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Dial in on lower phone fees

About the author

Bryan Borzykowski is a Toronto-based business writer and editor. He writes about personal finance, wealth issues and other money topics for BBC Capital and also contributes to the New York Times, CNBC, CNNMoney, Canadian Business and the Globe and Mail. He’s written three investing and personal finance books, too. Follow him on Twitter @bborzyko. 

Dialling in

The cost of making a mobile call abroad is falling – but not fast enough for some travellers. (Thinkstock)

Travellers planning a weekend getaway to another city might go online to check the weather or fun activities. Not Toronto-based marketing professional Kerri-Lynn McAllister. Before boarding her plane to Chicago recently, McAllister checked her wireless service provider’s roaming rates. Her conscientiousness came after a hard lesson learned during another trip.

The last time she’d travelled, McAllister had bought a CAD$40 ($38.39) plan, but wound up paying CAD$100 ($95.98) for what amounted to a few calls, texts and emails.

She was pleasantly surprised this time: her usual voice, data and text combo plan was $15 cheaper than it was on the last trip she took two months earlier.  

McAllister isn’t the only traveller who’s suddenly noticing lower roaming fees.  Telecom rates globally are falling and consumers in many parts of the world should now feel a little less of a pinch when they travel abroad.

A combination of customer complaints, stringent legal regulations and competition has forced many firms to slash roaming rates. Despite the good news, consumers still are at risk of being caught unawares by still-high costs. A few simple steps, which take only a few minutes, can protect consumers from unwelcome surprises when they open the bill from their wireless provider. 

Rates slide

Over the last two months every major Canadian telecom has dropped rates. In September, Bell Canada slashed its US roaming rates by 50%, while Rogers Communications and Telus Communications, McAllister’s carrier, have introduced cheaper roaming options.

A number of telecoms in other countries have reduced rates, too. On October 28, Vodaphone’s Indian operation cut its data fees by 95% and voice calls by 78%. In September, Australian telecom Telstra reduced its pay-as-you go mobile data roaming rate from AUD$15.36 ($14.61) megabytes to AUD$3 ($2.85) a megabyte. Earlier this year China Telecom announced that it was lowering roaming rates in certain countries by more than 50%.

European telecoms have been slashing rates for a few years. By the middle of 2014, outgoing voice calls made within the European Union will have fallen 55% from their 2009 levels, while data rates will have dropped by 71% since 2012. There’s now a push by the EU to end incoming roaming rate charges all together.

Not just goodwill

Don’t be fooled— these rate reductions aren’t merely goodwill gestures on the part of telecom companies, said Bill Menezes, a Denver-based analyst with technology research firm Gartner Research. In many cases, regulators are forcing carriers to cut rates, while free wi-fi-based calling apps, such as Viber and Skype, are making roaming packages less attractive. It also helps that consumers are finally fed up with paying seemingly exorbitant prices.

“A lot more attention is being paid to how out of whack roaming fees are, compared to domestic fees,” said Menezes.

Whatever the reason, cheaper fees are good news for mobile phone users. McAllister, who travels to the US about six times per year, always purchases roaming packages, but still goes over the allotted usage.She went over her minutes during her recent Chicago vacation, but because McAllister’s package was cheaper she only spent about $15 extra on roaming fees.

Still too high?

Despite the recent reductions, many experts think roaming rates are still too high. Nishi Nangia, an analyst with London-based Informa Telecoms & Media, said that when she travels to Paris, which is just a five-hour drive away, she pays three-times more for a call than she normally would.

The gap between roaming fees and regular costs will likely remain wide, barring further regulation. It’s not clear how much money telecoms make on roaming calls, but Nangia said that margins could be as high as 90%. That’s come down as fees have fallen, but companies are still making a mint off their border-crossing customers, she said.

 “Roaming is a cash cow for them,” she said. “It’s a small segment of their overall revenues, but it’s a high margin part of the business.”

Due diligence

Cheaper plans don’t automatically mean lower bills. Bruce Cran, president of the Consumers’ Association of Canada, said that if you don’t do your research on the different options the telecom offers, you could end up going over your minutes and paying extra fees.

“Whether this prevents what we might call a catastrophe, like coming home and finding out you have a large bill, isn’t clear yet,” he said. “Those things could still happen if you don’t supervise your phone usage in a roaming situation.”

That due diligence is easier said than done, said Menezes. Pricing has “never been transparent or simple,” he said and that hasn’t changed.

When looking for plans, make sure you buy a package that sends you notifications when you start roaming and when you near your minutes limit, he said. It’s even better if your plan allows you to cap the number of minutes you use, instead of automatically charging you if you go over.

Also look for price differentials between prepaid and postpaid plans, said Menezes. Some companies offer better prepaid roaming plans. In that case, it could be less expensive to buy a cheap phone and prepaid minutes than using the roaming rates that come with your existing contract.

Finally, look for rates that align with how you plan to use the phone. If you want to upload photos to Facebook, buy something with higher data usage. If it’s just voice calls, then don’t purchase the more expensive combo packages.

 “There’s not as much transparency as most consumers would like,” said Menezes. “They really need to do their homework.”

While it’s unlikely that roaming fees will ever be abolished, further price cuts will likely come as competition heats up and regulators crack down, he said.

“It’s definitely gotten better, but I still pay a lot,” said McAllister. “At least it’s a shift in the right direction.”

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