Memorandum by the European Commission
ANSWERS
27 FEBRUARY 2007
1. The European Commission regards the charges
for making and receiving calls on mobile phones when in a different
EU Member State as unjustifiably high. There is no meaningful
relationship between the costs an operator incurs in providing
these services and the prices charged to retail customers. The
Commission takes the view that competitive forces alone have failed
to bring about benefits to the consumer in the past.
2. In December 2005, the European Regulators'
Group (ERG) alerted the Commission to its concern that measures
being taken by national regulatory authorities would not resolve
the problem of high roaming prices. It also made clear that it
was committed to working with the Commission to develop an appropriate
and more complete solution. It further noted that roaming created
an exceptional instance in which mere application of the existing
regulatory framework for electronic communications services on
its own would not suffice.
3. The mobile phone industry claims—for
example through the GSMA, a trade association representing mobile
operators' commercial interests—that prices for roaming
services have fallen by up to 25 per cent in 2006. However,
the Commission notes, first, that prices for roaming services
are still very significantly above the prices for domestic services,
although the differences in underlying cost structures are not
very significant. Second, the Commission further notes that these
price decreases have only taken place against the background of
a credible threat of impending regulatory intervention, and that
in the absence of such threat the industry might simply revert
to its old pricing habits. National regulators have already told
the Commission in December 2005 that they cannot resolve this
issue on their own.
4. The Commission has proposed a wholesale
price cap of 23 pence per minute for calls made to another EU
country and a wholesale price cap of 15.3 pence per minute for
calls made within a visited EU country. The Commission has further
proposed a retail price cap of 30 pence for calls made to another
EU country and a retail price cap of 19.9 pence for calls made
within a visited EU country. Finally, the Commission has proposed
a retail price cap of 10 pence per minute for incoming roaming
calls[1].
The resulting overall price level for roaming services is deemed
by the Commission to offer sufficient incentives for operators
to invest into, and develop new, competitive offerings over time.
5. Some submissions to the public consultation
phase conducted by the Commission in the first half of 2006 have
suggested that in response to a reduction in roaming revenues
operators could be expected to raise prices for other services.
The Commission takes the view that while at the margin some rebalancing
of tariffs might occur in response to regulation, a general increase
in the price level for other services, given intense competition
in major markets, is highly unlikely. The Commission further believes
that whilst any regulation may have unanticipated consequences,
the positive effects on consumer and social welfare flowing from
the proposed regulation of roaming charges will be so large as
to outweigh any unforeseen negative impacts.
6. Some observers have voiced concerns that
European mobile operators could be forced under existing obligations
of the WTO/GATS agreements to grant regulated lower wholesale
prices to non-EU operators on a non-reciprocal basis and thus
suffer competitive disadvantges. The Commission takes the view
that the risk of a possible WTO tribunal or the appellate body
finding in favour of non-EU operators in this context is minimal.
7. The Commission has consulted widely on
the data underlying its impact assessment and the proposed regulation.
It has consulted inter alia the ERG, national regulatory
authorities, national administrations, mobile operators, industry
associations, consumer groups, economic consultancies, academic
researchers and financial analysts. The Commission believes that
all figures provided in its impact assessment are correct—including
the figure of approximately 147 million EU citizens being directly
concerned by the problem of high roaming charges.
8. The UK and France in the current Council
deliberations no longer propose a sunrise clause. Instead, they
support the German Presidency's proposal for an unconditional
consumer protection tariff to be applied at retail level as soon
as practicable after the entry into force of the regulation. There
is wide support in the Council (and in the European Parliament)
for the Commission's proposal to combine wholesale regulation
with retail regulation, rather than to opt for one or the other
in isolation.
9. The Commission has proposed different
price caps for different types of calls (see above point 4), because
this reflects current commercial practice of the mobile industry.
However, single caps would have the advantage of simplicity and
be in line with the principles of better regulation.
10. The Commission's proposal is based on
the average mobile termination rate prevailing in the EU in a
given year, as this figure can usefully serve as an approximation
for underlying costs of service provision. It cannot be excluded
that an alternative, perhaps simpler, methodology could be found
to yield similarly appropriate results.
19 February 2007
1 These figures are based on the average mobile termination
rate prevailing in the EU in 2006 (exchange rate as on 15 February
2007, 1 EUR = 0.6711 GBP). Back
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