rose to move, That this House takes note of the report of the European Union Committee on Mobile Phone Charges in the EU: Curbing the Excesses (17th report, HL Paper 79).
The noble Lord said: My Lords, I speak as chairman of European Union Committee Sub-Committee B: Internal Market. I thank for their support—both speaking and moral—in this debate the noble Lords, Lord Mitchell, Lord Dykes and Lord Lee of Trafford, and my noble friend Lady Eccles.
The sub-committee reported through the Select Committee to the House of Lords on 23 April. I pay tribute to the retiring Clerk of the sub-committee, Duncan Sagar, who has distinguished himself in his service to Sub-Committee B. He is moving on to perhaps higher things in the Government Whips Office. He will doubtless be able to help facilitate debates on interesting reports coming from this committee in future. I also thank our special adviser, Chris Williams.
Our report dealt with international mobile phone calls within the European Union. There has undoubtedly been market abuse over the past five years in terms of the level of charges made to consumers. It has been estimated, among others by Commissioner Reding, that the charges could have been up to four times the rate of domestic mobile phone charges. The industry has reacted to criticism over the years, but in the judgment of the committee it has not done enough. Charges have not come down fast enough.
In the United Kingdom, and indeed in certain other nations, we regulate domestic charges, but until now there has been no method of controlling charges on an international level or within the European Union. I pay tribute to Ofcom, which is regarded within Europe as one of the better, if not the best, regulators in the telecommunications industry. However, its writ does not run to control the costs of charges coming from within the European Union back home to the United Kingdom.
In our judgment, there is justification for the European Union authorities to act. The high level of charges is a barrier to developing effectively a single market. The charge levels affect businesses, particularly small and medium-sized enterprises. We believe that it is in the clear interests of European consumers for the European authorities to act.
What did we propose? We proposed a wholesale cap on the rate of charges between network operators. For example, when a call emanating from Spain comes back to England, it goes through a network from Spain and perhaps through intermediate countries, back to a terminal in the United Kingdom. From thence it becomes a domestic call. The wholesale charges are presently completely without any kind of regulation. We recommended a cap of 30 eurocents per annum. That is the rate that network operators charge each other. I am glad to say that the European Parliament also came up with that figure. The presidency, under Germany for the past few months, has so far broadly supported that level of charge, and a consensus is building around it.
We did not suggest specific retail caps; that is, a specific sum charged to both the sender and the receiver of an international mobile phone call. However, we were in favour of a safety-net tariff that limited the total cost to the consumer. We argued that there was no need for caps at the retail level because of our fear that innovation and competition would be endangered. We argued for an opt-in mechanism for existing customers of mobile phone operators being able to make specific decisions to opt in to this safety-net tariff and for new customers automatically coming within the protection of a safety net but having the ability to opt out.
We also argued for sunset provisions for the regulations. I think that we were the only voice, certainly in this country and possibly in Europe, arguing for that. It is a matter for the European Parliament and the Council of Ministers under the co-decision principle, and for the Commission to implement. It is not for this Parliament to implement a regulation of international charges.
I am glad to tell your Lordships that there has been significant progress in recent weeks. The European Parliament voted yesterday for action on this front, and I understand that the Council of Ministers has reached agreement with the European Parliament. It is due to consider the issue on 7 June. It will be the duty of Mrs Reding—a very impressive commissioner whose views did not necessarily in their entirety commend themselves to your Lordships’ committee, but we were very impressed with her energy and enthusiasm—to implement any decision agreed between the Council and Parliament.
What are the differences between the report of your Lordships’ Committee and the European consensus? We are agreed on the wholesale cap. It should be based on average charges throughout the year for different network operators, but we agree with the 30 eurocents per minute cap. Incidentally, the European Parliament has voted for a gradual decrease of that cap over three years. I welcome that, although it was not in our report. The European Parliament has voted to protect consumers with a maximum retail cap—obviously that includes the wholesale charges from the operators, but also the cost of delivering the call to the mobile phone or landline of the subscriber—of 49 eurocents per minute for an outgoing call and 29 eurocents per minute for receiving a call. That is a total of 73 eurocents. Those caps would also decrease over three years.
Although we disagree with that approach, what we would end up with is certainly preferable to no action. Our concern with setting retail caps is that the industry might move immediately to charge the maximum, which would inhibit competition and innovation.
I shall briefly touch on four points that may be helpful to future debate. It is a pleasure to see the noble Lord, Lord Truscott, in his place to answer the debate. He made a rapid transition from membership of European Union Sub-Committee C to ministerial duties and we thank him for taking time to come to answer this debate.
My first point is that during the three-year uninterrupted life of the regime controlling mobile phone costs, I want the Commission to watch for the impact on competition and innovation in the industry. If we end up with everyone charging the same rate throughout Europe, that would be to the ultimate disadvantage of the consumer.
Secondly, please let us not proceed on the assumption that there will inevitably be a renewal at the end of three years and an automatic extension. The proposed regulation passed by the Parliament suggests that the Commission and the Council look at the situation after 18 months and make a decision on whether further legislation is needed to extend the regime. I think and hope that the Commission will take a rational view of that, look at data on the costs of providing services and not automatically assume that the regulation should stay permanently.
Thirdly—the noble Lord, Lord Mitchell, was one member of the committee who correctly referred to this—the proposal to which the Parliament has agreed and with which the Council seems to agree excludes any kind of regulation of data transmission. It covers simply voice transmission. Data transmission is becoming increasingly important, especially to businesses working in the European Union. We need to keep track of charges for data transmission to see whether similar action to the control over what I call the retail voice market is needed.
Finally I make a plea for transparency. This is a plea to the industry. The tariffs which individual operators in this country make available to consumers are complicated. I am sure that quite a small percentage of your Lordships who use mobile phones are aware of the tariffs that you are offered by your UK mobile phone operator when you travel in Europe. We must have a mechanism to make sure that a wider audience is aware of what is offered. I hope that what is offered will be competitive.
I conclude by making a brief comment on the timeliness of reports from the European Union Select Committee. The noble Lord, Lord Grenfell, who is in his place, is a distinguished chairman of the committee. I hope that he will not mind if I say that my personal view is that we must make greater efforts to ensure that our reports are concise, timely, listened to and can influence the outcome in Parliament, the European Parliament and the Council of Ministers. Here, the Department of Trade and Industry has performed extremely well with this report. We published emerging conclusions before our final report on 13 March. The Minister of State in the DTI, Mrs Margaret Hodge, replied very quickly. We produced our report on 23 April, and the Government responded very quickly. In the event, we found ourselves in almost complete agreement. Finally, the Lords parliamentary managers ensured that we had this debate today. Although Parliament took its decision yesterday, the Council’s decision is yet to come. I hope that we have been timely, and that the department and our colleagues in Europe have found our modest contributions helpful.
The noble Lord, Lord Currie, the chairman of Ofcom, has written to me to say that he could not be present today, although he would have participated. I have already paid my tributes to Ofcom. In his letter, he says, “we believe this agreement”—an agreement between the European Parliament and the Council to act, to which I have just referred—
“marks a momentous achievement and that the interests of British industry and British consumers have been safeguarded under these negotiations and in the Regulation itself”.
We are nearing the summer holiday time. Millions of people in Europe will head for the beaches. I make a plea to the European Council of Ministers and the Commission to agree regulations to reduce international mobile phone charges, and to have them published by the end of June. That is not an impossible target. I also make a plea to the mobile phone operators not to wait for the statutory two months but to implement the recommendations enshrined in the regulations immediately. Let the young family on the beach in Torremolinos call mum and dad back home in Manchester, free from the worry over excessive costs. Let us please have action, if not this day, then this month.
Moved, That this House takes note of the report of the European Union Committee on Mobile Phone Charges in the EU: Curbing the Excesses (17th report, HL Paper 79).—(Lord Freeman.)
My Lords, if ever there was a timely debate, this is it, because just for once the European Commission has shown its mettle and resisted ferocious pressure. Yesterday the European Parliament voted to cap mobile phone charges. I thank the chairman of the EU Sub-Committee, the noble Lord, Lord Freeman, for the efficient and inclusive way in which he led this investigation. In a short time, we took evidence and produced an excellent, hard-hitting report. The noble Lord has set an example to us all.
There are two heroes of the hour: Mr Rod Baber and Commissioner Viviane Reding. Mr Baber’s name might not be known to noble Lords, but he became the first person ever to make a mobile phone call from the summit of Mount Everest. He is a hero because he had to remove his face covering and oxygen mask to make this epic call. I thank him, because at least it reminded me of the fact that the mobile phone has become ubiquitous. Very few places on Earth are out of reach, except, predictably, Hampstead, where I live and where reception is zero. When I think of Mr Baber, I also think of roaming charges. What does it take to link up a phone call from the top of Everest, via China Telecom directly to the UK? The cost per minute must have been enormous. Luckily for Mr Baber, it was too cold to speak for long.
The mobile phone industry has been a huge success. In 20 years, it has grown from almost nothing to become one of the largest industries on the planet. Once it was the preserve of well heeled business types, who carted their massive handsets around like suitcases—I know; I was one of them—and today the pocket-sized cheap mobile is everywhere, even in poor villages in Africa. For all its curses, it offers us communications that were undreamt of just a few years ago, from the City types who are virtually welded to their BlackBerries to worried parents who can now be secure in the knowledge that their children are safe. As a parent of teenage children, I confess that there is no sound more wonderful than the text bleep telling me that they have arrived at their destination. It has revolutionised our lives.
I am going to say some fairly critical things about the mobile phone industry, which is why I have prefaced my speech by saying what a great job the industry has done. It has taken risks and invested massive amounts of money, and it deserves its rewards, or at least some of them.
I must start with a quote from a Mr Tom Phillips of the GSM Association, a global trade association representing 700 GSM mobile phone operators in 218 countries. It claims that its members represent 2 billion mobile phone users, which is equivalent to 80 per cent of all mobile users. Mr Phillips said:
“Mobile phone operators price their services to a broad range of customers … our members operate in a highly competitive market”.
That is a nice try, Mr Phillips, but you are half right and half wrong. You are right when you look at domestic tariffs. Here in the UK, for example, you can walk from shop to shop comparing what is on offer. On a contract where the charge is £30 a month you get so many minutes free of charge and so many hundreds of free SMS text messages. It is highly competitive and each operator offers special goodies to entice new customers. That is the competitive environment that gives capitalism a good name.
However, Mr Phillips is wrong in regard to market sectors where operators relentlessly exploit sub-markets not located on the high street and where price cartel is the order of the day. Roaming within the EU has been one such cartel. Last night at the Champions League final in Athens, tens of thousands of football fans must have been calling home to Liverpool or Milan. The cost of such calls would have been as high as 85p per minute. No wonder Vodafone was the major sponsor of the event. It must have got its money back from the football fans alone.
Why has super-pricing on roaming charges continued for so long and why has the market not encouraged competition to do what the European Union has stepped in to do this August? I think I know the answer. Until last July I was gainfully employed and my company paid my mobile phone bills. I never looked at them. Now I pay the charges myself and I am staggered by what I have seen. I would bet that most business people are just like I was—totally oblivious. Someone else picks up the tab and roaming charges become just another cost of doing business. As for the man on the street—or should I say, as the noble Lord, Lord Freeman, said, the man on the beach in France or Spain—a few pricey phone calls a year from there to here hardly warrants a major investigation. Complacency has ruled and the operators have profited from consumer inertia. It is calculated that €5.8 billion per annum is spent on inter-EU country roaming charges.
It is true that the operators have made some half-hearted attempts to lower roaming charges. I shall pick on Vodafone for no reason except that I use it, but what I shall say could be true of any other operator. Vodafone has come up with a great wheeze called Passport. Basically, if you make a call from abroad and you are signed up to the Passport programme, you pay a 75p fixed charge per call and then you pay the standard domestic tariff. But there is an awful lot that you are not told about this programme. It does not tell you that it works only if you use a Vodafone network operator overseas. I am fairly good on technology—probably better than most—and I know how to set my phone abroad to use a specific network, but I wonder how many other people know how to do that. It also does not tell you who its operators are. In Italy, where I spend a lot of my time, I think that I can draw the conclusion that VodafoneIT is part of the Vodafone network, but who would know that it is SFR in France? However, it is a total roulette to select your operator in Italy. You can face one way one day and you get one operator: you can face the other way on another day and get another operator. In addition, you are not told that SMS texts are not included. Vodafone also fails to mention that if you are called from a landline within the EU that does not count. If you call another user in a third country, that too does not count, even if that user is on the Vodafone network.
That has now ended, and we must thank the real heroine of the hour, Commissioner Viviane Reding. Despite heavy lobbying by the industry, which is out to protect its nice little €6 billion earner, she has persevered in getting these price caps in place. Roaming charges are about to be reduced by 70 per cent, and the commissioner did it. This summer many glasses of champagne or prosecco ought to be raised to thank her. She will be saving phone users in Europe €4.2 billion a year. I call that a real result.
It would be wonderful if that were the end of the story, but sadly it is not. The operators still have other sub-markets where they use their oligopolistic powers to continue to rip off consumers. SMS texting is not covered by the new European arrangement, and neither is data. The text messaging business is huge and a licence to print money. I do not understand why this sector has not been capped. Then there is data. Next month there will be a revolution in mobile phones. Apple Computer is about to launch its iPhone. Apart from being a phone, it is also a multimedia device. Users will be able to download or transfer photos, movies, podcasts and music. It is like an iPod with a high-speed mobile phone connection. The demand for data is going to explode. Imagine the very same European citizens on the beaches in Europe next year, this time sending multimedia data across the continent on their iPhones. Data pricing is uncapped and the operators are going to have a field day.
This debate centres on the EU, but outside it are huge markets which are further cartel sub-markets for the operators. Many of our citizens go to the United States for their holidays or for business. Roaming charges from America are astronomical, as they are from Asia, Russia and Australia. I would like to see moves to cap these sector prices as well.
The thrust of the industry criticism is that the natural forces of competition should rule pricing policy and that the EU should stay out. Well, they are bound to say that. Last Tuesday, there was a withering editorial in the Wall Street Journal accusing Ms Reding of being a “Soviet era central planner”. What utter nonsense. I am not a politician, but an entrepreneur by background. In my bones I understand full well the balance between risk and reward. I might have been expected to be sympathetic to the operators, but I absolutely am not. When consumers are the victims of monopoly power and when producers conspire to maintain artificial prices, the moment comes for such power to be contained. That is what the EU has done. It has taken the first step and it deserves all our thanks.
My Lords, the noble Lord, Lord Mitchell, says that he is a capitalist and entrepreneur. We pay tribute to his work in those fields over many years, but for him to say what he has just said really spells it out: one has to have regulation when there is clear abuse of the market whereby customers have no chance of making proper calculations about real prices. We thank him for what he has said. Above all, I want to add my congratulations to the noble Lord, Lord Freeman, on the truly outstanding way in which he has husbanded this important investigation through our committee proceedings. There was a danger that we would miss the momentous developments in this saga, understandably and through no one’s fault, and yet we did not and I am grateful to him and to our Clerk, officials and advisers for what was done to make sure that we were kept up to speed on this extremely complicated matter for those who are not experts in mobile phones, particularly in their use when overseas.
Our celerity was especially noticeable in the expeditious treatment of a very rapidly unfolding scene once the mobile phone companies realised that the old game of excessive charging in an imperfectly informed marketplace was finished, or at least beginning to be finished. It was necessary for Sub-Committee B to move very fast indeed on this one. Everyone co-operated and the Government also acted rapidly—I thank the noble Lord, Lord Truscott, and Mrs Margaret Hodge for what they have done—to keep some control of the situation, bearing in mind that it is an international and very complex matter. The speed and decisiveness of our chairman and the members of the committee were especially needed as co-ordination between them and the members of the Government and officials at Ofcom dealing with the inquiry was going to be overtaken by the hugely energetic work of the German presidency, Commissioner Reding and Members of the European Parliament who are particularly expert on this subject.
It was gratifying to see in the opening stages of this exercise that even hints of future action by the European Commission had the industry responding with charmingly hasty cuts in some roaming and related charges, once again showing how super-normal the profit-making already had been for far too long. This is yet another example of where the Commission’s energetic battling to secure genuinely open and transparent single market conditions in many different fields is gradually bearing fruit. It is a slow and painful process, and one where often the national press in different countries, particularly in this country, writes articles resisting the process. The resistance and the cartel antics of the companies in many sectors have to be fought very hard indeed, particularly in this sector.
I sense the same mistakes are made by often understandably ignorant consumers—not through their own fault but through the nature of the market and the complexities of all kinds of services—in blindly accepting monopolistic, imperfect overcharging markets in areas such as bank charges and credit charges. How many holidaymakers calculate the costs—particularly if they are paying their credit card over a month, which is always very unwise—when they change from sterling into the euro? The cost would shake them if they sat down and did the figures, but it is amazing how few people do so. This happens with mortgage charges, too, particularly in this country which is not a member of the eurozone. Mortgages here are much more expensive than they are in the leading countries of the eurozone.
It remains sadly true that if customers really took the meticulous trouble to work out precisely how much they are paying in some of these market places, they would be truly outraged. All too often they have only a vague idea or they shrug their shoulders and say, “Well, it is an overseas market”. But it is supposed to be the developing single European market, not an overseas market in the conventional sense.
Not all consumers of roaming services, however, were so supine. In the evidence we accumulated in February, representatives from companies such as Hutchinson, for example, admitted that they, the public,
“coming back from holidays are often horrified at … the charges that have been made”.
It has always been the case that business users might pay more attention to these excess costs if they were roaming frequently abroad. Most roaming is done by business users, particularly by small and medium-sized companies, but in reality that could be offset—it sounds cynical, I know—if the costs were being borne not by the person personally but by the company’s treasurer’s department. For private consumers the situation is much starker.
Naturally, we in the committee were primarily concerned with the plight of private self-paying users. Although they remain a minority, the figure goes up when the summer holiday comes along throughout Europe, mainly in Mediterranean areas. In the mean time, retail roaming prices had begun to come down a little in recent years as competition began to exert more effect and other parts of the packages offset, to some degree, the heavy incidence of the roaming net cost to customers.
Some of us were surprised—the noble Lord, Lord Mitchell, alluded to some of the comments made by the companies—that Orange, part of the worldwide France Telecom group, felt that no regulation of wholesale or retail charges was needed at all; that everything could be done by competition. It also felt strongly that Article 95 of the Treaty of Rome was inappropriate as a way to impose regulation of maximum charges. I would love to hear from any noble Lord who has experience of trying to cancel a mobile phone contract. It is an exceedingly difficult process and takes a long time. You have to insist or threaten with lawyers before you get out of it.
Market 17, the one for international roaming charges, was already being scrutinised under the new regulatory framework procedure, of course, but I feel strongly that the Commissioner was fully justified in seizing the reins quickly and accelerating the inquiry processes by the subsequent decision on what was effectively severe market abuse and excessive market cartelisation, notwithstanding Vodafone’s repeated claims that it had launched more competitive roaming rates as far back as 2001, described eloquently by the noble Lord, Lord Mitchell.
The distinguished MEP, Dr Paul Rubig from Austria, reminded the committee in his testimony that it was bad enough facing excessive charges and profiteering in the UK, but at least it was across the water. Psychologically it seemed a little more remote and perhaps was understandable as the wires were a long way away—not that they have wires. He asked about considering the question of the psychological stress on our continental neighbours. He cited in his testimony a five cents charge for domestic calls through 1,000 kilometres of his own country, but someone on the border of Austria with Germany calling a nearby German neighbour would pay up to €2 because it was over a national frontier.
Moreover, the charges were always so vague and complicated to calculate, with rebates on accounts afterwards to make it even more obscure. As he stated, it was like being in a restaurant where the waiter would give you the wine and work out the price afterwards.
The committee also benefited from the written evidence given by the Bureau Européen des Unions de Consommateurs, reminding us starkly that the Commission had started action way back in 2000, but that this had not stopped the rise in unfair roaming charges and that the national regulatory agencies—even the excellent Ofcom in Britain—could not solve these problems across national frontiers. Only the Commission, once again showing the validity of its work in the single market, had that intrinsic capacity. That will be shown in many other fields in future, as the public in different member states begin to accept this, even in Britain.
The British Minister in charge, Mrs Hodge, assured us that the UK Government were going all out to support the EU-wide solution because of self-evident market failure, as I said earlier. I therefore enthusiastically support the committee’s recommendations, and am glad to have been involved in an inquiry that will be of great help to mobile phone customers in years to come. However, to be fair to the companies, we also proposed a sunset clause, and some kind of review is necessary to see the changes in the marketplace over time.
I welcome our references to the crucial field of data roaming services—I imagine they will outstrip individual calls in due course, as my noble friend Lord Mitchell has suggested. Our conclusions also underscored the reality that high roaming prices were adversely affecting SME personnel trying to do legitimate business in what is supposed to be a single market.
If wholesale regulation is the right approach, however, the consumer protection tariff, or the EU tariff, is the way forward. We understand why the MEPs have reached that decision, which will be finalised on 7 June. We have thus almost reached, last week and this week, the end stage of a complicated scene, with the agreement between the member states and the EP to fix the maximums and the caps. I believe the Council telecom Ministers will now be fully engaged in discussing properly and accepting—not just rubber-stamping by the member states—the European Parliament debate suggestions.
This has been a very good example of strong work co-ordination between the national parliaments, national Governments, the European Parliament and the member states. Some people regard that as an international conspiracy. I think it is a very good thing.
My Lords, as one who has supported the concept of closer European co-operation over 40 years, originally being a member of the Manchester Common Market Group and more recently being chairman of the Northwest in Europe campaign, I am delighted to participate in today’s debate.
The report discussed here today is on draft regulation, which is important because of what it represents. It is not just legislation that will help to reduce the excessive prices European consumers are charged when using their mobile phones abroad; it is a good example of how legislation on the EU level can actually make a difference to the everyday life of the citizens of EU member states. The cost of roaming could not be dealt with individually by member states. The cross-border nature of this service made it impossible for national regulators to act. Action on the EU level was required, and the Commission’s proposals, as amended by the European Parliament, the member states and the Council of Ministers, aim to do just that. They offer a solution at European level that will benefit every traveller who uses his or her mobile phone when abroad in another EU member state. All in all, it was a well received report that contributed to the debate and fed in important recommendations to the decision-making process in Brussels.
I join my colleagues from the committee, my noble friend Lord Dykes and the noble Lord, Lord Mitchell, in paying tribute to our chairman, the noble Lord, Lord Freeman, and to our colleagues. We had a very happy committee under the noble Lord’s chairmanship. I also pay tribute to our committee staff.
The agreement announced this week should reduce roaming charge bills by between 50 per cent and 70 per cent. In the Financial Times today, Nigel Farage, the leader of UKIP and a British MEP, is quoted as saying that in his view the law is a publicity stunt:
“Frankly, it smacks of communist central planning when bureaucrats and politicians think they know what the right market price is. They are always wrong”.
I am a little disappointed that the noble Lord, Lord Pearson of Rannoch, is not in his place. If he were, no doubt he would be attacking the agreement which so demonstrably benefits so many of us who travel overseas or go there on business.
There is a suggestion in the media and a number of other quarters that perhaps mobile phone companies will seek to replace lost revenue and profits by raising charges in their national markets. The national Governments in the EEC have various differing regulatory powers in individual member states and monitor in different ways. In the UK we have, thankfully, a free market. I hope that genuine competition will keep prices down and that consumers who are accustomed to a certain price level for mobile use will be on their guard against artificial price rises. The UK regulatory authority, Ofcom, will need to be extra vigilant in policing our market.
In conclusion, I commend our report and welcome the European agreement with the caveats so clearly set out by our chairman, the noble Lord, Lord Freeman.
My Lords, I thank my noble friend Lord Freeman for giving us the opportunity to debate this European Union Committee report as well as the noble Lords, Lord Mitchell, Lord Dykes, and Lord Lee of Trafford, for their hard work on the sub-committee that prepared this report and for taking the time to speak to us today. I should have mentioned that my noble friend Lady Eccles of Moulton, who was also on the committee, is in her place. I congratulate the committee on the timeliness of its report; we heard yesterday that the European Parliament voted for action on this front, which must be very pleasing to hear.
The small number of speakers on this debate is certainly not a reflection of its importance. The interesting speeches we have heard have shown how much of an impact mobile phone charges can have not only on those who travel for pleasure but on businesses operating in countries across the European Union.
I should like to open my remarks by saying how glad I am that this report is being debated at all. Far too often, European Union regulation is imposed on this country without adequate scrutiny. This lack of due process leads inexorably to goldplating, misunderstandings and the sort of public backlash that is in no one’s interest, even when the regulations are to be welcomed, as they are in this case. We have seen too many examples in recent years where government legislation to introduce new European Union rules have shown them to be far in excess of what is required, and I hope that this will not be the case here.
We must instead move to a more consistent and rigorous process where legislation imposing EU regulations is subjected to regulatory impact assessments and other appropriate analysis, as national legislation is. We in this House and another place should be making informed decisions on the validity and extent of EU regulations, rather than having to choose between trusting blindly in the Government or resorting to knee-jerk opposition in the face of inaccurate media stories.
On these Benches we broadly welcome these regulations. Sub-Committee B of the European Union Committee, with its remit to focus on the internal market, has flagged up some important points. In general, we hope that placing a cap on mobile phone charges will significantly reduce the cost for small businesses and tourists who use a mobile phone in the European Union.
I am pleased by the provisions for further data collection. As the committee’s report pointed out, the decision to impose the regulations was based on rather inadequate data. It is crucial that this is addressed immediately. Without accurate EU-wide data on how the caps are affecting customers and providers, how can a decision be made on whether the regulations should be extended?
As it appears that one of the primary causes of the excessive prices was the confusion and obscurity that surrounds the pricing structures and comparative tariffs, better data must be collected and made widely available.
There cannot be effective competition in a market where not even the Government, let alone the consumer, can establish what the pricing levels are. For this reason, I welcome the obligation for providers to inform the customer what charges they will be liable to.
It appears from the report that a major failing has been the regulatory bodies in other European Union countries. My noble friend Lord Freeman and I congratulate Ofcom on showing its effectiveness and value by providing accurate and extensive data for the United Kingdom. I have heard nothing but praise for the constructive and informed role that it has played in the debate at national and European Union level. What steps is the Minister taking to encourage regulators in other European Union countries to learn from Ofcom?
As we have heard, improved monitoring should spur greater competition also in areas that the price caps do not affect; namely, texting and data roaming. The greater competition that we have recently seen among providers for voice roaming will, I hope, be replicated in these other services. It would be a great pity if it was found necessary to impose similar regulation on data roaming. I remain optimistic that now that consumers have been made more aware of the potential for improvement, they will demand a more competitive service from their provider.
Finally, how glad I am that the compromise agreement includes the sunset clause. Regulations such as these, while necessary in this instance, are a very blunt instrument. The rapid lowering of prices, even in anticipation of these regulations, gives cause for optimism that they will not need to be extended and that the greater transparency and awareness will keep the market working more effectively in the future.
Repealing unnecessary or outdated legislation is unfortunately given a rather low priority by many Parliaments. I am glad that, in future years, these regulations will not be added to the enormous pile of meaningless and petty restrictions that no longer have any practical use. These regulations will be a short, sharp shock to the industry, and I look forward to seeing the telecoms market return to a less restrictive level of regulation, but one where consumers are able to use these services at a reasonable price.
My Lords, this has been a very useful, constructive and informative debate. If only the whole issue had been treated in this thoughtful way, we might well have ended up with better regulation earlier.
I thank the noble Lord, Lord Freeman, other members of the European Union Committee and the internal market sub-committee in particular for their work on this thorough and considered report before your Lordships' House. I am pleased to say that the Government agree with virtually all the report’s conclusions and that the committee’s views have provided a welcome and valuable insight into this topic, which has been the subject of protracted and complex negotiations during the past year. I thank the noble Lord, Lord Dykes, for his kind words on the work done by Her Majesty's Government in this area.
The noble Lord, Lord Dykes, mentioned concerns about transparency. I certainly agree that it is important that people know the costs of their calls when they travel and the regulation ensures that such prices are delivered by SMS as soon as a foreign country is entered.
A wide range of points and questions has been raised today, but before addressing them individually, it might be useful if I outlined where we now are in the process. As the noble Lord, Lord Freeman, said—I thank him for his elucidation of this matter, which I am sure has helped all noble Lords—the regulation is almost taking final shape.
As my noble friend Lord Mitchell and the noble Lord, Lord Freeman, mentioned, the European Parliament yesterday concluded its first reading of the relevant dossier. The text will be presented for endorsement by Ministers at the Telecoms Council on 7 June. Unless the council took a radically different approach from that previously taken during the discussions last week, the regulation will be agreed. Indeed, if there was not an agreement, the regulation would have to be sent back to the Parliament for a Second Reading, so we would not be seeing cheaper roaming calls until next Easter at the earliest. Obviously, we want to avoid that.
So-called first reading agreements are not that common and involve an enormous commitment between the institutions to find a compromise. This dossier was certainly no exception in that regard; and involved no fewer than four long and detailed negotiations between the council, represented by the presidency, the Commission and representatives of the European Parliament. The fact that an agreement was reached says a lot about the skills of the German presidency. I take this opportunity to thank ministerial colleagues in France, Italy and Spain who worked tirelessly with my right honourable friend Margaret Hodge to secure a solution that did not damage the competitiveness of this important sector for Europe.
The European Union has agreed at this stage that the Euro tariff will be the same as a safety net, as noble Lords themselves wanted in their report. That allows for innovation, as other tariffs can be offered. A variety of figures have been quoted in the press purporting to be the new mobile roaming prices. It may be worth restating them at this point. The Euro tariff will be available to all roaming customers. Under it, outbound calls made to other member states under the tariff will be charged at 49 eurocents—that is, 33.5p per minute. Calls received from other member states will be charged at 24 eurocents, or 16.5p per minute. Those rates will fall in the next two years of the regulations to 31.5 and 15p in year 2 and 29.5 and 13p in year 3.
All users will not automatically be transferred on to the Euro tariff. Those already on more favourable tariffs, perhaps by virtue of using bundle services, will be offered the Euro tariff but will not be obliged to take it and will not be put on it unless they ask. That is an important point of principle for the UK. The new roaming customer or one who moves to another network can be offered a variety of tariffs but will be put on the Euro tariff if a choice is not made. When moving from one network to another, users will be entitled to receive information about the new tariffs that they will be charged.
At the wholesale level, prices will be capped at 30 eurocents per minute, equating to 20.5p for the first year, which will drop to 19p in year 2 and 17.5p in year 3. These rates, which we believe are an adequate reflection of costs, should not, despite what one reads in the media, cause increased prices in the domestic market. On the other hand, the initial proposals made by the Commission would have had this effect.
As for the introduction of price caps, I am pleased to confirm that the wholesale cap will be introduced two months after the regulation is published, which will probably be in September, with the Euro tariff taking effect a month later. That will mean that by October all subscribers should have the choice of adopting the new tariff.
The regulation contains a sunset clause, as the noble Lord, Lord Dykes, said, which means that unless its continued existence proves necessary the regulation will cease to operate after three years. The noble Lord, Lord Freeman, also mentioned this. The need for an extension of the lifespan of the regulation will be determined by means of a review, which will be carried out after the regulation has been in force for 18 months. It is not automatic and any extension over the three years must be voted on again by the European Parliament and Council. I believe that that answers the noble Lord’s point on that matter.
The regulation has attracted a great deal of interest, for obvious reasons. Mobile phones have become an integral part of many people’s lives and working practices, as my noble friend Lord Mitchell graphically illustrated to your Lordships' House. Nobody enjoys paying high prices for something they have come to regard as a necessity. There was general agreement from the very start that the objectives of this regulation were good. As a well-known advertising slogan said, “It’s good to talk”—but not at £1, or more, per minute.
As noble Lords said, lower prices for international mobile phone calls make sense. Clear information about charges for roaming calls also makes sense. Lower wholesale prices between mobile operators are also to be welcomed. The main objective of this regulation is to encourage business people and leisure travellers to use their phones in the knowledge that they will not face a hefty phone bill later. It is also intended to encourage smaller mobile operators to enter the market. Competition drives innovation and gives rise to a better deal for the consumer.
The noble Lord, Lord Lee of Trafford, referred to charges being raised in national markets. We do not think that will happen. We agree that competition should prevent that happening. We have taken action to ensure that rates are not set below operators’ costs.
There have been many calls—if noble Lords will forgive the pun—on mobile operators to lower prices, especially from the European Commission, but up until now they have been to no avail. Furthermore, the national telecoms regulators across Europe stated through the European Regulators Group—the noble Lord, Lord Lee of Trafford, made this point—that they were unable to take effective action individually and had asked the European Commission to intervene. I agree with the noble Lord that the role of the regulators should be enhanced and that they should remain vigilant. I support his call for vigilance on the part of the regulators. Finally, in July last year, the Commission, with a fanfare, issued a draft regulation which aimed to address this problem. Like other noble Lords, I commend Commissioner Viviane Reding for her heroic efforts in this sphere.
We believe that we have now agreed a good and pragmatic solution which will deliver the desired results. Importantly, in relation to this debate, it is almost entirely consistent with the form of regulation called for by the committee. It balances the objectives of lower prices, innovation in the marketplace and sustained competition. It ensures that subscribers are not forced on to tariffs that might be less favourable to them and secures enhanced levels of transparency for all citizens using their phones abroad. It has a “sunset” clause limiting the life of the regulation to three years, unless it is decided that an extension is needed.
Importantly, the regulation—after some debate in the European Parliament—applies only to voice calls; the price of text messages and data downloads are not controlled. A number of noble Lords made that point, including the noble Lord, Lord Freeman, my noble friend Lord Mitchell and the noble Baroness, Lady Wilcox. However, it contains a provision that the price of such services should be made available to subscribers when they are roaming and that information about these should be collected by the national regulatory authorities. If these prices remain at an unacceptably high level, they may also be regulated in the future. Clearly, it would be preferable if this did not prove to be necessary, but the Commission has already said that it will monitor the situation, and Commissioner Viviane Reding has been reported as confirming that. The Commission will also review data and SMS costs in its report after 18 months.
As I have noted, the UK has worked closely with other member states to put forward constructive suggestions throughout these negotiations. The noble Baroness, Lady Wilcox, referred to sufficiency of data for formulating the regulation. The data used to derive the wholesale price cap levels were based primarily on detailed cost calculations and analysis undertaken by national regulatory authorities and were consulted on with mobile operators in order to set mobile termination rates. We believe that these are a reasonable proxy for the most costly parts of providing international roaming services. Further analysis and data will always improve the accuracy of any measure. However, the need for further detailed analysis should be weighed against any resulting benefit. At this stage we believe that the additional burden incurred by a delay in implementing the regulation would outweigh any benefit gained by a more accurate understanding of underlying costs.
As regards the cap on mobile phone charges, I should point out that the Euro tariff is not a cap but a tariff with regulated rates available to all. Our aim has always been to ensure that the proposed regulation would deliver a better deal for the consumer without unnecessary damage to the telecommunications industry. I suggest that, in the light of the regulation agreed by the European Parliament yesterday and our debate this afternoon, that has been achieved.
In conclusion, I thank all noble Lords who have taken part in the debate, and I commend the committee on its excellent work.
My Lords, I thank the Minister for that very thorough answer, in his typical style of ensuring that all points are answered, and for dealing with the subject in such a sincere and intelligent fashion; the House appreciates it. I thank all noble Lords who have taken part.
We on this side of the House are always impressed by my noble friend Lady Wilcox’s quick grasp of the issue, which she demonstrates in her calm and charming fashion. She must give up her job on the Front Bench immediately and join us in Sub-Committee B; we need all the help we can get.
If Commissioner Viviane Reding reads Hansard tomorrow, perhaps she will through the airwaves or at least through the lines of Hansard recognise that, if she is still there in 18 months’ time and if I am still in post as chairman of the committee, I hope to go to Brussels along with my colleagues. We will look over her shoulder to make sure that there is a sensible review of whether these regulations are needed and that any changes needed in the interests of the consumer will be made.
On Question, Motion agreed to.
House adjourned at 6.16 pm.