Roaming charges are still ‘a rip off’

It is usually at this time of year that stories appear about some poor soul unwittingly incurring huge mobile phone roaming charges while on holiday. Coincidentally, it is also the time of year that mobile phone companies announce lower roaming charges in Europe.

For once, we have reason to thank Brussels bureaucrats: several years ago they took aim at the pricing policies of phone companies and have been hacking away at their charges ever since.

The European Commission began its efforts by merely publicising, via a consumer website launched in 2005, just how high roaming charges were. If this was an attempt to shame mobile phone operators into lowering prices it didn't work. Legislation swiftly followed and there has been a mandated gradual reduction in roaming prices every year since 2007.

Neelie Kroes, the Dutch EU 'Minister for the Digital Agenda' has driven the most recent tariff reductions and has proudly pointed to an 80 per cent reduction in roaming costs since the Commission began its work. Nevertheless, she still describes the new, lower prices as a 'rip off'. The Commission is pushing for roaming charges to be abolished completely by the end of next year.

The end of these charges cannot come quickly enough. There is a basic economic concept called price elasticity of demand. It might be basic but it has failed to make an impact on the management teams of the various phone companies.

Demand may or may not respond very much to price changes - demand may be more or less inelastic. Phone company executives, it might be thought, should have learned something about elasticity with their experience with voice calls and texting. As prices came down, demand exploded. As they have been forced to cut the cost of data roaming, the use of the internet while travelling has similarly grown.

That’s evidence of very high elasticity. In such circumstances, you shouldn’t be too worried if you are running a company that cuts prices as your revenues will nevertheless rise thanks to that high elasticity. You might even think about a strategy that strives to establish yourself as a customer friendly organisation that cuts prices ahead of being forced to by legislation. Such a strategy might enhance customer loyalty, build brand awareness and all those other things that business school teaches budding mobile phone executives. Most business schools also teach that if you aggressively rip off your customers at every available opportunity, sooner or later your company will probably fail - or be forced by law or the market to change.

Any signs of enlightened management thinking? Not a chance. Mobile operators cling to their rip-off tariffs literally to the last second. Two years ago, for example,a megabyte of data would have cost you 70 cents (excluding VAT). The EU’s website proudly proclaims that as of this month this has fallen to 20 cents. All well and good but phone companies still rely on the fact that some (most?) of their customers don’t read the small print.

Whatever you do when downloading data - surfing the web, sending a Tweet, posting a photo - don't hook up your iPhone to your Ipad. The data that you download is exactly the same but if you use your devices in this way, your charges will be €5 per megabyte. Thats right, despite an advertised - and mandated - price of 20 cents, a loophole in the legislation allows companies to charge 25 times the supposed maximum. At least, that's what Vodafone charged this foolish customer on a recent trip to Europe.

When I challenged Vodafone about this they pointed to the small print of my contract. Which, of course, I had never read. I put it to the very pleasant customer service lady that I had been ‘sold’ my current contract over the phone and had signed nothing. But a verbal contract is still a contract. I was peeved because I had been sold my current tariff by a salesman who claimed he had ‘analysed my recent bills’. If so, he would have seen that I regularly connect my phone to my tablet. I could have been warned that this was a dangerously expensive habit.

We don't expect much customer service from Ryanair because they never lay claim to such attributes (until, intriguingly, recently at least). Perhaps I am just naive when I think that phone companies seem to have customer focussed ambitions. They could do so much better if they moved away, just a touch, from gouging their customers at each and every opportunity. They would even make more money.