The EU’s roaming and net neutrality vote puts it on the path to a digital crisis

[Commentary] The EU Parliament voted on a telecommunications package that includes free roaming and net neutrality.

Future historians will likely mark the date as a key event for the onset of the EU’s digital crisis. U politicians have made free roaming the centerpiece of their digital market effort. Essentially, it is an effort to harmonize mobile roaming prices across the 28 member nations, regardless of the underlying costs. It is nothing more than “feel good” politics. Plus, it’s a cheap win for politicians as operators foot the bill. No matter where their customers go, operators are forced to eat the costs of their customers’ traffic, even if the costs exceed their revenues.

There are two nasty intended consequences of the free roaming regime. First, artificial price ceilings create a perverse market for mobile arbitrage. People and speculators can game the trade of SIM cards, buying them in low cost traffic countries (Lithuania) and bringing them to high cost traffic countries (e.g. UK or Germany where spectrum costs and taxes are considerably higher). Second, in order to police this illicit activity, the EU will have to start a surveillance regime. Europe, which is still smarting from the financial crisis, is on the course for another, digital one, where users will not be able to get the network service they need because operators are too poor to deliver it.

Wrong-headed and overzealous investment has stifled broadband investment. Network neutrality is a mess, not least for content/applications providers. Creating a world with a patchwork of net neutrality regulation will itself provide arbitrage opportunities.

[Layton studies Internet economics at the Center for Communication, Media, and Information Technologies (CMI) at Aalborg University in Copenhagen, Denmark]