Global roaming: Srsly, what gives?

Reliance Communications roaming plans

I have always assumed that the outrageous prices for global roaming on telcos is the problem of double marginalisation. Each of the monopolists takes their cut and here there’s your domestic carrier and then the others in the other market. Perhaps there are some other carriers along the way. But this doesn’t seem to me to explain more than a tiny bit of the extraordinary prices. And there are some very big telcos in the world with investments in many countries. They could span countries and overcome double-marginalisation.

It’s perhaps plausible that businesspeople pay the outrageous charges. Thus for instance one finds oneself paying a dollar or so per megabyte which is a markup of the cost you can get locally of ten thousand per cent or so. And tourists just don’t pay the prices – they get local SIMs. But in any event, it’s not a monopoly. So even if this is the profit maximising price, it should be easily undercut.

It’s not so bad in the US – you toss T-Mobile $60 odd and your right for a month with a gig or so of downloads and unlimited calls – including to a country of your choice for an additional $5 or so. But Europe? Well it’s more balkanised than banking it seems. And there’s a good reason for banking to have trouble as it’s all domestically regulated. Telecommunications is (I presume) also domestically regulated in Europe, but there’s no need to regulate it to so constrain the law of one price. Is there really regulation saying that Lebara in the UK can’t give its Oz customers access to Lebara’s network in the UK?

And there are plenty of merchants trying to arbitrage the market. So much so that Woolies is into it. But their prices hardly tempt one to let them do the arbitraging. They charge 45 cents a megabyte of data which makes 2 Gigs cost $900. Lebara will sell it to you for £12. Woolworths offering is pretty standard. After an hour of looking I found some that charged around 35 cents per megabyte.

Seriously does anyone know why this problem is so bad?

 

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SJ
SJ
6 years ago

I think you’ve answered your own question right here:

And tourists just don’t pay the prices – they get local SIMs. But in any event, it’s not a monopoly. So even if this is the profit maximising price, it should be easily undercut.

The high prices are just a trap for the unwary. If they can get, say, $5000 out of you, they absolutely do not care if you boycott them for the rest of your life.

Phil Clark
Phil Clark
6 years ago
Reply to  Nicholas Gruen

To answer your question, international switching between carriers is technically simple but difficult to charge unlike domestic calls and data which is fairly simple. There are plenty of resellers who would take up the challenge but the problem is at the carrier level and there ability to cost effectively bill back and forth, it’s just not worth it for them so like a trady who doesn’t want a job they just charge an arm and a leg and hope you will go away. It may seem strange but think about what your dealing with, over two dozen carriers in the EU alone often with completely different billing models, then there’s China, South East Asia, Pacific Rim, Middle East and North and South America, to be honest Iit’s a bit of a wonder it works at all. Even though some of the horror stories I have heard and experienced are just extortion, like 5k data bills for 2 days of normal use I received from a PA working with the CEO in NZ from a carrier which I know for a fact has reciprocal charge back arrangement with our carrier, and there’s many more of those stories from all over the world. Interestingly enough though I noticed these issues really only started happening after the fall of Blackberries which effectivly had set cost’s in most countries. It’s the access any where global road warrior that suffers the most from these problems. There are plenty of ways around them though, you just need to do a bit of R&D on your destinations, most of the cities and hotels have free Internet (we supply it at your local Libary Nic opposit the South Melbourne Town Hall) and using local SIM,s are the most common ways to keep the cost down. I think technology changes will force the billing models to simplify and homogenise allowing the current domestic type models to be available globally creating greater competition and lower costs. And I wouldn’t be surprised if it wasn’t fairly soon.
Cheers,
Phil

SJ
SJ
6 years ago

Alternative answer: competition is limited, and regulation is absent. Duh.

Dave
Dave
6 years ago

Jigsaw puzzle time: Intertemporal; Dated and located: and, Monopoly. Piece them together noting their perceptions.

Phil Clark
Phil Clark
6 years ago

It’s a rip of plain and simple but to answer your question the charges are based on the cost of recharging the local carrier to your domestic carrier. Next time your OS ask some one from the USA what there being charged. Why the high amount? Well for some reason that I have never been able to find out Australia decided to go down the route of paying for data as opposed to the connection only when charging for what we now know as the Internet service which makes the process of calculating and exchanging the cost (apparently) really complex and hard to do when dealing with an OS to AU service. If you break down what your paying for it works like this, your OS, your service (mobile number) has to be registered with the local carrier and linked back to The Oz carrier (for global roaming) so some one in OZ can call you and you can call them. Data is physically local but charged at your carriers cost pluss to due to the above. Is there a way around this, not really, because no matter what you do at the handset end you always have to connect through the Telco,s infrastructure which is a high cost layout that they are going to pump profit out of for as long as they can, for now. Telco,s have always mutually profit maximise because short of forcing price caps through Internationaly agreed regulations there’s no way a cost competitive market can emerge, what do you expect from a global monopoly.