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International mobile roaming:regulatory policies in the EU
Hans Bakker
Director, Regulaid
NATP-II Project leader
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What is international mobile roaming?
Service by a mobile network operatorenabling access to its network forsubscribers to a foreign mobile network formaking and receiving calls
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Calling home: how does it work
.
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Calling home: what does it cost
1.Wholesale fee of Host operator includingprofit mark-up
2.International transit charge including profitmark-up
3.Destination network termination fee includingprofit mark-up
4.Your home operator profit mark-up__________________________+
5.Your invoice
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Receiving calls: how does it work
.
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Receiving calls: what does it cost
1.(Caller pays own call to your home operator)
2.International transit charge incl.profit mark-up
3.Host network wholesale termination fee incl. profitmark-up
4.Your home operator profit mark-up____________________________+
5.Your invoice
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Why are the rates so high?
•Costs not significantly different from non-roamingcalls
•No competitive pressures in wholesale market
•Low consumer awareness: Many travellers
–not aware of high rates and of “called party pays”
–not aware of choice options
–no easy access to alternatives
Compare: hotel room telephone tariffs.
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No competitive pressures in wholesaleroaming market
•Random selection of roaming network:wholesale buyers can not exert buying powerand induce competitive behaviour
•However, emerging traffic direction technologiesenable operators to lead calls to specificroaming suppliers, thereby enabling themselvesto take a negotiating position
•But do they want to? International standardagreements between operators in GSMAssociation
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European Union efforts to addressinternational roaming price problem
1. Use of antitrust powers (EU Treaty) for ex postsanctions against “abuse of dominance” with crossborder effects
2.Promotion of transparency
3. Ex ante regulation
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Use of antitrust powers
•1999 start of ‘Sector Inquiry’ 1997-2000
•2000 Initial findings
•2001/2002 on-site inspections
•2004 statement of objections against two UKmobile operators: abuse of 100 % dominance onown network by charging excessive prices
•2005 statement of objections against twoGerman operators
•Ongoing. Very slow, difficult legal issues:
–Delineation of relevant market
–Prove excessive prices.
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Ex ante regulation: the old framework
-Cross border problem by definition
-Regulation on behalf of foreign stakeholderscalls for reciprocal and concerted action, whichwas not taken
-Regulators inactive under old regulatoryframework:
-not all were empowered
-not all were inclined to take action
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….so for a while nobody moved
-Ex post measures too slow and uncertain
-Ex ante regulation deadlocked
-Only transparency initiatives (website EC)
-Some initiatives by operators to introducewholesale discounts (up to 50 % - from whatmargins?) but these were not passed on toconsumers
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….until introduction of new regulatoryframework 2002:
-2003: Wholesale international roaming one of 18markets eligible for ex ante regulation
-2004: Regulators send questionnaires tooperators
-2005: ERG drafts common approach to marketanalysis
-Market analyses now being implemented
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ERG common approach (1):
-Although terminating incoming calls to foreign roamingend users is part of the wholesale market, this isgenerally done against usual terminating tariffs (same asother calls coming from international transit). High enduser prices for “receiving calls abroad” therefor comefrom home network mark-up
-Handling originating calls from foreign end users (“callinghome”) is charged heavily by Host network to Homenetwork through Inter-operator Tariffs (IOT). End userprices for “calling home” are combination of IOT andHome network mark-up.
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ERG common approach (2):Role of traffic direction
-Growing use of traffic direction technology makes itpossible to single out preferred roaming partner network,but unclear if this is used to negotiate lower IOTs or justto enhance alliances
-Where fully operative, traffic direction technology mayenable substitution of preferred providers, enhancingcompetitive price incentives
-It is not expected that MNOs will direct 100 % of traffic toone preferred partner network in the short to mediumterm; contracts will all MNOs.
-All MNOs in a given country therefor part of thewholesale roaming market.
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ERG common approach (3):Single player SMP
-Market dominance of single Significant Market Power(SMP) players not indicated by market share: no evidenthigh and persistent market shares.
-Single player SMP less likely if widespread use of trafficdirections technology for price negotiations andcountervailing buying power
-Single player SMP may however result from ability touse membership of alliance to behave independentlyfrom buyers
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ERG common approach (4):Joint dominance
-Joint dominance/Tacit collusion: “Even in the absence ofstructural links between operators, market structure canbe conducive to co-ordinated outcome”. Likely if:
-Mature product: yes
-Homogeneous product; yes
-Stagnant growth on demand side: yes
-Similar cost structure of operators: yes
-Low elasticity of demand: yes
-High entry barriers: yes
-Lack of potential market entry: yes
-Likely collective interest stronger than likely gains of individualcompetitive behaviour: yes
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Market analyses ongoing
1.Market analysis in each member state: “market 17”often is last in line, possibly to enable concertedapproach
2.Consultation procedures
3.Notification to European Commission, which can vetomarket definition
4.Choice of remedies
5.And then…..appeal procedures.
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Recent consultation document ARCEP (Fr.)
1.No single SMP player in wholesale internationalroaming market
2.Situation qualifies as joint dominance
3.European Commission should assess legitimacy ofGSM Association agreements
4.If necessary, regulation by new law
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Options for remedies (1): Transparency
ERG report lists transparency options, e.g.:
-Websites by regulator or independent third party
-SMS initiated by home operator or end user
-SMS by host operator (expanded welcome message)
-Paper info in airplanes
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Options for remedies (2):enhance competition
1.Bypass option: local prepaid SIM cards
2.Competition on the networks: mandatorynetworks access for MVNO’s targetingroaming prices
3.“Carrier selection” for mobile roaming
4.Voice over broadband bypasses will grow inuse
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Options for remedies (3): price regulation
1.In retail price control (not EU): Linking upwith non-roaming retail tariffs for identicalfunctionalities
2.In wholesale: Retail-minus wholesale rates
Remedies must be internationally co-ordinatedto prevent market distortions.
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NATP-II Project
1.Workshops with in-depth transfer ofinformation
2.Bilateral direct assistance (“leverage”)
3.High level meetings EU and MEDAcountry regulators
4.Help prepare common approach
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Thank you
hbakker@natp.org
hbakker@regulaid.com