Roaming accords more fraught than trade talks

OPINION: In the last year 2.4 million people visited New Zealand. Almost all of them own phones, many own data cards attached to laptops or iPads, and almost all were unable to use the data functions.

The reason is simple - the cost of data roaming is exorbitant. The cheapest deal I found for Australians visiting New Zealand was Vodafone Australia's Roaming Data Bundle, the largest of which costs A$249 (NZ$304) for 200MB, or A$1275 per GB.

That's not too bad versus standard rates and competition, but once the visitor goes over that 200MB limit then the rate steps up to A$7998 per GB.

The excellent Trans-Tasman mobile roaming study from the Economic Development Ministry and Australia's Department of Broadband, Communications and the Digital Economy estimated a 2009 average of NZ$20.81 per MB (A$20,322 per GB) for Australians visiting New Zealand, [PndStlg]6.55(NZ$14)/MB for British visitors, US$18.81(NZ$27)/MB for United States visitors and S$26.01(NZ$27)/ MB for visitors from Singapore. Multiply those numbers by just under 1000 to convert to the more common $/GB measurement.

The reaction from travellers to these obscene prices is obvious, as shown by a European study last year that found two thirds of roamers leave their phones switched off when out of their home country. That is likely to be much higher for visitors to New Zealand who are further away from home in distance and time zones. It is a global problem, and so bad that the EU last year passed laws to cap data roaming spend at [Euro]50 (NZ$90) per month. However, the other part of that deal is a cap at [Euro]1 per megabyte downloaded in 2009-10, which is still [Euro]977 per gigabyte, so that the [Euro]50 cap would be reached after browsing about 40 pages of Stuff.co.nz.

None of this is acceptable, not even remotely. The prices are mired in the past and, unlike domestic mobile or home broadband prices, do not fall each year.

We all lose. Visitors and the tourism industry lose as visitors are offline as they travel the country. Visitors are unable to stay linked to home, which could shorten their stay and reduce their enjoyment while here. Visitors are also unable to easily use Google maps or applications to find their way around the country, nor to browse online to find activities or accommodation for each day.

The mobile phone companies lose as most people simply do not data roam, and those who do are extremely upset when they eventually receive their bill.

Those high prices are embedded in bilateral or multilateral arrangements between carriers. Thus, when a Telecom customer roams in Australia, that customer will roam on Telstra's network, and pay the agreed price between Telstra and Telecom.

Those prices are, apparently, very close to the retail prices charged to customers, so one of the carriers makes only a small margin. If a Telecom customer balks at the excessive charges, then Telstra will still demand full payment from Telecom, and Telecom will wear the cost.

So the only way to fix the issue is for those carrier agreements to be renegotiated. A simple one-off price change will not be enough - as prices in this industry fall sharply each year. The negotiated roaming prices should have automatic annual adjustments to account for the ever-increasing flow of data to and from each device.

The current data roaming rates are orders of magnitude out. The $7813 per GB that Telecom charges for New Zealand visitors to Australia is almost 100 times larger than the charge for domestic customers on their cheapest plan, $79.95 for 80GB. We can also assume that the $79.95 for 80GB is a much fairer reflection of the true physical costs of delivering data to a handset or data card that is in New Zealand.

Now the process of changing the roaming agreements between the hundreds of telecommunications companies across the world may be an effort that makes free trade negotiations seem simple. So why not take a leaf out of the free trade book, and instead focus on bilateral agreements starting with Australia and New Zealand? That seems to be consistent with the existence of the Trans-Tasman Mobile Roaming study.

So here is my proposal for the Australasian carriers and their respective ministers - Steven Joyce and Stephen Conroy. Aim to cap data roaming costs between Australia and New Zealand at $40 per gigabyte, with that price automatically reducing by 25 per cent per year thereafter.

That annual reduction should be transparently related to the change in international capacity costs or to domestic data prices. Monitor the results, and watch as travellers start to leave their phones on, increasing your overall revenue, increasing the happiness of customers and giving you some much needed government and public support.

Once the results are in, use them to cut bilateral deals with other countries and carriers, letting the eventual snowball effect follow so that we can leave our devices on. It is your chance to change the world.

Lance Wiggs is a consultant to industrial, media and internet-based businesses. He is a director of several companies and a regular blogger on his website lancewiggs.com.

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