Neelie Kroes tells Vodafone's Colao more regulation is good for customers, good for him

And the EU Parliament's industry committee backs her in voting in favor of new caps

Vodafone's warning that caps on roaming charges would cost jobs has provoked ire in European Union institutions.

Vodafone CEO, Vittorio Colao, said on Monday that unless the European Commission stops imposing price cuts, mobile companies will slash investment in networks. "Does Europe need employment or does Europe need rate cuts? We should stop having this continuous intervention on prices and let the industry reinvest the money," he said. But on Tuesday, Digital Agenda Commissioner, Neelie Kroes, said that she would not be threatened.

"Message to Vittorio and Vodafone: I call your bluff. I take the side of the Vodafone customer. Remember, if consumers lose their fear of using their smartphones and tablets when traveling across Europe, operators will benefit as well," said Kroes.

Fortunately for the commissioner, the European Parliament's industry committee backed her up. The ITRE committee voted by 55 to 5 in favor of new caps on roaming charges when the current caps on phone calls and SMS messaging expire in June 2012. If approved, the new rules would also cap retail data roaming charges for the first time.

The Parliament committee also backed rules from March 2014, known as local break-out, that would allow people going abroad to buy packages from mobile companies separate from the ones they use at home but to still keep their normal phone numbers. Any such switch to an alternative roaming service provider would have to be free of charge.

Although mobile phone operators have reduced roaming tariffs to match E.U. price caps, customers are still not being offered roaming tariffs that are markedly lower than the caps, according to the Commission. And the industry committee set even lower price caps than the Commission's proposal.

Under ITRE's plan, the cost of a call would be no more than €0.25 (US$0.33) per minute to make and €0.08 per minute to receive. After July 2014, it would drop to €0.15 to call and €0.05 to receive. The cost of a text message between E.U. countries would be no more than €0.08, and €0.05 from July 2014.

The committee members also voted to limit the cost of downloading from the Internet on a mobile in another E.U. country to €0.50 per megabyte and €0.20 from July 2014. The Commission had proposed €0.90, decreasing to €0.50. Despite this, some regretted that the committee had not taken the price-capping even further.

"There is no logical reason for the continuing exorbitant costs of mobile phone roaming. The artificial difference between domestic and roaming prices should be completely ended. We should be ending the roaming rip-off now," said Green member of parliament Philippe Lamberts.

Europeans for Fair Roaming, a citizen's initiative that started on Facebook and now reaches more than 150,000 people also said the committee should have gone further. "There is no reason why consumers should pay up to €200 per GB for using their Internet when abroad when the same service costs only a fraction of that at home," said Bengt Beier, Europeans for Fair Roaming coordinator.

The industry committee also wants the new law to allow new firms that do not own a part of the mobile spectrum, so-called mobile virtual network operators, to be able to access the market and compete for customers against traditional customers.

Martin Whitehead, director, GSMA Europe, warned that any new law must get the balance right: "The proposals to separate roaming and domestic markets will only be effective if retail price caps are set at levels that encourage market entry rather than discourage it. Caps should provide a safety net for consumers without undermining the competitive effect of the structural measures. Finally, we would like to reinforce the importance of ensuring that operators are given sufficient time to implement the structural changes."

The proposed rules could be put to a vote by Parliament as a whole as soon as April.

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