Setback for mobile firms in fight against EU pricing limits

Four of Europe’s largest mobile network operators suffered a setback today in their legal battle to stop the EU imposing limits on the cost of using mobile phones abroad.

The four, Vodafone, Telefonica O2, T-Mobile and Orange, say the setting by Brussels of uniform maximum “roaming” prices across Europe exceeded the power of the European Commission and should be left to national authorities.

But in a legal “opinion” today, an Advocate General at the European Court of Justice said the EU was right to act – because the Commission’s previous attempts to curb high roaming charges through political pressure and competition inquiries had failed.

The Commission had stepped in as “a last resort” when it found that roaming prices varied widely across Europe “in ways that could not be explained by underlying costs”.

Operators were making profits of above 200% for calls made while roaming, and of 300% or 400% for calls received:

“Given these excessive charges and the need for timely action, a decision to regulate retail prices was an option reasonably open to the Community” declared Advocate General Poiares Maduro.

His opinion will now be considered by the full court before a final verdict is delivered later this year or early next year.

Compulsory maximum roaming rates came into force last summer to tackle what EU Telecoms Commissioner Viviane Reding called the “roaming rip-off”. She acted after warning the mobile phone industry that she was not satisfied with voluntary agreements to keep prices in check.

The result was one of the most popular consumer-driven moves by the EU – an average 60% cut in the maximum charges operators could levy on mobile users making or receiving calls while in another EU country.

The four big mobile operators went to court in the UK challenging the validity of setting prices using an EU law allowing the harmonisation of national rules “in order to achieve the internal market” – the EU’s single market.

The High Court then asked the European Court of Justice to rule on whether the EU had acted correctly by setting maximum prices.

Today’s “opinion” said the EU was entitled “to impose limits on the prices charged by mobile phone companies for roaming calls in the interests of the internal market”.

The differences in prices between calls made at home and made abroad “could reasonably be regarded as discouraging the use of cross-border services such as roaming”.

The “opinion” went on: “Such discouragement of cross-border activities has the potential to impede the establishment of an internal market in which free movement of goods, services and capital is ensured. Indeed, there is no clearer cross-border activity in the mobile telecoms sector than roaming itself.

It said it was “expedient and appropriate” for the EU to regulate retail prices.

The fact that the scheme was intended to expire after three years, that roaming charges were by definition a cross-border issue, and that roaming was “of minor concern to national regulators, made the EU better placed to address the problem. Had the issue been left to the 27 national regulators it may have taken too long to introduce effective control of retail prices.”