TELECOMMUNICATIONS: ANTITRUST AND AGCOM PROPOSE CHANGES TO RECHARGE FEES ON MOBILE TELEPHONY
PRESS RELEASE
PRESS RELEASE
TELECOMMUNICATIONS: ANTITRUST AND AGCOM PROPOSE CHANGES TO RECHARGE FEES ON MOBILE TELEPHONY
A regulatory change would protect consumers, particularly less affluent ones
Changes are needed to the structure of fees levied on the recharging of mobile phones, making all the pricing components of mobile telephony transparent so that competition can lead to significant price reductions in the future. This is the main proposal to emerge from the joint fact-finding investigation carried out by the Italian Competition Authority and the Italian Telecommunications Authority (AGCOM) which was completed on 15 November 2006. Based on the investigation's findings, there would seem to be room for an intervention by AGCOM regarding the high recharge fees in order to protect all levels of customer but especially the economically less advantaged ones. Operators should also provide transparent information which would allow users to make informed purchasing decisions.
In the Authority's view, a revision, preferably a total revision, of these fixed charges would make the choices offered more transparent and comparisons easier. The changes would also eliminate the regressive nature of recharging costs which, by adding a larger percentage on the smaller recharge amounts, distort the market for consumers at the low end.
The report of the fact-finding investigation, which will now be forwarded to the European Commission, emphasizes that the “cost” of recharging mobile phones is an Italian anomaly which does not apply in other European countries.
The report also points out that prepaid services were created as an alternative to contract services which carry the government concession tax. This is a tax that in 2005 brought phone service providers revenues before costs of approximately 1.7 billion euros, equivalent to over 15% of total revenues from prepaid SIM cards. In Italy, over 90% of users have chosen the rechargeable service, compared with a European average of around 50%. While per-minute call prices have fallen progressively as time has gone on, the recharge fee for the different denominations has remained unchanged for all operators.
The investigation also makes clear that recharge fees bear no direct transparent relationship with the costs borne by the operators in managing the recharging service, but represents a price component added by those businesses as part of their pricing strategies. In particular, it has been estimated that the mark-up on recharge fees is of the order of 50-55%, amounting to a total of about 950 million euros in 2005. The result of the recharge fee is to increase the per-minute price by a fixed percentage: in effect, given the same price per minute, the purchase of small-denomination recharges means an overall price increase which may be significantly in excess of that applied for larger denominations.
In a context of great pricing complexity, then, the recharge fee has increased the maze of factors to be considered, obscuring even further the consumer's perception of the effective cost of the service.
ATTACHED TABLES
Table A – Percentage distribution of revenue from recharge fee by denomination
| | 2003 | 2004 | 2005 |
| Up to 20 euros | 33.5 | 40.7 | 48.3 |
| From 20 to 50 euros | 54.7 | 48.3 | 45.4 |
| Over 50 euros | 11.8 | 11.0 | 6.3 |
| Total | 100.0 | 100.0 | 100.0 |
Source: derived from supplier data
Table B – Average recharge fee by denomination (€)
| 2003 | 2004 | 2005 | % Change 05/03 | |
| Average | 2.34 | 2.20 | 2.25 | -4.1 |
| - Up to €20 | 1.28 | 1.30 | 1.51 | 18.2 |
| - From €21 to €50 | 3.99 | 4.06 | 4.11 | 2.9 |
| - Over €50 | 4.23 | 4.66 | 4.21 | -0.5 |
Source: derived from supplier data
The report of the fact-finding investigation will be made available on the websites of AGCM and AGCOM.
Rome, 16 November 2006