3 Mobile phone "roaming" costs
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11724/06
COM(06) 382
+ ADDs 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
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| Legal base | Art 95 EC; QMV
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| Document originated | 12 July 2006
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| Deposited in Parliament | 21 July 2006
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| Department | Trade and Industry
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| Basis of consideration | Minister's letter of 12 March 2007
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| Previous Committee Report | HC 41-vi (2006-07), para 1 (17 January 2007); see also HC 34 xxxvii (2005-06), para 13 (11 October 2006) and HC 34-xxiii (2005-06), para 7 (29 March 2006)
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| Discussed in Council | December 2006 Telecoms Council
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| Committee's assessment | Legally and Politically important
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| Committee's decision | Not cleared; further information requested
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Background
3.1 "International roaming" is the ability of mobile
phone subscribers to use their phones whilst travelling abroad.
For this, a mobile network operator needs to conclude international
roaming agreements with operators in other countries. Mobile termination
rates (MTRs) are the fees mobile phone companies charge other
carriers to terminate calls on their networks. The mobile phone
subscriber pays both to make and receive calls when "roaming".
High "roaming" charges have been identified as a persistent
problem by consumer organisations, regulators, policy makers and
legislators across the Community.
3.2 In response, the Commission says some operators
have announced plans to reduce prices but there has been no general
industry response that obviates the need for regulatory action.
It proposes:
— A
"wholesale" price cap for the charges made between the
operator of the roaming customer and the operator of the network
used while roaming; based on the MTR, which is already regulated
within the EU;
— For calls made within a country, the
"cap" would be twice the average termination rate; and
three times the rate for calls made back home;
— A "retail" cap for calls made
abroad, at 130% of the maximum wholesale price; and
— a cap of 130% of the average MTR for
receiving calls while travelling abroad.
3.3 We considered these proposals (outlined in more
detail in our previous Report) and the Minister's views on 11
October 2006, and kept them under scrutiny pending further information
from her on discussions in the Telecoms Working Group and with
the European Parliament , prior to the 11 December 2006 Telecoms
Council.[10]
3.4 The Minister's subsequent letters, from before
and after that Council meeting, reported that:
— the
European Parliament had not yet begun consideration, and was unlikely
to produce a view before May; so
— political agreement was unlikely before
the end of the German Presidency; and
— the UK and France have been working together
to promote a different approach.
3.5 In considering the merits of the Commission's
proposals, the Minister was concerned that the proposed retail
price cap for outgoing calls would impact upon the cost of other
mobile communications services; disadvantage the less affluent
on pre-pay contracts; and deter competition and innovation (for
example the Vodafone "Passport" scheme would be prohibited
under the proposal). She and the European Regulators Group favoured
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 saw "significant
procedural and legal problems", whereas she saw it as offering
an opportunity to provide the assurance that the Commission is
seeking that cuts in wholesale prices will be passed on to consumers
in the form of lower retail prices. The package being promoted
by France, with UK support and input (which is annexed to our
previous Report) appeared to be moving in the direction she desired.
3.6 The Minister was uncertain at the outset last
September (though not explaining clearly why) about the use of
Article 95 EC as the legal base. Come December, all she said in
her first letter was that she was pursuing this with the Commission
legal services; that she had nothing to say about this in her
second was no doubt because only a fortnight separated them.
3.7 We felt that this and other points — particularly
how the French/UK package would attain the objective of ensuring
lower "international roaming" prices in the EU for all
types of mobile phone subscriber — would best be discussed
at an evidence session with the Minister. This took place on 28
February, and will be published as HC 366- i.
The Minister's Evidence
3.8 The discussion reviewed:
— the
nature of the Commission proposals and the Minister's views thereon;
and
— the proposed legal basis of the draft
Regulation.
3.9 The Minister's evidence on the technical issues
may be summarised as follows:
— There
was a good case for regulation to ensure that consumers pay a
fair price, but the regulation needed to be got right.
— The present Commission proposal, for
a maximum retail price with a 30% mark-up between the wholesale
and retail tariff, would generate negative spill-over effects
on the domestic marketplace. It would in her view become a minimum
retail price, which would inhibit both innovation and competition.
She was, along with French counterparts, instead advocating two
alternative proposals:
- a consumer protection tariff,
for the infrequent "roamer", for both incoming and outgoing
calls, and known in advance; and
- an average retail tariff, to enable the operating
companies to continue to offer a wide range of different packages
for the frequent "roamer".
— She
agreed that this is "a really complex issue of regulation"
and that it is very important to avoid unintended consequences,
which was the Minister's "great fear with the initial proposition
put forward by the Commissioner". It would be important to
ensure that the different tariffs set both reflected fairly the
consumers' interest and also maintained competition and innovation.
She felt that a package centred on transparency and rigorous control
over wholesale tariffs, with both the consumer protection tariff
— available to everyone, of approximately 50 cents for outgoing
calls and 25 cents for incoming calls — and an average tariff
would achieve these objectives. Overall, the operators' aggregate
charges would have to be under a retail target, which at the moment
in the Council negotiations was around 40 cents. This would provide
both protection under the consumer protection tariff and protection
if the consumer opted into another type of package.
— Although convinced of the need for regulation
around wholesale tariffs, for retail tariffs the Minister would
have preferred to have had a "sunrise clause", i.e.,
a period in which operators could demonstrate that they were bringing
down retail charges without regulation; if they failed to do so
"then regulation would kick in". But that position did
not command much support in the Council, "because people
want political certainty that prices will actually fall, and I
can understand that".
— Having conceded that point, the Minister
said that the UK/France proposition would reduce prices to consumers
more quickly than the Commissioner's proposition because the changes
would be introduced more quickly.
— However, there was still "a discourse
to be had in Europe around what is called a 'sunset' clause"
whereby a regulation would be in place for three years, a study
would be undertaken 18 months into the regulation to see whether
or not there was justification for renewing the regulation and
then there would have to be "agreement in the Council, with
the Commission and with Parliament to put that regulation back
in place".
— Although there were differences within
the European Parliament's Industry, Research and Energy Committee
and Internal Market and Consumer Protection Committee on exactly
how they would be calculated and the precise figures for each
one, both Committees' opinions were building on the Council's
position of a wholesale cap, a consumer protection tariff and
an average retail charge. Discussions between the Presidency and
the Parliament were aiming at a consensus that would enable agreement
on a regulation at the June "Telecoms" Council meeting;
if that was achieved, consumers could expect to see prices falling
by the early autumn. Much would depend on what happened in the
next few weeks.
— Although "unclear at present quite
where the Commission stands", the Minister felt that agreement
in the Council and with the Parliament was possible; so, although
based on majority voting, the necessity of even having to try
to block the Commission's proposal would not arise "because
we think we have won the argument, or we think we are winning
the argument".
3.10 We then examined the question of the legal
base, noting that when the Minister wrote to us in December
2006 she had said she was not sure about whether Article 95 EC
would be adequate as a legal base and that she had sought legal
advice from the Commission.
3.11 In her evidence, the Minister confirmed that
she had as yet had no response from the Commission. The Head of
the Department of Trade and Industry's Legal Group dealing with
Competition and Communication explained her belief that that Article
95 was an appropriate base for this particular regulation as follows:
"You are probably aware that the UK did
oppose the use of Article 95 in a couple of cases because we were
concerned to ensure that it was used appropriately for harmonisation
measures essentially. Those challenges were defeated last year
and the European Court, in doing so, took a very wide view of
the meaning of Article 95 and the meaning of harmonisation measures
which could be adopted using Article 95 as a legal base. Having
considered those judgments and considered the particular context
of this regulation — the mobile roaming market is quite
a distinctive market — we have reached the view that it
is appropriate, that there are exceptional arguments to use Article
95, bearing in mind the very wide definition of harmonisation
measures which the European Court has now laid down" Q25.
3.12 We considered that Article 95 could be used
to approximate existing national legislation or to deal with a
situation where prospective national legislation was likely to
diverge, but that it could not be used simply to approximate prices.
It seemed to us that this case concerned price controls across
Europe. We asked if the Government had considered the possible
consequences for the scope of the Community's regulatory powers
on the wider economy of allowing Article 95 to be used as a legal
base to regulate prices in the absence of any need for the approximation
of national laws in the area.
3.13 The Minister referred to two judgments: firstly,
the December 2005 judgment on "smoke flavourings"[11]
and then the judgment on the European Network and Information
Security Agency (ENISA)[12]
in January 2006. Having regard to these judgments, she said that
the advice she had received from those leading the negotiation
on this particular regulation was that Article 95 EC is an appropriate
base. These two cases gave a very wide interpretation as to what
would be a harmonising measure, which led Government legal advisers
to believe that it is not always going to be necessary to say
there is now divergent national law. The approach was "case
by case"; it was not a general view, and another Minister
might take another view on a different regulatory proposal, but
in this particular instance it was appropriate. The Minister did
not think that it would prove an unhelpful precedent for future
cases. It could be looked at on an individual basis. We were also
to "remember we do actually support the Commission in trying
to introduce a regulation around pricing so that we can reduce
charges to consumers and to business users".
3.14 We noted that in the Tobacco Advertising
case,[13] the ECJ indicated
that Article 95 could be used not only where there were existing
divergences in national law but also to prevent future obstacles
to trade resulting from varied development of national law, provided
such obstacles were likely. We noted in this case that there was
no reference anywhere to the likely emergence of divergent national
legislation; the only relevant reference before us being to a
theoretical possibility that the present Community regulatory
framework might leave some scope for Member States to address
the problems identified in the international roaming markets by
means of other legislative measures. However, the Commission nowhere
pointed to evidence suggesting any actual intention on the part
of any Member State to adopt such supporting legislation. We questioned
whether the Minister was not going too far down the route of looking
at the broad purposive approach to the Treaty even in the light
of the Court's own decisions, and whether there was a danger that
any of the companies which might become regulated would challenge
the legal basis of the Regulation before the ECJ which could risk
the Regulation being struck down, thereby denying the consumer
the expected benefits.
3.15 We concluded by noting that we would be looking
to the Commission to provide watertight legal support for the
Minister's view if other developments enabled the draft Regulation
to be brought forward for formal adoption in June.
The Minister's letter
3.16 In the meantime, in response to questions concerning
the reaction of operating companies thus far, the Minister wrote
to us on 12 March with what she describes as "further details
of the behaviour of international mobile phone roaming prices
(wholesale and retail) since the announcement of the proposed
Regulation last July". She continues as follows:
"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".
3.17 The detailed analysis enclosed with the Minister's
letter is at Annex 1of this Report.
Conclusion
3.18 If this issue transpires as the Minister
anticipates, we continue to be minded 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.
3.19 In the meantime, we shall continue to keep
the draft Regulation under scrutiny.
10 See headnote. Back
11
Case C-61/04 United Kingdom v European Parliament and Council
Judgment of 6 December 2005. Back
12
Case C-217/04 United Kingdom v European Parliament and Council
Judgment of 2 May 2006. Back
13
Case C-376/98 Germany v European Parliament and Council 2000 [ECR]
I-8419. Back
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