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Documents considered by the Committee on 29 March 2017 Contents

6Digital Single Market: Wholesale roaming charges

Committee’s assessment

Politically important

Committee’s decision

Previously cleared from scrutiny; further information requested; drawn to the attention of the Culture, Media and Sport Committee and the Exiting the European Union Committee

Document details

(a) Commission Report on the review of the wholesale roaming market; (b) Proposal for a Regulation amending Regulation (EU) No. 531/2012 as regards rules for wholesale roaming markets.

Legal base

(a) —; (b) Article 114 TFEU; ordinary legislative procedure; QMV

Department

Culture, Media and Sport

Document Numbers

(a) (37869), 10327/16 + ADD 1, COM(16) 398; (b) (37870), 10329/16 + ADDs 1–2, COM(16) 399

Summary and Committee’s conclusions

6.1In October 2015 the EU agreed to end the roaming charges that mobile operators charge their customers when they travel abroad by 15 June 2017. Delivering this without causing excessive disruption to domestic markets is challenging because of factors such as discrepancies in inbound and outbound travel volumes between northern and southern Member States. To make the policy commercially deliverable for mobile operators it is therefore necessary to take a number of actions, including the introduction of lower caps on ‘wholesale’ roaming charges—the prices that operators charge each other for use of their networks when their customers roam on the ‘visited’ operators’ networks.

6.2On 16 June 2016 the Commission presented a proposal to further reduce EU caps on wholesale roaming. The former Minister of State for Culture, Communication and Creative Industries (Edward Vaizey) indicated that the Government supported this measure and was seeking lower caps than those proposed by the Commission as this would benefit UK mobile operators.

6.3During negotiations regarding the level at which to set the different wholesale roaming caps (for data, SMS and voice calls) tensions arose both within and between the different European institutions. EU Member States which experience net influxes of roaming consumers, mainly the southern Member States, have an interest in maintaining higher levels of wholesale caps so that their mobile network operators (MNOs) can benefit from higher revenues. As the UK has a net outflow of roaming consumers, lower wholesale roaming caps are in the interests of UK mobile operators.

6.4On 31 January trilogue negotiations concluded with an informal agreement between the institutions which was acceptable to the Government. The Committee cleared the document from scrutiny on the understanding that the Minister would subsequently provide an account of the fair use policy and sustainability mechanism implementing act, and also respond to a number of questions about the implications of Brexit for mobile roaming charges.

6.5The Minister of State for Digital and Culture (Matt Hancock) now responds with a further update. He reports that the proposed Regulation was approved by the Industry, Research and Energy (ITRE) committee of the European Parliament on February 28, 2017. Adoption by the European Parliament plenary is expected later in March. There will be an ‘A point’ vote at the Council of Ministers, most probably in April, but this will be a formality. The Minister provides a summary of the fair use policy and sustainability mechanism implementing act as requested.

6.6Regrettably, the Minister does not respond in any detail to the Committee’s questions about the implications of Brexit for mobile roaming charges; however, he does suggest that by retaining EU law in domestic law through the Great Repeal Bill “the same rules and laws will apply on the day after Brexit as they did before, including for roaming”. On the basis that the same rules will apply after the UK leaves the EU, it is suggested that “any decision to diverge will be taken after that point and an assessment of the likely impacts will be made at that time”.

6.7On this basis, the Minister asks the Committee to clear the document from scrutiny.

6.8We thank the Minister for his update regarding the Wholesale Roaming Regulation, including his account of the fair use policy and sustainability mechanism implementing act that has been adopted by the Commission.

6.9We note the Minister’s request that the Committee clear the proposal from scrutiny: the Committee did so in its chapter on the Wholesale Roaming Regulation in its report of 8 February 2017.11

Brexit implications

6.10However, the proposal was cleared on the understanding that the Minister would respond to the Committee’s remaining questions concerning the implications of Brexit for the issue of mobile roaming. A number of these have not yet been answered.

6.11We therefore reiterate our request that the Minister:

6.12We welcome the Minister’s update that “DCMS economists have analysed the possible cost to the UK mobile industry of implementing ‘roam like at home’ (RLAH)”, which it estimates at between £110 and £200 million. In answering the previous question, we ask that the Minister clarify:

Great Repeal Bill

6.13Finally, the Committee is not persuaded by the Minister’s view that the Great Repeal Bill will ensure that “the same rules and laws will apply on the day after Brexit as they did before, including for roaming”.

6.14The cross-border nature of roaming itself and the necessarily reciprocal nature of the EU roaming regulations means that, post-exit, even if the Government chose to retain the same EU rules in domestic law through the Great Repeal Bill, those rules would not have the same effect as at present (in the absence of a bilateral agreement with the EU27). The Government would be able to cap the wholesale roaming charges that UK-based operators could impose on EU operators for using their networks, but could not require EU-based operators to reciprocate when the UK consumers used EU networks. EU operators would, in consequence, be free to charge UK operators higher wholesale roaming charges if they wished, which would quickly have the effect of rendering surcharge-free roaming services commercially unviable for UK networks.

6.15It is important that this point is clarified at the earliest opportunity, as the Minister’s belief that an assessment of the implications of divergence from the EU on roaming can wait until we have left the EU is clearly based on the assumption that we can retain the status quo at the moment of exit.

6.16To address our concerns we ask the Minister to commission a legal assessment from the Department’s lawyers of whether or not it would be possible to ensure the continuation of present roaming arrangements solely through the Great Repeal Bill, in the absence of any bilateral agreement and to provide us with a summary of this assessment.

6.17We request responses to the questions outlined above by 10 May 2017. In the meantime we draw our report to the attention of the Culture, Media and Sport Committee and the Exiting the European Union Committee.

Full details of the documents

(a) Commission Report on the review of the wholesale roaming market: (37869), 10327/16 + ADD 1, COM(16) 398; (b) Proposal for a Regulation amending Regulation (EU) No. 531/2012 as regards rules for wholesale roaming markets: (37870), 10329/16 + ADDs 1–2, COM(16) 399.

Background

6.18Consumers who use their phones while travelling frequently pay high charges for roaming on mobile networks in other countries. Since the introduction of the EU roaming regulations (or ‘Eurotariff’) in 2007, the roaming charges consumers pay to make calls, send SMS or use data from another EU Member State have fallen by over 90%. The EU has capped these charges for EU citizens travelling within the EU and gradually lowered these caps.

6.19In October 2015 the EU agreed to end the roaming charges that mobile operators charge their customers when they travel abroad by 15 June 2017. Delivering this policy without causing excessive disruption to domestic markets is challenging because of factors such as discrepancies in inbound and outbound travel volumes between northern and southern Member States. To make this policy commercially deliverable for mobile operators it is therefore necessary to take a number of actions, including to introduce lower caps on ‘wholesale’ roaming charges—the prices that operators charge each other for use of their networks when their customers roam on the ‘visited’ operators’ networks.

6.20On 16 June 2016 the Commission presented a proposal to further reduce EU caps on wholesale roaming. On 2 December the Telecommunications Council agreed a General Approach in relation to the Regulation on wholesale roaming (10329/16). As the Minister in his previous letter had not sought clearance of the Regulation the Government’s vote in favour of the General Approach constituted a scrutiny override.

6.21The Minister acknowledged the override in a subsequent letter, in which he stated that it was necessary to vote in favour of the measure as it was in the UK’s interests. He also provided a summary of the General Approach, which will reduce wholesale roaming caps for mobile operators.

6.22The Committee concurred with the Minister’s assessment that the agreement represented “a significant further reduction in wholesale data caps relative to the caps proposed in the Council’s General Approach” which would be “beneficial for both UK consumers and mobile operators”. On this basis it agreed to clear the document from scrutiny, on the understanding that the Minister in subsequent correspondence:

6.23The Committee also noted that there is no precedent for any third country securing access to the EU roaming regime. As the roaming regulations are EEA measures, non-EU EFTA members of the EEA (Norway, Iceland, Liechtenstein) participate in them. Non-EEA countries—even including Switzerland, which participates in the EU’s Board of European Regulators of Electronic Communications (BEREC), and makes a substantial contribution to the EU budget—do not, meaning that their citizens pay higher charges when using roaming services within the EU.16 When the UK leaves the EU it could in principle conclude a bilateral arrangement that would allow UK and EU consumers and mobile networks to continue to benefit from caps on roaming charges, were both parties willing to do so; however, World Trade Organisation (WTO) most favoured nation (MFN) rules appear to preclude a preferential arrangement of this kind on a bilateral basis unless it is part of a comprehensive Free Trade Agreement.17

The Minister’s letter of 16 March 2017

6.24The Minister of State for Digital and Culture (Matt Hancock) now writes to the Committee requesting clearance of the document from scrutiny, and answering some of the Committee’s questions.

The wholesale roaming regulation

6.25The Minister states that the Wholesale Roaming Regulation was agreed at Telecoms Council on 2 December, and was supported by the UK. The Council completed trilogue with the European Parliament and the Commission on 31 January, agreeing wholesale caps as follows:

Data caps:

June 2017–Dec 2017

Jan. 2018–Dec 2018

Jan. 2019–Dec 2019

Jan. 2020–Dec 2020

Jan. 2021–Dec 2021

Jan. 2022–

€ / gigabyte

7.7

6.0

4.5

3.5

3.0

2.5

€ / megabyte

0.0077

0.0060

0.0045

0.0035

0.0030

0.0025

6.26The Minister adds that the draft regulation was approved by the ITRE committee of the European Parliament on February 28, 2017 and adoption by the plenary is expected later in March. He states that there will be an ‘A point’ vote at a Council of Ministers meeting—meaning that the item will be a formality—which is likely to be in April.

Implications for UK consumers and Mobile Network Operators

6.27In response to the Committee’s question about the implications of the changes for UK mobile operators, the Minister states that UK operators are generally content with the caps that have been agreed. He explains:

“UK operators wanted caps for data lower than in the Commission’s original proposal. This is because more UK consumers roam to other Member States (many to holiday destinations in southern Europe) than users from other Member States come to the UK. Therefore the flow of revenue is asymmetric, but the lower the cap, the less the difference. This is particularly relevant to virtual mobile network operators (MVNOs), who must pay outward roaming charges but do not receive revenues from inward roamers. UK operators are generally content with the caps agreed in trilogue.”

6.28The Minister states that DCMS has examined the cost implications of participation in the ban on mobile roaming surcharges for EU travel, and concluded that the cost to business will be between £110 million and £200 million p.a.:

“DCMS economists have analysed the possible cost to the UK mobile industry of implementing ‘roam like at home’ (RLAH), using data on roaming from a study for the Commission by the TERA consultancy. The key input is the amount of data UK consumers use once RLAH comes into effect. Based on TERA data, this would be 2 GB per month. The overall impact on UK firms would then be about £110 million pa. If consumers used 3 GB a month, it would be in the region of £200 million pa.”

6.29By implication, non-participation in the EU initiative to abolish roaming charges will save UK mobile operators a significant amount of money. However, the Minister does not respond to the Committee’s question about the implications for consumers. Independent analysis conducted by Oxera suggests that the increased revenues UK telcos would experience in the event of non-participation in the EU-wide abolition of roaming charges would come at the expense of consumers, reflecting the finding that “retail roaming prices are typically a large mark-up on the equivalent wholesale charge that underpins the service”.18

The implementing regulation on fair use policy and the sustainability mechanism

6.30As requested, the Minister provides a summary of the fair use policy and sustainability mechanism implementing act that has been adopted by the Commission. The Minister states that the problems that the fair use policy (FUP) addresses are:

6.31The Minister says that the Commission’s first draft FUP (5 September 2016) allowed operators to limit customers’ roaming to periods of thirty days, with a maximum of ninety days per year. The first draft was withdrawn and replaced on 26 September with an FUP incorporating three main elements:

6.32He states that the UK had two areas of concern about this replacement proposal, which were:

6.33The Minister states that:

“Because of these reservations, the UK abstained in the vote at COCOM on 12 December, along with eight other Member States. Seven voted against, and twelve in favour. There was no qualified majority vote (QMV) in favour, but neither was there a majority against—there was a ‘plurality’ of votes in favour and, by the QMV rules, the Commission was allowed to adopt the regulation, which it did on 15 December 2016.”

6.34The Minister provides additional analysis of a number of features of the fair use policy that were agreed. In relation to fraud, he clarifies that:

“The regulation specifies fair use policies that mobile operators may apply, if they choose to, with the intention of guarding against ‘abusive or anomalous’ usage. They are not intended to protect against fraud, for which normal contract terms would apply. This is without prejudice to any fair use limits that apply to domestic use—which will continue to apply while roaming.”

6.35The Minister also explains the principles of residence and ‘stable links’ that underpin the fair use policy:

“‘Stable links’ of customers with the Member State of the provider, or of residence there, are used to determine if the usage might be abusive or anomalous. Operators may require customers to provide proof of residence or stable links, which include ‘durable’ employment or contractual links, courses of study, retirement and other situations requiring ‘an analogous level of territorial presence’. The only other indicators of risk of abusive or anomalous use that operators may consider are:

6.36The Minister provides a summary of how the fair use policy will apply to pay-as-you-go mobile users:

“For pre-pay (pay-as-you-go) customers, as an alternative to establishing residence or stable links, operators may limit consumption of data roaming services (but not of voice or text messages). The limit must be no less than the volume obtained by dividing the overall amount of paid-for credit remaining at the commencement of roaming by the regulated roaming charge (cap).”

6.37Finally, he adds that “The Body of European Regulators of Electronic Communications (BEREC) is drafting guidance on implementing fair use policies, aiming to have the guidance finalised before Easter”.

6.38The Minister has amply satisfied the Committee’s request for more information in relation to the implementing act which details the fair use policies and sustainability mechanism.

Brexit implications

6.39On Brexit, the Minister responds to the Committee’s various questions with the following statement:

“I note that you raise some questions about the position of roaming after the UK leaves the EU and in relation to free trade agreements, and bilateral agreements. We will be seeking the best possible deal which delivers for British consumers and business as part of our exit negotiations. We will examine precedents from other agreements, however we will not seek to replicate an existing model unless it delivers the right deal for the UK. The Great Repeal Bill will end the authority of EU law. The same rules and laws will apply on the day after Brexit as they did before, including for roaming. Any decision to diverge will be taken after that point and an assessment of the likely impacts will be made at that time.”

6.40The Minister’s claim that “The same rules and laws will apply on the day after Brexit as they did before, including for roaming” appears to be legally dubious. Even if the Government retained the same rules regarding roaming as part of the Great Repeal Bill, it is clear that they would not apply in the same way as previously. Although the Government could effectively require its domestic networks to respect the wholesale roaming caps that they charged EU networks when their consumers used roaming services in the UK, in the absence of a bilateral agreement there would not be any reciprocal obligation for EU telecoms to require their networks to continue to respect wholesale roaming caps when UK consumers used EU networks.

6.41The Minister neglects to respond to most of the specific Brexit-related questions in the Committee’s previous report. He does not:

Previous Committee Reports

Thirty-first Report HC 71-xxix (2016–17), chapter 18 (8 February 2017); Twenty-sixth Report HC 71-xxiv (2016–17), chapter 3 (18 January 2017); Eleventh Report HC 71-ix (2016–17), chapter 16 (14 September 2016).

11 Thirty-first report HC 71-xxix (2016–17), chapter 18 (8 February 2017).

12 From the Minister’s letter of 18 November 2016, as covered in our Twenty-seventh report HC 71–xxix (2016–17), chapter 3 (18 January 2017).

13 Business Insider UK, ‘Brits could see a huge increase in mobile phone roaming charges after Brexit’ (December 30, 2016).

14 Oxera, “Written evidence on the effects of mobile “ (10 November 2016).

15 Financial Times, UK mobile users face return of steep roaming bills after Brexit (29 December, 2016).

16 Brueghel, Mobile roaming, Brexit, and unintended consequences (28 June, 2016).

17 Financial Times, UK mobile users face return of steep roaming bills after Brexit (29 December, 2016).

18 Oxera, “Submission to the Lords EU Internal Market Sub-Committee on the inquiry Brexit: future trade between the UK and the EU“, (10 November 2016).

19 An ‘open data bundle’ is: ‘a tariff plan for the provision of one or more mobile retail services which does not limit the volume of mobile data retail services included against the payment of a fixed periodic fee, or for which the domestic unit price of mobile data retail services, derived by dividing the overall domestic retail price, excluding VAT, for mobile services corresponding to the entire billing period by the total volume of mobile data retail services available domestically, is lower than the regulated maximum wholesale roaming charge referred to in Article 12 of Regulation (EU) 531/2012.’



31 March 2017