‘Convergence’ on Some Key EU Roaming Issues Remains Elusive

The EC proposal envisions price ceilings on wholesale prices operators charge each other for mobile calls made while roaming. Tariffs for international calls made within a visited country would be capped at twice the EU average mobile termination rate for dominant operators. Wholesale rates for calls made back home or to a 3rd country within the EC would be limited to 3 times the average mobile termination rate for such operators.

The EC proposed setting price limits at the retail level for the same categories of roaming calls at 130% of the applicable wholesale limit. Calls received while roaming abroad would track the cost of calls received in consumers’ home countries. Providers would have to give customers free, personalized information on retail roaming costs on request and at certain other times.

Alternatives are on the table. The German Presidency recently recommended a set rate of 49 euro cents a minute for outgoing roaming calls and 25 euro cents per minute for incoming. Austrian MEP Paul Rubig, the official reporter on the EC proposal, detailed a “3-pillar model” for retail pricing in which (1) existing rates would continue to give consumers a choice of packages for home use. (2) a single, standardized “eurotariff” would be set, with consumers able to opt in for international roaming calls. (3) operators would have to offer an international, all-inclusive monthly flat rate for mobile telephony, Internet and other services.

Information Society Dir.-Gen. Fabio Colasanti noted much progress on the rule. The EC has “the impression that we're moving toward a consensus” on the Commission plan’s chief elements, including wholesale and retail caps and greater transparency in pricing, he told lawmakers.

Colasanti addressed several issues. On the possibility of including SMS and data transmissions in the regulation, he said while concerned about their costs to consumers, the EC isn’t convinced it would be useful to regulate them. But national regulators are required to keep an eye on such products and step in if market problems arise, he said.

One mainstay of the proposal is to simplify roaming costs for consumers, Colasanti said. That way the EC could accept a single price cap rather than the 2 proposed for wholesale rates, he said. If they were combined, the cap would have to be higher than the average rate because most roaming calls are made to users’ home countries. In any case, he said, average mobile roaming rates will drop, since national regulators already have fixed mobile termination rates for operators with significant market power.

Telecom regulators back a wholesale cap but are leery of setting retail rate ceilings, said European Regulators Group (ERG) Chmn. Roberto Viola. ERG’s chief objective is to ensure consumer protection while maintaining competition, he said. A standard tariff would be transparent to and protect users, but might not ensure lower roaming rates. It could be combined with an average retail cap, but that would mean more variations in price and be harder to enforce, he said.

The ERG believes regulation is necessary, but only to achieve a significant price reduction, with rules removed when no longer needed, Viola said. The group is “slightly worried” about the ability of national regulators to enforce the rule, he said.

Industry Reaction Mixed

Any roaming regulation should be proportional and weigh several factors, said Steve Jordan, Telefonica head of European regulatory policy. Fewer than 50% of EU citizens travel abroad in any year, he said. Consumers buy roaming as part of a package of mobile services. The cost of providing roaming services caries widely by operator and country. And operators’ total revenue divided by minutes plunged 22% between last summer and this.

Telefonica O2 offers tariffs progressively being rolled out across Europe and available on networks outside its own, Jordan said. The EC proposal would bar consumers from using them, he said. Any price caps must let operators compete while ensuring consumers don’t get price shock, he said.

A simple protective rate and the ability for consumers to choose other tariffs would work best, Jordan said. He urged MEPs not to include SMS and data in the rule, saying the markets aren’t mature, and the issues, dissimilar to those in voice roaming, need more analysis.

Regulation will reverse a fundamental market failure at the wholesale level and lead to a healthier mobile communications sector, said Hutchison Whampoa Deputy Chmn. Christian Salbaing. High wholesale rates are creating retail tariffs that scare consumers, he said. Hutchison wants SMS/data services tariffs regulated as well, he said. Hutchison is offering a new rate that gives customers roaming on other 3G networks the same price they pay at home, Salbaing said. But that price can only be offered where Hutchison need not pay unreasonably steep wholesale charges, he said.

Irish independent operator Meteor accepts the need to cut international wholesale rates but notes that major players now control such tariffs, said Chief of Policy & Corp. Affairs Andrew Kelly. Regulating now would force larger companies to use their dominance to give themselves wholesale rates smaller rivals can’t compete with, he said.

It’s unclear if the EC understands that its rule could lead unintentionally to margin squeeze, Kelly said. He called for a non-discrimination provision to ensure fair access by smaller, unaligned players lacking the market power of large operators’ alliances.

Using averages to set rates complicates things, said Dominique Forest, senior economic adviser to European Consumers’ Organization BEUC. It requires calculations by national regulators that could lead to delays, he said. Consumers support a retail tariff but don’t want the rule to contain a sunrise clause that could be “easily captured” by industry and make implementation of the rule more complex.

The regulation must contain 3 key provisions, Forest said: (1) It must require that consumers have access to information on cross-border roaming rates via a “push” system in real time. (2) It must be simple, with an absolute maximum retail cap. (3) It should mirror as closely as possible consumers’ needs.

EP Vote in May?

The 2 EP panels’ positions are converging, said MEP Joseph Muscat, who authored a working document on roaming for the Internal Market & Consumer Protection committee. Many crucial issues have been resolved but several remain open, including the adequacy of costs and caps proposed by the EC and whether a push or “pull” system for consumers is better, he said, predicting Rubig’s report could see plenary action in May.

A technical and legal problem bars inclusion of data and SMS services in the rule, Muscat said, noting that an EC technical assessment doesn’t cover them so lawmakers can’t legislate in that area. MEPs should ask the EC to consider an impact assessment and analysis to see if regulation is required, he said.

The EC “listened with interest to the concerns expressed by the EP on SMS and data,” the spokesman for Information Society & Media Comr. Viviane Reding told us later. The proposal has a clause that would require national regulators to revisit the issue. But if the EP “comes up with a proposal that’s justified, the Commission will have an open mind and consider it,” he said.