Comment : EU mobile operators are unable to stop price gouging even when their own numbers say they should

The GSMA (global trade association representing more than 750 GSM mobile phone operators across 218 territories) recently released data showing that a 25% decrease in data roaming costs between April 2007 and April 2008 increased consumer usage by 75% (a price/demand elasticity that virtually any other industry should covet). So why exactly are these same mobile operators grumbling about an EU mandated cut in roaming data charges?

Every shareholder in Vodafone, O2 et. Al. should be forming a picket line in Brussels in support of mobile roaming fee caps. While this may sound counter-intuitive, the overwhelming majority of mobile operators have failed at developing their business strategies in response to market evolution.

They have failed to address the growing penetration rates of smart phones, failed to address the growing popularity of mobile software and services that utilize the mobile data channel and, resultantly, they have failed to address the growing demand for mobile data access at reasonable prices.

Since these market factors have gone unaddressed, and since they don't seem to pay attention to their own statistics, the threatened EU regulation could just be the medicine that this industry needs.

Mobile operators have a spectacular crutch - voice and SMS. These provide the overwhelming majority of revenues for mobile operators located in the EU.

For Vodafone, for instance, these totaled over 87% of their revenues for the year ended March 31, 2008. However these are also the services that will be the first to be cannibalized by new technologies such as peer-to-peer messaging and mobile Voice over Internet Protocol.

The immediate implication is that established mobile operators are facing a growing direct attack on their revenues. What the mobile operators need to do is cast off their crutch and start innovating according to consumer demand.

This means encouraging mobile data use, enabling 3rd party mobile service and content providers and, finally, stop charging so much for the connectivity that it kills any good idea before it starts.