European Commissioner Viviane Reding is expected to announce plans to regulate the prices they charge for sending and receiving data and SMS messages while abroad, which are known as roaming fees, pointing out once again the impact that government regulations have on fundamental aspects of carrier business models.

 

Reding will announce tomorrow that regulation is needed at wholesale and retail levels for SMS messaging to bring down the price consumers pay to send and receive texts abroad, reports Michelle Donegan, Unstrung European Editor. Reding last year regulated voice roaming charges.

 

According to data gathered by the European Regulators Group (ERG), the average price of an SMS while roaming was €0.29 ($0.46) in January and it is still €0.29 ($0.46) today. That isn't enough to avoid regulation, as Reding was hoping for a 19 cent rate by now.

 

As a result, prices will be forcibly slashed about 70 percent, Donegan suggests. That's going to crimp revenue potential for mobile carriers if users do not dramatically increase their usage. But there are other wide-ranging effects. To the extent that all manner of alternatives have had some breathing room under the high-price umbrella, the possibility of price arbitrage is going to shrink as well.

 

There's still room for arbitrage, of course, just not as much as has been the case. Over time, the slimmer savings--though pounding dominant carrier revenue streams, will solidify their hold on the market, as competitors will have a tougher value proposition as well. It's a cruel reality, but competitors do best when dominant providers set high prices.

 

As those prices come down, so do opportunities for competitors to take easy market share.

 

There is already some indication of the range the European Commission is considering for SMS roaming price caps. The ERG recommends a retail price cap between €0.11 ($0.17) and €0.15 ($0.24) per SMS message while abroad and a wholesale price cap between €0.04 ($0.06) and €0.08 ($0.13) per SMS message.