusively rely on WiFi and turn on my phone’s other functions perhaps once a week (for example, if I get lost, or need to make an emergency call).

3 thoughts on “How I Learned to Stop Worrying and Love Roaming Charges

  1. “And p for many readers of this blog, just as for me, it is a bit of a bummer.” seems to have bonus ‘p’ in.
    “I can’t in good conscience say that roaming charges should be banned against” should probably be ‘again’.

    Excellent points I had failed to consider, you have changed my mind to being in favour of clearly displayed roaming charges. I think the cap the EU put on card transaction cards to retailers was entirely good however, and that the UK should slam this back on. Its a concrete thing they could do that would impact inflation by ~0.5%. Having said that outloud its kind of hard to understand why they haven’t (except that ‘gone back to doing what the EU made us do’ is probably not the publicity they were looking for, and doing things isn’t their strong suit).

    1. I don’t know much about that situation, but your position seems very plausible! A big difference is that there doesn’t appear to be much meaningful competition there.

  2. I only did a quick search on my phone, but it looks like there’s not much analysis of the effect of roaming regulation on tariff prices, which in the EU are accompanied by price caps between operators. But this paper (https://doi.org/10.1016/j.ijindorg.2023.102927 – sorry, behind a paywall(1)) suggests that there had been no effect on tariffs in EU countries, being virtually non-existent for multi-national operators (the Big 4/6), but with higher cost on revenue per customer for countries with higher tourism.
    To quote the conclusion:
    “Our results suggest that ARPU [Average Revenue per User] of EU mobile operators decreased on average by 9.1% since 2007 due to the regulation. When considering purchasing power parities, the decline of ARPU is estimated at 5.8% on average. However, in this case, we cannot reject that there was no decrease at all. We also find that the impact of the regulation on ARPU depends on traffic imbalances, which may be related to tourism flows, and has a stronger negative impact on operators from countries that have a surplus in tourism traffic. There is, however, no difference in the impact of the regulation on cross-country and national operators. Although a possible “waterbed” effect could have prompted mobile operators to increase their domestic retail tariff plans to recoup lost revenues from roaming after the RLAH [Roam Like At Home] regime entered into force, we find no evidence of such a response.”
    It’s a little surprising that there is no effect, since I would also expect such companies to pass on costs, but I guess that’s the price cap regulation in action (i.e. restrictions on what companies can charge each other for roaming) – I’m not sure what the status of that cap is in the UK any more, or between operators across the EU/UK divide.
    Several of the articles cited within is free to access, I suspect due to EU research regulations, with a relevant example being https://scholar.google.com/scholar_lookup?title=Evaluating%20the%20Impact%20of%20Price%20Caps-Evidence%20from%20the%20European%20Roam-Like-at-Home%20Regulation&publication_year=2021&author=G.%20Canzian&author=G.%20Mazzarella&author=L.%20Ranchail&author=F.%20Verboven&author=S.%20Verzillo
    (1) The paywall is because Elsevier are evil money-grabbing bastards who are in need of proper regulation themselves, which is relevant in this case (2)
    (2) e.g. https://telescoper.blog/2023/03/08/the-cost-of-elsevier/

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