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When in 'Roam' (or Brussels), elites protect their own

Jens F. Laurson and George A. Pieler explain why cell phone roaming charges in Europe remain stuck in the stratosphere.

    Europeans on August vacations got one small break: the European Union capped (admittedly confusing and inconsistent) roaming charges at a flat rate, just in time for the holiday season. Yet there is some static in the air: major mobile providers are rumored to have a legal case ready, challenging the roaming cap on grounds of inequitable implementation.

    No wonder that cross-border roaming charges were at the top of the agenda of Members of the European Parliament (MEPs): international roaming charges deeply affect 99.9 percent of all such parliamentarians.

    Truth be told, the charges occasionally affect these authors, too. But unlike the politicians who clamor for the limelight in crediting who cuts the mobile phone industries' profit margins most, they don't necessarily think that it is the job of the government to set price levels (directly or indirectly) for services offered on the free market. And so Europe caps roaming charges.

    Were these politicians judges, they'd have to recuse themselves from the issue, since most are bound to save several thousands of euros a year from the legislation they are so busily trying to pass. As U.K. MEP Syed Kamall put it: "The consequence of this legislation will be higher prices for the 65 percent of consumers who do not roam, for the sake of the elite (MEPs?) who frequently do. Legislation should be a last resort tool to correct market flaws, not for boundary setting."

    Forcing the average customer to pay for international legislators' (and their staffs') international phone charges--which is what the European Parliament is doing--surely isn't the answer.

    Fortunately, such archaic notions as recusal don't apply to parliamentarians. Nor does, in some cases, the conscience of those allegedly in favor of free markets interfere.

    Roaming charges are rather high when traveling from one European country to another--and those invisible borders do seem a little archaic when passport-free travel and a common currency make everything else seem as though Europe had grown into a convenient "one." But the dividing lines call themselves back into memory when the phone and Short Message Service (SMS) bill arrives. Little wonder that European politicians, known for some roaming of their own, soon zoomed in on those seemingly egregious charges.

    They have now--it seems--agreed to cap roaming charges for three years (then what?), at .49 euros for outgoing and .24 euros for incoming calls. This is convenient for those who travel and chat a lot, but it's not actually good for the majority of consumers or the long-term health of the telecom industry.

    The parliament's initiative is proudly labeled, "Roaming Charges: For Affordability and Transparency." Indeed genuine transparency would serve the market very well. Most people are not aware of the extraordinary premiums they pay for international calls and messages (a Short Message always reminds the user that his or her phone works in the new network, also, and how it is used...but with no word about the additional charges), and those who suspect have a difficult time informing themselves about such charges in advance. Asking the industry to list its charges--and enabling the customer to compare--is what would be necessary to let the market work.

    Liberalizing the telecommunications market so that national carriers can offer services in any European country they wish is another, better, way to give the customer meaningful choice. If international roaming charges were still higher than national ones, it might have to do with the fact that international roaming services cost the telecommunication company more than national ones--and that relatively few customers so regularly follow routines where international roaming charges matter much to them. By zeroing in only on unpopular roaming fees, politicians press telecom companies to squeeze more profit out of the rest of the service bundle.

    The result? Average prices are likely to rise, while neo-populist politicos brag about "consumer protection."

    Only because everyone in Brussels is personally concerned about roaming--and everyone they know, too, as Mr. Kamall points out--doesn't mean that the problem is universal, nor even large, or even important. Forcing the average customer to pay for international legislators' (and their staffs') international phone charges--which is what the European Parliament is doing--surely isn't the answer.