1 Mobile phone "roaming"
costs
| (27710)
11724/06
COM(06) 382
+ ADD 1-2
| Draft Regulation on roaming on public mobile networks within the Community and amending Directive 2002/21/EC on a common regulatory framework for electronic communications networks and services
|
| Legal base | Art 95 EC; QMV
|
| Document originated | 12 July 2006
|
| Deposited in Parliament | 21 July 2006
|
| Department | Trade and Industry
|
| Basis of consideration | Minister's letters of 6 and 19 December 2006
|
| Previous Committee Report | HC 34 xxxvii (2005-06), para 13 (11 October 2006); see also HC 34-xxiii (2005-06), para 7 (29 March 2006)
|
| Discussed in Council | December 2006 Telecoms Council
|
| Committee's assessment | Legally and Politically important
|
| Committee's decision | Not cleared; further information requested
|
Background
1.1 Mobile termination rates (MTR) are the fees mobile phone companies
charge other carriers to terminate calls on their networks and
are a significant input cost in providing the retail service of
fixed-to-mobile and mobile-to-mobile calls.
1.2 "International roaming" is the ability
of mobile phone subscribers to use their phones whilst travelling
abroad. Users can make and receive calls using the same number
as they do at home. For this, a mobile network operator needs
to conclude international roaming agreements with operators in
other countries. At the heart of these are MTRs, whereby the mobile
phone subscriber pays both to make and receive calls when "roaming".
The draft Council Regulation
1.3 In its own Explanatory Memorandum, the Commission
said that the high prices that mobile users pay for international
mobile roaming has been identified as a persistent problem by
consumer organisations, regulators and policy makers across the
Community. It cited the European Regulators Group (ERG), who had
said that retail charges were very high without clear justification,
which appeared to result both from high wholesale charges levied
by the foreign host network operator and also, in many cases,
from high retail mark-ups charged by the customer's own network
operator; and that reductions in wholesale charges were often
not passed through to the retail customer, with consumers often
lacking clear information on the charges for roaming. It also
recalled the European Parliament resolution of 1 December 2005
on European electronic communications regulation and markets 2004,
which called on the Commission to develop new initiatives in order
to reduce the high costs of cross-border mobile telephone traffic;
further concern from the ERG that measures being taken by them
would not resolve the problem of high prices; and the March 2006
European Council conclusions on the importance for competitiveness
of reducing roaming charges in the context of focused, effective
and integrated information and communication technology (ICT)
policies required to achieve the renewed Lisbon Strategy goals
of economic growth and productivity.
1.4 Against this background, the Commission concluded
that while some operators had announced plans to reduce international
roaming prices in response to the EU initiatives, there had been
no general industry response that would achieve the objectives
of this proposal without the need for regulatory action; and,
in particular, no guarantee that all international roaming customers
would see the benefits of lower prices envisaged by the proposal.
The proposal therefore aimed to "provide a harmonised legal
basis for such action that will facilitate the completion of the
internal market for electronic communications".
1.5 In a comprehensive and helpful Explanatory Memorandum
of 12 September 2006, the Minister of State for Industry and the
Regions (Margaret Hodge) explained the main provisions of the
draft Regulation:
— Wholesale
pricing
a "wholesale" price cap for the charges
made between the operator of the roaming customer and the operator
of the network the customer will use while roaming in the EU.
The cap would be based on the termination rate a mobile operator
pays when a call from a customer is made to (i.e. terminates on)
another network (which rate is already regulated within the EU).
For calls made within a country the "cap" would be twice
the average termination rate; for calls made back home, three
times.
— Retail pricing
a "retail" cap for calls made abroad, at
130% of the maximum wholesale price.
— Timing of application of maximum retail
charge limits for regulated roaming calls
the retail price cap on international mobile roaming
calls would be implemented six months after the regulation enters
into force.
— Receiving Party Pays
a cap of 130% of the average termination rate of
calls for the cost of receiving calls while travelling abroad.
— Transparency of pricing information
the home provider to give its roaming customers information
on the costs they will incur on request and free of charge; and
to provide new customers with full information on roaming costs
when they take out a subscription.
— Supervision and enforcement
national regulatory authorities (in the UK's case,
OFCOM) to be responsible for monitoring and supervising compliance
and for devising appropriate penalties for infringements.
— Calculation of the average mobile
termination rate
explained in Article 10 — this rate is used
for calculating the maximum price limits.
1.6 The Minister said that there were no concerns
about subsidiarity and that the compliance costs were unlikely
to be significant. With respect to the "true economic costs
of the proposal", there was "as might be expected ….
a degree of dispute between the Commission (in their draft Regulatory
Impact Assessment) and the operators".
1.7 She found the proposal more coherent and sensible
than the Commission's opening shot in March ("roaming"
cost per call to be the same as that in home country). However,
she was not sure if Article 95 TEC was the right legal base, though
without clearly explaining why, beyond saying that, in proposing
specific and detailed price controls in a sector already subject
to Community legislation, the precedent that could be set needed
to be taken into account.
1.8 As to the details, the Minister felt that the
current proposals (with the current retail cap) could lead to
inefficiencies and unintended "spillover effects" in
related markets, as operators sought to recover the shortfall
in their roaming costs in other ways (subscriptions, restrictions,
higher domestic rates etc), with this bearing especially heavily
on infrequent roamers (since they will have least countervailing
power). Pre-pay customers, who are often the most disadvantaged
and for whom it is easier for operators to terminate their ability
to roam than for contracted customers, would be at risk of arbitrage
in the EU market for SIM cards (where the regulated "roaming"
price dips below the domestic price for calls in an EU country)
and of operators terminating the sale of SIMs altogether. She
also noted that "non-aligned" operators (i.e. those
without their own major networks) were potentially badly affected
by the introduction of retail caps since they are less able to
internalise their costs to the same extent as larger ones and
might be forced to exit the roaming market altogether, with a
negative impact on competition and innovation (for example the
successful Vodafone "Passport" scheme, which would be
prohibited under the proposal).
1.9 She therefore favoured (as made clear to the
Commission prior to adoption of the Regulation), as did the European
Regulators Group, a "sunrise" clause that would only
"trigger" the maximum retail cap if — after a
certain time period — the operators had not reduced their
call charges to an average level agreed by Member States. The
Commission, though, saw "significant procedural and legal
problems", whereas she saw this as offering an opportunity
to provide the assurance that the Commission is seeking that cuts
in wholesale prices would be passed on to consumers in the form
of lower retail prices.
1.10 On the future timetable, the Minister
said that the draft Regulation would be subject to discussion
in the Telecoms Council Working Group from September and in the
European Parliament towards the end of the year; that the Finnish
Presidency might seek to obtain a political consensus at their
Ministerial Council in December, with a final approval likely
in June 2007 under the German Presidency; and that the DTI was
currently organising a consultation exercise that would allow
UK individuals and organisations to comment upon the draft regulation,
the responses to which would be available before the December
Council discussions and which would help determine the position
taken in Council and in the Government's lobbying in the European
Parliament.
1.11 When we considered the draft Regulation and
the Minister's Explanatory Memorandum on 11 October, we endorsed
the objective of ensuring lower "international roaming"
prices for all types of mobile phone subscriber in the European
Union. However, it was plain that there were significant policy
and legal aspects of the draft Regulation that had yet to be negotiated
upon and clarified during the autumn. We envisaged a possible
debate on the draft Regulation prior to the December Telecoms
Council meeting, and asked the Minister to report on the outcome
of the negotiations, with an explanation of the line that the
Government was likely to be taking and her views then on the legal
base, in good time for such a debate to be organised beforehand,
should we then so recommend. In the meantime, we kept the draft
Regulation under scrutiny.
The Minister's letters
1.12 In her letter of 6 December
2006, the Minister agrees that a
host of technical and regulatory issues needed to be addressed
with respect to the Commission proposal. Six meetings of the Council
Working Group had looked at the Commission text and made some
progress "in understanding the reasoning of the Commission
and where there may be better alternative approaches". But
political agreement at the 11th December Telecommunications
Council meeting was unlikely. In addition to the slow progress
in the working group, the Presidency had also been constrained
in their ambition by a draft timetable from the European Parliament
that envisages a First Reading in May 2007. She understood, though,
that the forthcoming German Presidency was still seeking an agreement
by summer 2007.
1.13 In terms of the substance, the Minister reports
that there has been "a robust debate on all of the facets
of the Commission draft". While there was a general agreement
that some form of price restraint, particularly at the wholesale
level was justified, there was a significant concern that constraints
on retail prices could be damaging to both operators and (ultimately)
consumers. UK officials had been active in the negotiations and
had recently tabled a "sunrise" proposal through which
retail caps would only take affect if operators (in any one jurisdiction)
did not significantly reduce roaming prices to the consumer. She
believed that this approach, which "includes a more sensible
way of calculating the wholesale cap", would help safeguard
competition and innovation. It had been welcomed by several Member
States, and she would be advocating it at the Council.
1.14 With respect to the legal base of the Regulation,
the Minister assures us that she has sought clarification from
the Commission Legal Service on the justification for using Article
95 EC; offers to update us on this and other aspects of the proposed
Regulation after the Council; and notes that the final shape of
any agreement will be uncertain until the European Parliament
considers the proposal early in 2007.
1.15 In her subsequent letter of 19 December 2006,
the Minister describes the Council as "essentially an opportunity
for the Presidency to report on the deliberations that had taken
place under their watch and to seek views of Member States on
the detail of the Commission proposal", and an opportunity
to consider how a compromise could be found that would enable
the Council and Parliament to agree the dossier by the end of
the forthcoming German Presidency. The debate was "both constructive
and informative", and provided her with "an opportunity
to outline the UK view and to back France in outlining a number
of high-level principles that we believe an agreement should be
based on". She encloses the Paper that she and her French
counterpart sent to Member States and the Commission just before
the Council (which is annexed to our Report) and continues as
follows:
"Essentially our position is to agree with the
Commission for a substantial and urgent reduction in roaming prices
but to manage the process in such a way that neither undermines
competition nor stifles innovation. I am glad to report that the
joint approach (which includes the concept of a sunrise clause)
gained considerable support from other member States, and may
well be taken up (at least to an extent) by Germany in a possible
Presidency text for next year.
"On the particular issue of calculating the
wholesale cap, which I know you were concerned about, the Commission
let it be known that they could probably endorse the use of "average"
termination rates, a position advocated by nearly all member States.
"I am confident that there is sufficient agreement
in the Council for an acceptable solution to be found, though
recognise that this will, to an extent, be determined by the views
of the Parliament which will probably not become clear until around
Easter next year. I will, of course endeavour to keep you up to
date with developments".
Conclusions
1.16 We are grateful to the Minister for this
comprehensive updating, and note the progress made on the technical
issues.
1.17 We note, however, that she has not said anything
further on the uncertainty over the legal base of the draft Regulation.
1.18 We propose to discuss this and other aspects
of the Government's views on how best to attain the objective
of ensuring lower "international roaming" prices in
the EU for all types of mobile phone subscriber at a forthcoming
evidence session.
1.19 Last October, when the Finnish Presidency
seeking political agreement in December was in prospect, we envisaged
recommending a debate beforehand, so that the House could hear
and debate the Government's considered views ahead of the Council.
Looking ahead, despite what the Minister says, as the end of the
German Presidency nears, pressure for a first reading deal with
the EP, with its attendant risks, would not be at all surprising.
If this transpires, then we would be minded similarly to recommend
a debate ahead of the June Telecoms Council, which would be called
upon to endorse it, to enable the Government's position to be
examined.
1.20 In the meantime, we shall continue to keep
the draft Regulation under scrutiny.
Annex: Principles on Roaming
France and United Kingdom believe that the following
principles should form the basis of an efficient, balanced, consumer
protective, regulation on roaming :
1. Comprehensive information to the consumer
on the retails tariffs. This is in line with the proposal
of the Commission.
2. A single price cap of the wholesale average
tariff between any two operators based on a multiple of the average
European termination rate enforced by National Regulatory Authorities.
The Commission proposed different price caps for the wholesale
tariffs depending on the type of call (local call when roaming
or international call). Our approach ensures a price reduction
in the wholesale market, a protection for small operators and
is easy for NRAs to enforce.
3. A single control
on average retail charges, covering all intra-Europe roaming calls
made and received, defined in order to cover the retail costs
of the operators. This will be applied only to operators which
have not voluntarily reduced their average prices below an agreed
cap within 6 months and enforced by National Regulatory Authorities.
The Commission proposed here different
price caps based on the type of call and linked to the different
price caps for wholesale tariffs; we believe a single cap is simpler.
It would be based on the average retail prices allowing competition
in the offers between operators and better offers for consumers.
4. A "Consumer protection tariff"
for those customers who want, as a free option to subscribe.
This option will allow customers who do not want to choose from
among the wide scope of commercial offers, that no minute will
be charged to them, when roaming, above a certain price level.
5. A right for NRAs to exercise discretion
and set the national retail price cap below the European price
cap. In exercising such discretion, the NRA shall take into
account the specific situation of the national market.
Further discussions in the Council and the Parliament
will be necessary to define the adequate price cap levels and
protection tariff.
| 
