By Andy Peers, VP Strategy and Innovation at MDS
Roam-like-home regulation was introduced today (15 June) and promises to be good news for both pre-pay and post-pay customers across the EU.
Under the new rules, customers travelling in the EU will be able to use their mobile devices in the same way, and to the same extent, as at home, without paying any additional charges.
And as long as they do not exceed the fair usage limitations – which aim to prevent the resale of low-price SIM cards for permanent use in other countries – this means the dreaded holiday bill shock will finally be a thing of the past.
Those customers who do exceed the fair usage limits will only pay wholesale rates for additional call minutes and data: €0.032 per minute for a voice call, €0.01 per text and, initially, €7.7 per GB of data, falling to €2.5 per GB of data by 1 January 2022.
Whilst roam-like-home is excellent news for consumers, it poses some real challenges to MVNOs.
For a start, the new regulation is likely to cause disruption and decreased profits as MVNOs struggle to recover their wholesale costs.
Network operators have reciprocal roaming agreements in place so they still benefit from inbound roaming.
MVNOs, on the other hand, do not have such agreements, so visitors to the UK will always roam on the host network – and this means the MVNO loses out.
To make matters worse, roaming is likely to increase and match, if not exceed, customers’ domestic usage patterns.
In the past, most consumers would have restricted their roaming while abroad to avoid bill shock.
With roam-like-home, they may now be tempted to use their mobile devices even more whilst on holiday, spending their free time on social media sites and streaming data-heavy videos or music on demand.
Yes, the fair use policy will be triggered after certain thresholds have been reached, and customers will have to pay for the extra usage.
However, this will only stop the MVNO from losing more money: customers paying wholesale rates won’t generate any profits.
While the time that customers spend roaming will affect the MVNO’s bottom line, it is important to remember that most customers are only going to be abroad for a couple of weeks each year.
For the remaining 50 weeks, these customers still bring in profit.
The far bigger challenge is business customers, who are likely to travel more within the EU and therefore roam more often.
To maintain profitability, there is a range of tactics that MVNOs can try, but they must ensure that these measures do not make them uncompetitive.
For example, MVNOs could drop the ability to roam altogether with domestic-only packages, or increase prices to cover the additional cost, but with both of those tactics they risk losing customers.
Three Ireland intended to circumvent the new regulations with a more creative strategy by changing the wording of its plans, describing its current “all you can eat” data allowances as “service benefits” rather than part of the core plan.
They later abandoned this idea after being criticised by the European Commission.
MVNOs can also seek temporary exemption from the regulations like Belgian MVNO Voo has done.
The European Commission may permit a temporary derogation from the regulations in order to prevent an increase in domestic prices, but this can only be authorised by the national regulator, and only if the retail roaming losses of the MVNO represent three percent or more of its margin.
The bottom line is that MVNOs need to improve their bottom line.
There are a number of ways in which they can do this, from adjusting pricing to moving towards becoming a digital MVNO.
More customer-friendly tactics such as upselling combined roaming bundles for the rest of the world and the EU, and offloading customers onto Wi-Fi where possible are likely to be more successful in maintaining profitability and staying competitive.
Becoming a digital MVNO means they can offer customers compelling online experiences and engage with them in real-time, even while they are roaming, increasing profitability so that the additional costs from roam-like-home are no longer a threat.
An additional strategy for MVNOs is to renegotiate their wholesale agreements.
To do this effectively, they must have a thorough understanding of their wholesale costs and usage, as well as their margins and price elasticity.
Using predictive analytics, MVNOs can typically reduce their wholesale costs by 7-10 percent through analysing and optimising their usage; a saving that could improve their margins and easily absorb the additional costs of roam-like-home.
Roam-like-home isn’t going to go away but it can be used as a timely reminder that with the combination of the right consultancy, analytics and real-time solution looking at their subscriber data, there are margins to be made that can counteract the effects of roam-like-home.