By Julia Fioretti
BRUSSELS (Reuters) - The European Union proposed on Wednesday cutting the wholesale roaming rates that telecoms operators pay each other when customers use their mobile phones abroad to pave the way for the abolition of retail roaming charges by summer next year.
The EU struck a deal a year ago to abolish mobile roaming charges across the 28-country bloc by June 2017 but that hinges on wholesale prices being competitive enough to allow firms to offer customers free roaming without operating at a loss.
The European Commission, the EU's executive, proposed cutting the maximum amount operators can charge each other to 4 euro cents a minute for calls, 1 euro cent per text message and 0.85 euro cent per megabyte of data to ensure that retail roaming charges can be abolished in a year without distorting the market.
"In a year from now, we'll say goodbye to roaming charges," Commission Vice-President Andrus Ansip said.
However, the proposal is likely to run into many of the disagreements that hampered the law to abolish roaming charges, which was eventually agreed after much wrangling over the date.
Operators in countries with lots of incoming roaming traffic such as Spain, Greece and France want wholesale rates to be high enough to compensate them for handling the extra tourist traffic and ensure they can keep investing in networks.
Operators in countries with cheap domestic rates and whose customers travel a lot, such as Baltic and eastern European countries, fear removing retail roaming rates without lowering wholesale prices first will force them to raise prices at home to recoup the cost.
Wholesale prices are currently 5 euro cents a minute for calls, 2 euro cents for text messages and 5 euro cents per megabyte of data.
GSMA, the mobile operators' association representing the likes of Vodafone and CK Hutchison Holdings' mobile businesses, said "any regulation of wholesale prices should ensure that consumers are able to continue to enjoy and grow their use of roaming services in a predictable and confident manner while all mobile operators ... can cover their costs from providing those services."
The European association representing mobile virtual network operators (MVNOs)- which rent capacity from companies with a mobile network - said the rates proposed by the Commission were too high.
"Various mobile operators will not be able to cancel roaming charges as foreseen and they will be forced to use the exceptions permitting them to continue to apply roaming surcharges to recover their costs," said Innocenzo Genna, vice-president of MVNO Europe.
“This scenario will also favour an increase of mobile tariffs in general because the wholesale market will be less competitive.”
Once retail charges are abolished on June 15, 2017 operators will be able to apply a "fair use" policy to stop users roaming permanently with a cheaper foreign contract.
They can also ask to be exempted from the obligation to provide free roaming if they can prove they will not be able to recover their costs and would therefore have to raise domestic prices.
(Reporting by Julia Fioretti; Editing by David Clarke and Mark Potter)