INTERVIEW WITH ADAM HAYES, CFO ESEYE.
Earlier this year it was announced that data roaming charges will be abolished within the EU by June 2017 (Source: BBC News, 30th June 2015). This agreement, requiring telecom operators to treat most internet traffic equally, has been long-awaited, particularly in light of US adoption of net-neutrality rules. For the first time in Europe the principle of internet neutrality will be reached, which means internet service providers (ISPs) no longer need to favour national MNOs to keep costs contained. Starting from April 2016, telecom operators will only be allowed to add a stated surcharge for the services, making roaming within EU up to 75% cheaper. With this upcoming decrease in revenue will it have a negative impact on service?
With this in mind, we decided to address a few questions to Adam Hayes, CFO at Eseye, to get his opinion on what happens to roaming pricing when that time comes. With a long career in Telecoms and electronics, Adam has a deep knowledge of IoT business processes and industry pricing. Here’s what he had to say:
Q: Why are there roaming rates in the first place – isn’t it all IP based communications nowadays (are the MNOs just greedy)?
A: It all started back in the days of fixed line telecommunications; if you wanted to call someone overseas (the national operator was usually a monopoly) they needed to have a phone on the network to answer. So it was a way of funding international network development and compensating them for connecting the call. I believe it actually first started between Postal Services for letters. Otherwise the “other end” received no money as typically only the person making the call (sending the letter) gets billed. The introduction of fixed line competition within countries meant that the model was extended to cover national traffic as well.
When mobile telephony started it followed the same process except that you take your phone with you, and “roam” onto another network when you are abroad (very few countries have national roaming). You are still billed in your home country but the local network (who run all those masts) need to be paid and this is done via the roaming rate.
If each operator sends each other the same amount of traffic then no one cares much about the actual rate as it nets off, but if the traffic is out of balance then it can be very lucrative. The more out of balance it is the less one party wants to re-negotiate the rate. Therefore, as the underlying cost of delivering a call has fallen the “roaming” part has not fallen as quickly. This means that local prices have fallen faster than international roaming rates.
When most of the people paying these international rates were business users there wasn’t much drive to correct this, but as inter EU travel has increased more people complained about the costs and the EU saw a way to do something positive! Hence they regulated reductions in the roaming rate.
In short, I don’t think the MNOs are greedy, but the charges did need sorting out. They have to find new ways of funding the continued investment in infrastructure as this was one of the means to do so.
Q: What does the roaming rate removal mean to Eseye customers – will the prices be lowered?
A: Our big reduction in rates has come over the last few years. The removal of roaming does not mean that data is free, just that we pay the same for the data in each EU country. We achieved that last year and have been offering the same rates not just in the EU, but in all our Zone 1 countries, including the USA and Australia.
Q: Will data eventually become commoditised to create ‘pay monthly, eat as much as you can’ for M2M (like we have for home broadband and mobile phone contracts today)?
A: I think this will take many years to be applied globally and the market is already seeing some pushback on this. Even for service providers, there are significant benefits to the ‘eat as much as you can’ model, as it’s much simpler to invoice and so the related back office/infrastructure needs are much smaller. However, the network still has to be paid for and there is always a point when it will be perceived as unfair that my phone isn’t connecting because someone else is consuming capacity by streaming music all day, when all I want to do is to make a phone call.
Q: What are the challenges organisations like M2M providers and MNOs face when they are forced to reduce their charges?
A: Convincing customers that other aspects of the service are worth paying for, and that, increasingly, the data quantity consumed is no longer the major part of the overall cost. At the same time, encouraging additional services that deliver more value to them and will inherently use more data, giving the service provider business revenues a natural lift.
Q: How will the turn off of 2G networks affect 2G pricing?
A: 2G statements from operators vary tremendously and few have formally committed to switching off 2G. For M2M, I am yet to be convinced that 2G is not the right solution for IoT applications using small amounts of data. Why pay 10 times the cost for a 3G or 4G modem when a 2G one will do the job equally well? For your consumer smartphone, 4G is absolutely imperative, but your smart meter doesn’t need it. The benefits of the Eseye AnyNet connectivity is that it allows us to provide a 2G service for as long as at least one network offers it in the country. There is no separate price for 2G – it is about network availability. I note here with wonder and amazement that there are still paging networks out there.