Are Global Data Roaming Prices An Example of Market Failure?

I passed a sign in the airport at Heathrow yesterday.  Vodafone was advertising global data roaming packages from $1.60 per MB.  Roughly translated, that means my AT&T package in the US of 2.5 GB is about $4.000 when consumed by roaming - this is 160 times the local price.  Voice minutes are, by contrast, about 10 times US prices when roaming - assuming an averge per-minute price of $0.10 and a roaming charge of $1 per minute.  That, by the way, is the "special" package.  If you don't buy a package in advance, you can be looking at even higher rates.

Is this an example of a market failure?  I think so.   While there is competition between mobile operators, it's primarily focused on domestic markets.  Including roaming services in the packages is not a key part of the decision-making process and once you are locked into a contract, just giving up your mobile is not really an option.

There are more and more options for savvy travelers, and increasingly it is less sophisticated users who find themselves gouged when they return home to a $2,000 roaming bill.  In Europe, regulatory intervention in the market for voice roaming has done much to bring down fees and benefit consumers without any evidence that it has hurt companies.

The same may be true in data roaming.  There is no compelling business reason for charges 100 times higher in roaming and it is clearly in the public interest to reduce those charges and make data services more accessible to travelers.

Get Ready To Pay.  Picture from James Cridland