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What did we propose? We proposed a wholesale cap on the rate of charges between network operators. For example, when a call emanating from Spain comes back to England, it goes through a network from Spain and perhaps through intermediate countries, back to a terminal in the United Kingdom. From thence it becomes a domestic call. The wholesale charges are presently completely without any kind of regulation. We recommended a cap of 30 eurocents per annum. That is the rate that network operators charge each other. I am glad to say that the European Parliament also came up with that figure. The presidency, under Germany for the past few months, has so far broadly supported that level of charge, and a consensus is building around it.

We did not suggest specific retail caps; that is, a specific sum charged to both the sender and the receiver of an international mobile phone call. However, we were in favour of a safety-net tariff that limited the total cost to the consumer. We argued that there was no need for caps at the retail level because of our fear that innovation and competition would be endangered. We argued for an opt-in mechanism for existing customers of mobile phone operators being able to make specific decisions to opt in to this safety-net tariff and for new customers automatically coming within the protection of a safety net but having the ability to opt out.

We also argued for sunset provisions for the regulations. I think that we were the only voice, certainly in this country and possibly in Europe, arguing for that. It is a matter for the European Parliament and the Council of Ministers under the co-decision principle, and for the Commission to implement. It is not for this Parliament to implement a regulation of international charges.

I am glad to tell your Lordships that there has been significant progress in recent weeks. The European Parliament voted yesterday for action on this front, and I understand that the Council of Ministers has reached agreement with the European Parliament. It is due to consider the issue on 7 June. It will be the duty of Mrs Reding—a very impressive commissioner whose views did not necessarily in their entirety commend themselves to your Lordships’ committee, but we were very impressed with her energy and enthusiasm—to implement any decision agreed between the Council and Parliament.

What are the differences between the report of your Lordships’ Committee and the European consensus? We are agreed on the wholesale cap. It should be based on average charges throughout the year for different network operators, but we agree with the 30 eurocents per minute cap. Incidentally, the European Parliament has voted for a gradual decrease of that cap over three years. I welcome that, although it was not in our report. The European Parliament has voted to protect consumers with a maximum retail cap—obviously that includes the wholesale charges from the operators, but also the cost of delivering the call to the mobile phone or landline of the subscriber—of 49 eurocents per minute for an outgoing call and 29 eurocents per minute for receiving a call. That is a total of 73 eurocents. Those caps would also decrease over three years.

Although we disagree with that approach, what we would end up with is certainly preferable to no action. Our concern with setting retail caps is that the industry might move immediately to charge the maximum, which would inhibit competition and innovation.

I shall briefly touch on four points that may be helpful to future debate. It is a pleasure to see the noble Lord, Lord Truscott, in his place to answer the debate. He made a rapid transition from membership of European Union Sub-Committee C to ministerial duties and we thank him for taking time to come to answer this debate.

My first point is that during the three-year uninterrupted life of the regime controlling mobile phone costs, I want the Commission to watch for the impact on competition and innovation in the industry. If we end up with everyone charging the same rate throughout Europe, that would be to the ultimate disadvantage of the consumer.

Secondly, please let us not proceed on the assumption that there will inevitably be a renewal at the end of three years and an automatic extension. The proposed regulation passed by the Parliament suggests that the Commission and the Council look at the situation after 18 months and make a decision on whether further legislation is needed to extend the regime. I think and hope that the Commission will take a rational view of that, look at data on the costs of providing services and not automatically assume that the regulation should stay permanently.

Thirdly—the noble Lord, Lord Mitchell, was one member of the committee who correctly referred to this—the proposal to which the Parliament has agreed and with which the Council seems to agree excludes any kind of regulation of data transmission. It covers simply voice transmission. Data transmission is becoming increasingly important, especially to businesses working in the European Union. We need to keep track of charges for data transmission to see whether similar action to the control over what I call the retail voice market is needed.

Finally I make a plea for transparency. This is a plea to the industry. The tariffs which individual operators in this country make available to consumers are complicated. I am sure that quite a small percentage of your Lordships who use mobile phones are aware of the tariffs that you are offered by your UK mobile phone operator when you travel in Europe. We must have a mechanism to make sure that a wider audience is aware of what is offered. I hope that what is offered will be competitive.

I conclude by making a brief comment on the timeliness of reports from the European Union Select Committee. The noble Lord, Lord Grenfell, who is in his place, is a distinguished chairman of the committee. I hope that he will not mind if I say that my personal view is that we must make greater efforts to ensure that our reports are concise, timely, listened to and can influence the outcome in Parliament, the European Parliament and the Council of Ministers. Here, the Department of Trade and Industry has performed extremely well with this report. We published emerging conclusions before our final report on 13 March. The Minister of State in the DTI, Mrs Margaret Hodge, replied very quickly. We produced our report on 23 April, and the Government responded very quickly. In the event, we found ourselves in almost complete agreement. Finally, the Lords parliamentary managers ensured that we had this debate today. Although Parliament took its decision yesterday, the Council’s decision is yet to come. I hope that we have been timely, and that the department and our colleagues in Europe have found our modest contributions helpful.

The noble Lord, Lord Currie, the chairman of Ofcom, has written to me to say that he could not be present today, although he would have participated. I have already paid my tributes to Ofcom. In his letter, he says, “we believe this agreement”—an agreement between the European Parliament and the Council to act, to which I have just referred—

“marks a momentous achievement and that the interests of British industry and British consumers have been safeguarded under these negotiations and in the Regulation itself”.

We are nearing the summer holiday time. Millions of people in Europe will head for the beaches. I make a plea to the European Council of Ministers and the Commission to agree regulations to reduce international mobile phone charges, and to have them published by the end of June. That is not an impossible target. I also make a plea to the mobile phone operators not to wait for the statutory two months but to implement the recommendations enshrined in the regulations immediately. Let the young family on the beach in Torremolinos call mum and dad back home in Manchester, free from the worry over excessive costs. Let us please have action, if not this day, then this month.

Moved, That this House takes note of the report of the European Union Committee on Mobile Phone Charges in the EU: Curbing the Excesses (17th report, HL Paper 79).—(Lord Freeman.)

5.31 pm

Lord Mitchell: My Lords, if ever there was a timely debate, this is it, because just for once the European Commission has shown its mettle and resisted ferocious pressure. Yesterday the European Parliament voted to cap mobile phone charges. I thank the chairman of the EU Sub-Committee, the noble Lord, Lord Freeman, for the efficient and inclusive way in which he led this investigation. In a short time, we took evidence and produced an excellent, hard-hitting report. The noble Lord has set an example to us all.

There are two heroes of the hour: Mr Rod Baber and Commissioner Viviane Reding. Mr Baber’s name might not be known to noble Lords, but he became the first person ever to make a mobile phone call from the summit of Mount Everest. He is a hero because he had to remove his face covering and oxygen mask to make this epic call. I thank him, because at least it reminded me of the fact that the mobile phone has become ubiquitous. Very few places on Earth are out of reach, except, predictably, Hampstead, where I live and where reception is zero. When I think of Mr Baber, I also think of roaming charges. What does it take to link up a phone call from the top of Everest, via China Telecom directly to the UK? The cost per minute must have been enormous. Luckily for Mr Baber, it was too cold to speak for long.

The mobile phone industry has been a huge success. In 20 years, it has grown from almost nothing to become one of the largest industries on the planet. Once it was the preserve of well heeled business types, who carted their massive handsets around like suitcases—I know; I was one of them—and today the pocket-sized cheap mobile is everywhere, even in poor villages in Africa. For all its curses, it offers us communications that were undreamt of just a few years ago, from the City types who are virtually welded to their BlackBerries to worried parents who can now be secure in the knowledge that their children are safe. As a parent of teenage children, I confess that there is no sound more wonderful than the text bleep telling me that they have arrived at their destination. It has revolutionised our lives.

I am going to say some fairly critical things about the mobile phone industry, which is why I have prefaced my speech by saying what a great job the industry has done. It has taken risks and invested massive amounts of money, and it deserves its rewards, or at least some of them.

I must start with a quote from a Mr Tom Phillips of the GSM Association, a global trade association representing 700 GSM mobile phone operators in 218 countries. It claims that its members represent 2 billion mobile phone users, which is equivalent to 80 per cent of all mobile users. Mr Phillips said:

“Mobile phone operators price their services to a broad range of customers ... our members operate in a highly competitive market”.

That is a nice try, Mr Phillips, but you are half right and half wrong. You are right when you look at domestic tariffs. Here in the UK, for example, you can walk from shop to shop comparing what is on offer. On a contract where the charge is £30 a month you get so many minutes free of charge and so many hundreds of free SMS text messages. It is highly competitive and each operator offers special goodies to entice new customers. That is the competitive environment that gives capitalism a good name.

However, Mr Phillips is wrong in regard to market sectors where operators relentlessly exploit sub-markets not located on the high street and where price cartel is the order of the day. Roaming within the EU has been one such cartel. Last night at the Champions League final in Athens, tens of thousands of football fans must have been calling home to Liverpool or Milan. The cost of such calls would have been as high as 85p per minute. No wonder Vodafone was the major sponsor of the event. It must have got its money back from the football fans alone.

Why has super-pricing on roaming charges continued for so long and why has the market not encouraged competition to do what the European Union has stepped in to do this August? I think I know the answer. Until last July I was gainfully employed and my company paid my mobile phone bills. I never looked at them. Now I pay the charges myself and I am staggered by what I have seen. I would bet that most business people are just like I was—totally oblivious. Someone else picks up the tab and roaming charges become just another cost of doing business. As for the man on the street—or should I say, as the noble Lord, Lord Freeman, said, the man on the beach in France or Spain—a few pricey phone calls a year from there to here hardly warrants a major investigation. Complacency has ruled and the operators have profited from consumer inertia. It is calculated that €5.8 billion per annum is spent on inter-EU country roaming charges.

It is true that the operators have made some half-hearted attempts to lower roaming charges. I shall pick on Vodafone for no reason except that I use it, but what I shall say could be true of any other operator. Vodafone has come up with a great wheeze called Passport. Basically, if you make a call from abroad and you are signed up to the Passport programme, you pay a 75p fixed charge per call and then you pay the standard domestic tariff. But there is an awful lot that you are not told about this programme. It does not tell you that it works only if you use a Vodafone network operator overseas. I am fairly good on technology—probably better than most—and I know how to set my phone abroad to use a specific network, but I wonder how many other people know how to do that. It also does not tell you who its operators are. In Italy, where I spend a lot of my time, I think that I can draw the conclusion that VodafoneIT is part of the Vodafone network, but who would know that it is SFR in France? However, it is a total roulette to select your operator in Italy. You can face one way one day and you get one operator: you can face the other way on another day and get another operator. In addition, you are not told that SMS texts are not included. Vodafone also fails to mention that if you are called from a landline within the EU that does not count. If you call another user in a third country, that too does not count, even if that user is on the Vodafone network.

That has now ended, and we must thank the real heroine of the hour, Commissioner Viviane Reding. Despite heavy lobbying by the industry, which is out to protect its nice little €6 billion earner, she has persevered in getting these price caps in place. Roaming charges are about to be reduced by 70 per cent, and the commissioner did it. This summer many glasses of champagne or prosecco ought to be raised to thank her. She will be saving phone users in Europe €4.2 billion a year. I call that a real result.

It would be wonderful if that were the end of the story, but sadly it is not. The operators still have other sub-markets where they use their oligopolistic powers to continue to rip off consumers. SMS texting is not covered by the new European arrangement, and neither is data. The text messaging business is huge and a licence to print money. I do not understand why this sector has not been capped. Then there is data. Next month there will be a revolution in mobile phones. Apple Computer is about to launch its iPhone. Apart from being a phone, it is also a multimedia device. Users will be able to download or transfer photos, movies, podcasts and music. It is like an iPod with a high-speed mobile phone connection. The demand for data is going to explode. Imagine the very same European citizens on the beaches in Europe next year, this time sending multimedia data across the continent on their iPhones. Data pricing is uncapped and the operators are going to have a field day.

This debate centres on the EU, but outside it are huge markets which are further cartel sub-markets for the operators. Many of our citizens go to the United States for their holidays or for business. Roaming charges from America are astronomical, as they are from Asia, Russia and Australia. I would like to see moves to cap these sector prices as well.

The thrust of the industry criticism is that the natural forces of competition should rule pricing policy and that the EU should stay out. Well, they are bound to say that. Last Tuesday, there was a withering editorial in the Wall Street Journal accusing Ms Reding of being a “Soviet era central planner”. What utter nonsense. I am not a politician, but an entrepreneur by background. In my bones I understand full well the balance between risk and reward. I might have been expected to be sympathetic to the operators, but I absolutely am not. When consumers are the victims of monopoly power and when producers conspire to maintain artificial prices, the moment comes for such power to be contained. That is what the EU has done. It has taken the first step and it deserves all our thanks.

5.42 pm

Lord Dykes: My Lords, the noble Lord, Lord Mitchell, says that he is a capitalist and entrepreneur. We pay tribute to his work in those fields over many years, but for him to say what he has just said really spells it out: one has to have regulation when there is clear abuse of the market whereby customers have no chance of making proper calculations about real prices. We thank him for what he has said. Above all, I want to add my congratulations to the noble Lord, Lord Freeman, on the truly outstanding way in which he has husbanded this important investigation through our committee proceedings. There was a danger that we would miss the momentous developments in this saga, understandably and through no one’s fault, and yet we did not and I am grateful to him and to our Clerk, officials and advisers for what was done to make sure that we were kept up to speed on this extremely complicated matter for those who are not experts in mobile phones, particularly in their use when overseas.

Our celerity was especially noticeable in the expeditious treatment of a very rapidly unfolding scene once the mobile phone companies realised that the old game of excessive charging in an imperfectly informed marketplace was finished, or at least beginning to be finished. It was necessary for Sub-Committee B to move very fast indeed on this one. Everyone co-operated and the Government also acted rapidly—I thank the noble Lord, Lord Truscott, and Mrs Margaret Hodge for what they have done—to keep some control of the situation, bearing in mind that it is an international and very complex matter. The speed and decisiveness of our chairman and the members of the committee were especially needed as co-ordination between them and the members of the Government and officials at Ofcom dealing with the inquiry was going to be overtaken by the hugely energetic work of the German presidency, Commissioner Reding and Members of the European Parliament who are particularly expert on this subject.

It was gratifying to see in the opening stages of this exercise that even hints of future action by the European Commission had the industry responding with charmingly hasty cuts in some roaming and related charges, once again showing how super-normal the profit-making already had been for far too long. This is yet another example of where the Commission’s energetic battling to secure genuinely open and transparent single market conditions in many different fields is gradually bearing fruit. It is a slow and painful process, and one where often the national press in different countries, particularly in this country, writes articles resisting the process. The resistance and the cartel antics of the companies in many sectors have to be fought very hard indeed, particularly in this sector.

I sense the same mistakes are made by often understandably ignorant consumers—not through their own fault but through the nature of the market and the complexities of all kinds of services—in blindly accepting monopolistic, imperfect overcharging markets in areas such as bank charges and credit charges. How many holidaymakers calculate the costs—particularly if they are paying their credit card over a month, which is always very unwise—when they change from sterling into the euro? The cost would shake them if they sat down and did the figures, but it is amazing how few people do so. This happens with mortgage charges, too, particularly in this country which is not a member of the eurozone. Mortgages here are much more expensive than they are in the leading countries of the eurozone.

It remains sadly true that if customers really took the meticulous trouble to work out precisely how much they are paying in some of these market places, they would be truly outraged. All too often they have only a vague idea or they shrug their shoulders and say, “Well, it is an overseas market”. But it is supposed to be the developing single European market, not an overseas market in the conventional sense.

Not all consumers of roaming services, however, were so supine. In the evidence we accumulated in February, representatives from companies such as Hutchinson, for example, admitted that they, the public,

“coming back from holidays are often horrified at ... the charges that have been made”.

It has always been the case that business users might pay more attention to these excess costs if they were roaming frequently abroad. Most roaming is done by business users, particularly by small and medium-sized companies, but in reality that could be offset—it sounds cynical, I know—if the costs were being borne not by the person personally but by the company’s treasurer’s department. For private consumers the situation is much starker.

Naturally, we in the committee were primarily concerned with the plight of private self-paying users. Although they remain a minority, the figure goes up when the summer holiday comes along throughout Europe, mainly in Mediterranean areas. In the mean time, retail roaming prices had begun to come down a little in recent years as competition began to exert more effect and other parts of the packages offset, to some degree, the heavy incidence of the roaming net cost to customers.

Some of us were surprised—the noble Lord, Lord Mitchell, alluded to some of the comments made by the companies—that Orange, part of the worldwide France Telecom group, felt that no regulation of wholesale or retail charges was needed at all; that everything could be done by competition. It also felt strongly that Article 95 of the Treaty of Rome was inappropriate as a way to impose regulation of maximum charges. I would love to hear from any noble Lord who has experience of trying to cancel a mobile phone contract. It is an exceedingly difficult process and takes a long time. You have to insist or threaten with lawyers before you get out of it.

Market 17, the one for international roaming charges, was already being scrutinised under the new regulatory framework procedure, of course, but I feel strongly that the Commissioner was fully justified in seizing the reins quickly and accelerating the inquiry processes by the subsequent decision on what was effectively severe market abuse and excessive market cartelisation, notwithstanding Vodafone’s repeated claims that it had launched more competitive roaming rates as far back as 2001, described eloquently by the noble Lord, Lord Mitchell.

The distinguished MEP, Dr Paul Rubig from Austria, reminded the committee in his testimony that it was bad enough facing excessive charges and profiteering in the UK, but at least it was across the water. Psychologically it seemed a little more remote and perhaps was understandable as the wires were a long way away—not that they have wires. He asked about considering the question of the psychological stress on our continental neighbours. He cited in his testimony a five cents charge for domestic calls through 1,000 kilometres of his own country, but someone on the border of Austria with Germany calling a nearby German neighbour would pay up to €2 because it was over a national frontier.

Moreover, the charges were always so vague and complicated to calculate, with rebates on accounts afterwards to make it even more obscure. As he stated, it was like being in a restaurant where the waiter would give you the wine and work out the price afterwards.

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