Letter from Rt Hon Margaret Hodge MP,
dated 12 March 2007
I offered to provide a note to the Scrutiny
Committee, following the meeting on 28 February 2007, which would
give further details of the behaviour of international mobile
phone roaming prices (wholesale and retail) since the announcement
of the proposed Regulation last July.
Obtaining detailed information for all of the
European markets to enable a full price comparison is unlikely
to be possible over a short timescale. Ofcom have been able to
provide me with information which gives a "snapshot"
of the movement in prices across the five UK Mobile Network Operators
over the past year, and which indicates in particular the costs
which UK consumers would pay if they were calling home from France.
This particular destination was chosen for analysis because it
is very popular with UK travellers and comparable in size to the
UK and therefore provides a reasonable indication of the impact
to date of the proposed regulation.
The analysis shows that retail prices have begun
to fall, although not in a uniform fashion across the Mobile Network
Operators and with some of the most noticeable changes occurring
in relation to the new roaming tariffs which have been developed.
If the committee would like to see information
on a broader range of markets, I would be happy to work with Ofcom
to see what could be provided.
ANALYSIS OF
REDUCTIONS IN
WHOLESALE AND
RETAIL ROAMING
PRICES FOLLOWING
ANNOUNCEMENT FOR
A REGULATION
The following paper provides a brief analysis
of reductions in wholesale and retail charges for international
roaming services. For wholesale, average rates across the EU for
2005 have been used.
For retail, spot prices for January 2006 and
January 2007, for making calls back to the UK whilst abroad on
three different tariff types (standard contract; Pay-as-you-go;
and a selection of more recent tariffs) for all five UK network
operators[2]
have been collated and compared. The graphs below set out the
analysis for France. [3]
This is a simple and fairly broad analysis,
and is only intended to provide an indication of retail and wholesale
price movements over the relevant period. Both wholesale and retail
prices vary according to a wide range of factors (for example,
by route, network used, or particular tariff). The intention is
to give a cross-section of what is actually available.
Wholesale
Indicative wholesale rates—January 2006
and January 2007
| Wholesale (£ per minute) operator
| 2005 average | 2007 rate
| % change |
| Vodafone[4]
| 0.46 | 0.30 | -35%
|
| O2[5]
| 0.65 | — | —
|
| Orange[6]
| 0.47 | 0.30 | -36%
|
| T-Mobile[7]
| — | — | —
|
| 3 | 0.59 | —
| — |
Source: MNO data to Ofcom and DTI 2006-07.
Wholesale charges are subject to commercial negotiation and
vary widely dependent on a wide range of factors. Headline rates
are often subject to discounting on an operator by operator or
group basis. Because of this wholesale rates are not routinely,
readily available.
Following Commissioner Reding's announcement for a Regulation,
several operators have announced reductions or commitments for
reductions of wholesale roaming prices. The data in the above
table shows significant reductions of over a third for both Vodafone
and Orange. T-Mobile's rates are also significantly below what
they were likely to have been prior to the Commission's announcement.
To date, discussion at Council has not tended to focus on
wholesale rates. We believe that recent proposals for wholesale
regulation at between £0.17 per minute and £0.21 is
reasonable. The focus for Council discussions has tended to be
regulation of the retail level.
Retail
As with wholesale charges retail prices tend to vary widely,
which is why we consider that provisions to improve consumer transparency
and awareness form an important part of the regulatory proposals.
The charts below offer only a snap-shot of standard (contract
and pay-as-you-go) tariffs, plus a number of "new" tariffs
that are available.
The snap-shot example above shows there has been some movement,
typically downward, in the standard retail contract and pre-pay
tariffs available to consumers. More significant reductions have
been achieved through the development of completely new roaming
tariffs, shown in the chart below.
This clearly shows that operators have introduced a number
of new tariffs, which offer consumer's significant savings over
standard rate tariffs for roaming (which have reduced in some
cases also). This goes some way to demonstrate that industry is
reacting to political pressure to reduce retail roaming prices,
and doing so through a combination of reductions to standard rates
and through introduction of new innovative tariffs.
Allowing industry to maintain a degree of flexibility to
act in this way, whilst also ensuring prices are actually reduced
is critical to maintain the correct balance between protecting
consumers against unreasonably high prices and allowing operators
to vary their tariffs according to different consumers' needs.
Maintaining this balance is precisely the reason for having
a dual approach to retail regulation, a consumer protection tariff
that would ensure that the most vulnerable consumers were protected,
while an average price control would maintain a requirement on
operators to continue with price reductions across the board.
In setting an average control however, care must be taken
to ensure that incentives on operators to set different rates
and develop innovative tariff packages are not lost. If an average
control is set at too low a level, then operators may simply set
all prices at the same level. Furthermore, there is a higher risk
that unregulated prices (potentially even those outside of roaming)
may increase.
Supplementary Annex
DATA TABLES OF RETAIL SPOT PRICES FOR FRANCE
| Standard contract tariff operator |
January 2006 | January 2007
| % difference |
| Vodafone[8]
| 0.75 | 0.75 | 0%
|
| O2 | 0.85 | 0.85
| 0% |
| Orange | 0.70 | 0.70
| 0% |
| T-Mobile | 0.75 | 0.55
| -27% |
| 3 | 0.80 | 0.80
| 0% |
Source: Ofcom user guide January 2006 and operator websites
(2007 data).
| Standard pre-pay tariff operator |
January 2006 | January 2007
| % difference |
| Vodafone[9]
| 0.75 | 0.75 | 0%
|
| O2[10]
| 0.99 | 0.99 | 0%
|
| Orange | 1.20 | 0.70
| -42% |
| T-Mobile | 1.00 | 0.55
| -45% |
| 3 | 1.00 | 1.20
| 20% |
Source: Ofcom user guide January 2006 and operator websites
(2007 data).
| [11]New tariffs operator
| January 2006 | January 2007
| % difference |
| Vodafone (Passport) [12]
| 0.25 | 0.25 | 0%
|
| O2 (My Europe) | — |
0.35 | — |
| Orange (bundles) [13]
| — | 0.50 | —
|
| T-Mobile (Bundles) [14]
| — | 0.45 | —
|
| 3 (Like Home) [15]
| — | — | —
|
Source: Ofcom user guide January 2006 and operator websites
(2007 data).
2
No analysis has been undertaken regards service providers or MVNOs
that may also provide roaming services to consumers. Back
3
France was chosen as it is comparable in size to the UK and it
features highly on the top travel destinations for UK consumers. Back
4
Averaged across EU and 2005-pre additional negotiated discounts. Back
5
Averaged across EU and 2005-post additional negotiated discounts. Back
6
Commitment to further reduce wholesale charges to £0.24 per
minute by October 2007. Back
7
Commitment to further reduce wholesale charges to £0.24 per
minute by October 2007. Back
8
Assumes roaming on Vodafone partner network. Back
9
Assumes roaming on Vodafone partner network. Back
10
Assumes calling UK fixed line or O2 mobile (otherwise £1.49
per minute). Back
11
Retail tariffs launched since announcement for a Regulation-with
the exception of Vodafone Passport. Access to special rate tariffs
may require roaming on a partner network. Back
12
Assumes a three minute call duration and use of bundled domestic
minutes (for which there is no charge). Back
13
Assumes full use of bundle (T-Mobile Voice55). Back
14
Assumes full use of bundle (Orange TravelTalk50). Back
15
3 "like home" offers domestic rates (ie no additional
roaming charges) but is only available in seven countries where
3 has sister networks. Back
| 
