The retail price of text messaging while roaming should initially be capped at close to Euro 0.11 (AUD$0.18) per message, but then fall toward a long-term goal of around Euro 0.04 (AUD$0.07) per message, the European Commissioner for the Information Society said Tuesday, unveiling plans to regulate the market for mobile phone messaging in Europe.

The price of accessing the Internet via a mobile phone while travelling outside one's home country is also far too high, Viviane Reding said, and warned that price caps for data traffic may also be imposed if mobile operators don't bring prices down by themselves in the coming weeks.

Over the next few months, the Commission will draft a revision to the existing roaming regulation, which covers charges for voice calls, extending it to include precise caps for retail and wholesale SMS (Short Message Service) roaming prices, and possible caps on data roaming prices.

The aim is to propose legislation by early October, get it agreed with national governments by the end of the year, and by the European Parliament in early 2009, so that the revised law can come into effect before next year's summer holidays, Reding said.

"Mobile operators clearly don't have the will to self-regulate," Reding said in a news conference, pointing out that SMS roaming prices have remained static since last October, despite her warnings that she would take action if they didn't cut their prices.

Average roaming prices across the E.U. are Euro 0.29 per SMS, Reding said. The Commission launched an SMS pricing Web site giving a breakdown of pricing for operators across the E.U.

Belgian mobile operator Proximus charges the highest price: Euro 0.75 per SMS while roaming.

Meanwhile, Austria's Mobilkom has what appears to be the best offer: a prepaid package of 100 SMS messages for Euro 10. This price of a‚¬0.10 per SMS while roaming is lower than the target figure Reding advised operators to aim at.

She said Mobilkom's offer is exceptional. "This is one operator out of 90 (that made a significant price cut). I'm not impressed at all," she said.

The Commission will set its initial price cap at Euro 0.11 or a little over that because this is within the range proposed by the European Regulators Group, a forum of national telecoms regulators from all 27 E.U. countries.

Reding then wants the price cap to fall to around Euro 0.042, a level proposed in a study conducted by the Danish National IT and Telecom Agency (NITTA).

"The Danish figure is a very strong indication for the whole E.U. in the long run," Reding said.

Daniel Pataki, chairman of the ERG, agreed that the Danish targets are a good guideline but warned that as Denmark is a small, very flat country, the study by NITTA will have based the retail price target on costs that are far lower than in many other countries in the Union.

On data roaming, Reding said the picture is less clear-cut, with some evidence of prices falling in recent months. Nevertheless she warned that data roaming prices are far too high -- as much as 1000 times the price of using a mobile to access data on the Internet when not roaming.

This huge differential is causing what Reding termed "bill shock", after a subscriber has been using a mobile phone to access the Internet while on holiday. "It's happened to my own children," she said. "One shocking bill and they don't use their mobiles abroad anymore."

Roaming prices for data range between Euro 0.25 and Euro 16 per megabyte. The average retail price has fallen to Euro 3.60 per megabyte, from Euro 5.24 last year, but it has to fall further, Reding warned.

The Commission will propose wholesale price caps because without them, smaller operators could be squeezed out of the market, she said. Wholesale prices are the prices operators charge each other for carrying data across their networks.

She has decided not to impose retail data roaming price caps yet, but "if we hear more horror stories of bill shock then we may have to take action here too."

The Danish regulator's study concluded that data roaming prices could go as low as Euro 1.18 per megabyte. Reding said "one day" maybe all Europeans could benefit from such a low rate.

Tom Phillips, chief government and regulatory affairs officer at the GSM Association, described the Commission's eagerness to be a price regulator as "a fixation."

"The Commission's proposals to single out yet another aspect of the mobile industry and apply retail price regulation, threatens to choke growth and stifle competition," Phillips said. "Different markets have inherently different costs, whether from variations in tax or, for example labor rates. These services should be priced based on local market conditions, not on some vision of a single Europe, originating in Brussels."