Documents considered by the Committee on 25 April 2017 Contents

22Digital Single Market: Wholesale roaming charges

Committee’s assessment

Politically important

Committee’s decision

Previously cleared from scrutiny; correspondence now concluded; 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

22.1In 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 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 introducing 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.

22.2On 16 June 2016 the Commission presented a proposal to further reduce EU caps on wholesale roaming. The Government welcomed the proposal, but sought to seek further reductions in the proposed caps—particularly those relating to data roaming charges. On 31 January 2017 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 respond to a number of questions about the implications of Brexit for mobile roaming charges.

22.3The Minister for State for Digital and Culture (Matt Hancock)’s subsequent response (16 March 2017) did not adequately address the Committee’s questions about the implications of Brexit for mobile roaming charges. The Committee also questioned the legal accuracy of his assessment that by retaining current EU rules 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”.82 The Committee therefore requested further clarification of this assessment, as well as responses to the Brexit-related questions the Minister had not yet answered.

22.4In his latest letter (20 April 2017), the Minister responds to the Committee’s questions, but does not coherently address the main point of legal confusion, namely whether, after the UK leaves the EU, the continuation of current roaming arrangements can be achieved solely through domestic legislation as he previously suggested. The Minister’s response is provided in the final section of this chapter.

22.5The Committee thanks the Minister for his responses to our questions about the implications of Brexit for mobile roaming charges.

22.6The Committee requested that the Minister provide legal clarification of his assessment that by retaining current EU rules 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”. We note the Minister’s response that “internal Government legal advice is not publicly disclosable”, but regret that he has not provided his own assessment, informed by legal analysis, as is standard practice. On this point, we also note his reference to Paragraph 1.24(c) of the Great Repeal Bill White Paper which clarifies that the Bill “will enable corrections to be made to the laws that would otherwise no longer operate appropriately once we have left the EU”.

22.7Neither of these points make a persuasive case that it will be legally possible for the Government to ensure that current UK-EU roaming arrangements are retained through the Great Repeal Bill, as the Minister has previously suggested: the rules which underpin surcharge-free roaming in the EU are reciprocal in character, as they limit the fees operators in EU Member States can charge each other when their consumers use roaming services on their respective territories, and reciprocal effects of this kind can only be achieved through bilateral agreements. In the absence of any evidence to the contrary, we conclude that the Government will not be able to ensure the continuation of reciprocal roaming arrangements through the Great Repeal Bill.

22.8We also note the Minister’s observation that “some mobile operators already offer surcharge free roaming to their consumers”. While acknowledging this development, we observe that these offers may be partly dependent on EU rules which limit the wholesale charges that UK operators pay EU operators for roaming services, and if the wholesale caps cease to apply the viability of these offers may be affected, or the increased costs passed on to consumers. We also note that commercial surcharge-free roaming offers are only offered by some operators and are often a premium service for which consumers pay extra; in contrast, the EU initiative will mean that all UK mobile users will be able to use their contractual allowance of minutes, SMS and data while travelling in the EU without incurring any extra charges, subject to a fair use policy.

22.9This file has previously been cleared from scrutiny. We consider correspondence in relation to it to have concluded. We draw this 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 and (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

22.10In its report on 29 March 2017 the Committee asked the Minister for responses to the following questions about the implications of Brexit for mobile roaming charges and the Great Repeal Bill. The Committee reiterated its request that the Minister:

22.11The Committee welcomed 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, and asked that the Minister, in answering the previous question, clarify:

22.12Finally, the Committee said that it was not persuaded by the Minister’s view that the Great Repeal Bill would ensure that “the same rules and laws will apply on the day after Brexit as they did before, including for roaming”. The Committee explained that the cross-border nature of roaming itself and the necessarily reciprocal nature of the EU roaming regulations meant 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.

22.13The Committee said that it was important that this point be 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 was based on the assumption that we could retain the status quo at the moment of exit. The Committee therefore asked 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 the Committee with a summary of this assessment.

Letter from the Minister (20 April 2017)

22.14Asked to confirm whether he considered that the UK would not be able to retain surcharge-free roaming in the EU post-exit, the Minister states:

“The UK’s decision to leave the EU does not mean there will be an automatic re-introduction of roaming charges—for example, some operators already offer surcharge free roaming to their customers. We will be seeking the best possible outcome for British consumers and business as we head towards EU exit.”

22.15The Minister’s response is somewhat unhelpful as the example he provides (“some operators already offer surcharge free roaming to their customers”) conflates two distinct issues. Although some mobile operators currently offer contracts that permit users to roam within the EU without incurring additional charges, these offers are particular contracts provided by particular operators, who may charge a premium for this service. In contrast, under the EU’s roaming rules from June 2017 all consumers with a mobile contract will be permitted to use their existing domestic allowance when travelling within the EU to make calls, send SMS, and use data services without incurring additional charges, irrespective of whether their contract includes surcharge-free roaming provisions or not.

22.16Secondly, these commercial offerings are underpinned by the EU’s wholesale roaming rules, which cap the charges that networks can charge one another when their consumers roam, limiting the cost to operators. If the UK no longer participates in the EU roaming arrangements, then network operators in other Member States will be free to charge UK operators higher prices to use their networks—something which is in their interests, as more UK consumers travel to other EU Member States than vice-versa. This could render existing surcharge-free roaming contracts commercially unviable. Users without surcharge-free roaming provisions in their contracts would incur increased roaming charges directly.

22.17Asked to clarify whether he agrees with EU Commissioner Günther Oettinger’s assessment that WTO rules mean that continued UK-EU surcharge-free roaming arrangements could only be concluded in the context of a comprehensive Free Trade Deal, the Minister states: “We will examine precedents from free trade agreements and other international agreements including Memoranda of Understanding86 on roaming charges”.

22.18The Committee also asked the Government to provide an assessment of the implications of non-participation in the EU-wide abolition of roaming surcharges for consumers, and, in doing so, to clarify (i) whether economists in DCMS or any other Government department had produced an assessment of the effect that non-participation in the EU roaming regulations would have on roaming charges themselves and how UK operators and consumers would be affected and (ii) whether DCMS economists accept or reject the analysis of Oxera consultancy, which concludes that UK operators would benefit financially if the UK ceased to participate in the EU roaming regulations, but that this would be partly funded by the increased roaming charges UK consumers would incur.

22.19The Minister responds:

“It is difficult at this stage to assess how non-participation in the EU roaming regulations might affect roaming charges, once consumers had enjoyed this benefit for the period from 15 June 2017 until the UK’s exit from the EU or until the termination of any potential transitional arrangements yet to be negotiated. The market in mobile communications is itself changing, with voice and text usage increasing little, but rapid growth in data consumption. We expect mobile roaming in the EU to move from a low volume, high charge model to one in which the volumes are much higher but the charges lower. Another variable is the growth in public wi-fi, which might restrict somewhat the increases in data roaming as consumers choose to use Over The Top services such as WhatsApp instead of regular mobile telephony. For these reasons, no assessment of this sort has been undertaken; nor do we believe it will be of value in setting policy until surcharge free roaming has become a fact. The Oxera analysis makes an interesting point, but one based on current market conditions.

“Similarly, an analysis of the impact on operators of ceasing to participate in the EU roaming regulations is unlikely to be valid until the effects of implementing roam like at home are known.”

22.20While the Minister is correct to note that it is not practical to model with precision the effects that exiting the EU will have on roaming charges and usage levels, as the growth in public wi-fi could have some effect on usage patterns, it is curious that the Minister’s analysis of the implications of Brexit for roaming charges nowhere acknowledges, in correspondence which ostensibly concerns changes to the regulation of Wholesale Roaming Markets, that non-participation in the EU’s wholesale roaming caps would mean that UK operators would incur higher charges when their consumers used foreign networks. These higher charges would either have to be absorbed by mobile operators or passed on to consumers.

22.21The Committee also asked the Minister about the Great Repeal Bill and how it related to mobile roaming charges. In particular, the Committee said that it was 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”, as outlined above (see: Background). The Committee felt that this was a serious issue, as the Minister’s belief that an assessment of the implications of divergence from the EU on roaming could wait until we have left the EU was clearly based on the assumption that we can retain the status quo at the moment of exit. For this reason the Committee requested that the Minister commission a legal assessment on this point.

22.22In response, the Minister states that:

“Legal assessments form part of our preparations for the Great Repeal Bill, but as you will be aware, internal Government legal advice is not publicly disclosable. However, since I wrote my last letter to your Committee, the Government has published the white paper on the Great Repeal Bill . Paragraph 1.24(c) explains that:

“… the Bill will create powers to make secondary legislation. This will enable corrections to be made to the laws that would otherwise no longer operate appropriately once we have left the EU, so that our legal system continues to function correctly outside the EU, and will also enable domestic law once we have left the EU to reflect the content of any withdrawal agreement under Article 50.”

22.23The Minister is correct to state that he cannot publicly disclose Government legal advice, however it is strange that he does not venture an assessment of his own, informed by the legal advice with which he has been provided, as is standard practice. The Minister appears to be using a technicality not to answer the Committee’s question directly.

22.24The passage the Minister quotes from the Great Repeal Bill White Paper does not substantially address the Committee’s previous concerns. Although the Government will be free to modify existing EU rules as it converts them into domestic legislation, it cannot modify those rules so as to compel third countries (such as the EU post-Brexit) to limit the wholesale roaming charges that are levied on UK operators.

Previous Committee Reports

Thirty-seventh Report HC 71-xxxv (2016–17), chapter 6 (29 March 2017); 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) and Eleventh Report HC 71-ix (2016–17), chapter 16 (14 September 2016).


82 Surcharge-free roaming in its current form is underpinned by reciprocal rules which limit the charges that operators in Member States can charge each other when their consumers use roaming services within the EU, whose reciprocal nature means they cannot be replicated through domestic legislation.

83 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).

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

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




27 April 2017