Regulation should concentrate on making wholesale markets operate in an effective manner. Innovation happens in the retail marketplace, and customers will choose what they want to buy.
In the last month, Orange Austria (formerly ONE) has launched some new tariffs. One of these tariffs is “Hallo Europa 0”, a 1000-minute tariff bundle for EUR25 per month, which includes calls to fixed and mobile numbers in national and EU27 international destinations. This may not be seen as an ‘unlimited’ offer, but it certainly shows that vigorous retail competition can produce attractive offers at eye-watering prices. At the same time, it has been widely reported that the European Commission is thinking of legislating against per-minute mobile tariffs. We hope that this is not the case, because it would be unwise.
Firstly, per-minute charging is not necessarily more expensive, because it depends on the headline price. With per-minute charging, a user typically pays for approximately 30 seconds more than they use, so if the average call lasts three minutes, the average charge will be approximately 3.5 minutes worth (without going into the maths). But if the per-second prices are 7/6 of the per-minute ones, then the two tariffs are, on average, equivalent. Changing from per-second to per-minute charging is a price increase: but this is no worse than a food vendor changing the quantity of goods in its retail packaging (another current practice, according to the Financial Times).
Secondly, from a policy perspective, the entire European regulatory framework for electronic communications is against unwarranted ex-ante intervention in the retail market. Regulation, where necessary, should concentrate on making wholesale markets operate in an effective manner. Innovation happens in the retail marketplace, and customers will choose what they want to buy. For example, many mobile users are on tariffs which mix a quantity of minutes and SMS (where 1 minute = 1 SMS); similarly, in the UK fixed market, BT offers tariffs which in effect charge per hour for some fixed calls. The existence of such tariffs shows that per-second tariffing may not be what consumers want.
Finally, when governments set tariffs, bad things do happen: within living memory there were waiting lists for fixed telephone services. Everyone in Europe needs to remember that competition, where it works, is much more powerful than retail price regulation in delivering benefits to consumers.