Memorandum by Bureau Européen des
Unions de Consommateurs (BEUC)
Present:
Eccles of Moulton, B
Freeman, L (Chairman)
Geddes, LLee of Trafford, L
Mitchell, L
BEUC represents 40 independent consumer organisations
from 37 countries. We have a long standing interest in the roaming
debate, given its importance for consumers.
27 FEBRUARY 2007
In general, BEUC supports competition. Nevertheless,
the international roaming market is characterised by a lack of
information in the retail market and by access problems related
to the cross-border nature of roaming at the wholesale level.
First of all, consumers need to be informed correctly and be protected
automatically (a so-called opt out system) to stimulate operators
to highlight the benefits of their own offers. Secondly, BEUC
considers both wholesale and retail regulation necessary. Prices
on retail level should be no more than 33 eurocents (22p) for
making international roamed calls, 25 eurocents (17p) for making
local roamed calls and 16 eurocents (11p) to receive calls while
roaming.
(i) Do you consider charges for making and
receiving calls on mobile phones when in a different EU Member
State to be appropriate or excessive as some have argued? Do you
think there is currently sufficient competition in the market?
We think charges are excessive because of the
lack of competition in the international roaming market. BEUC
has provided evidence as early as 2003[2].
Compared to both domestic tariffs and the cost of providing roaming
services, roaming charges are excessive.
A. COMPARING
ROAMING CHARGES
WITH DOMESTIC
TARIFFS
In general, comparing tariffs in the telecom
market is a difficult endeavour because of the lack of transparency
at retail level. FICORA, the Finish telecom regulator compared
the domestic prices with the roaming prices. On average, the price
of a domestic mobile call is ca. 7 eurocents a minute, for a roamed
from the UK to Finland the price is between 98 and 141 cents,
more than 20 times the domestic tariff[3].
The tariff plan of the UK operator 3 shows that
the lack of regulated wholesale prices is at the root of the problem.
3, present in Austria, Australia, Denmark, Italy, Ireland, Hong
Kong and Sweden, charges 20p to call back to the UK if its own
network is used, equal to its domestic tariff. Receiving calls
is free. When using another network to call to the UK or countries
within the same close zone, 3 charges between 80 and 180p. To
receive calls, charges range from 30 to 100p.
In the UK, it seems that roaming tariffs to
call home are four to nine times higher than domestic charges.
Receiving calls represents the most striking example of divergence:
for domestic call, it is free, for roamed calls it can cost up
to £1 a minute.
B. THE COST
FOR OPERATORS
TO PROVIDE
THE ROAMING
SERVICE
A recent technical analysis from the European
Parliament[4]
estimated that international roaming costs are between 10 per
cent and 30 per cent higher than a national-only system. From
a pure cost perspective, roaming tariffs should not be more than
10 per cent to 30 per cent higher than domestic prices. A proxy
of the costs to provide domestic telecom services is the Mobile
Termination Rate (MTR)[5].On
average, the MTR in the EU is 13 eurocents (8.6p). Adding 30 per
cent for providing the service and an extravagant 50 per cent
margin for overhead, roaming charges above 16.9p a minute can
be considered as excessive from a cost perspective.
Taking a European wide perspective, roaming
charges are surprisingly similar for different operators and the
situation is similar across Member States. Roaming tariffs' structure
is often too complex to understand. Ex-post detailed billing is
therefore difficult to check, while little information is provided
before making a call. Retailers/shops are often unable to deliver
the necessary information.
(ii) Is it appropriate for the Commission
to introduce legislation to cap the cost of roaming?
When market failures prevent competition from
arising, NRAs should normally intervene. The cross-border nature
of roaming nevertheless limits the power of the NRAs. As such,
it is indeed the Commission which is best placed to correct these
market failures.
(iii) Do you think that the mobile telecoms
industry has done enough in the last two years to address, through
self-regulation, concerns expressed by the Commission? Are National
Regulatory Authorities in a co-regulated environment able to address
these concerns on their own?
In spite of previous initiatives from the Commission
(for example the 2000 DG Competition sector inquiry and the opening
of formal investigations against certain operators), retail roaming
charges have remained persistently high. Since the opening of
the Commission's website on the roaming prices in 2005, most operators
have been stating that they have taken the threat of regulation
seriously and that they have suggested new tariff plans.
An independent study by ALTEX, a French consultancy[6],
analysed in detail the recent offers by Orange, T-Mobile and Vodafone
to see if roaming prices have actually decreased. No evidence
of this claim could be found—competition is still not working.
The offers are limited to specific subscriptions, limited to specific
time periods and are not suitable for ordinary consumers. An analysis
of the Vodafone Passport in France, in the UK and in Germany shows
that the offer is only valid when the Vodafone and "Vodafone-friends"
networks are being used (Eg Proximus in Belgium or SFR in France).
In the case of SFR/Vodafone Passport France, this condition applies
to incoming calls equally, an element beyond the consumer's influence.
Secondly, the tariff structure renders short calls even more expensive
than under a "normal" tariff.
In relation to self- and co-regulation, we refer
here to the impact analysis of the Commission. The Commission
has not received any general industry proposals for self-regulation.
Co-regulation cannot properly address the issue, because of the
cross-border nature of roaming.
(iv) Does the proposed Regulation risk narrowing
down the space for competition and thereby harming innovation
and investment in the sector?
Overall, the regulation will bring the mark-up
on roaming in line with the revenues from other telecom services.
The overcharging of consumers will come to an end, but the impact
on investment and EBITDA (Earnings before income tax depreciation
and amortisation) will be limited. For Vodafone, the impact of
the Commission's proposal will be a 0,5 per cent decrease in EBITDA[7].
The GSM Association stated that investments would decrease by
€500 million as a result of the regulation. For the five
biggest European telecom markets (UK, Italy, France, Germany and
Spain) this would mean a decrease between €5 and €30
million yearly. For an operator like Orange France, who invests
about €2 billion a year in its mobile phone network, the
percentage reduction is between 0.25 per cent and 1.5 per cent
yearly.
As far as innovation is concerned, BEUC denounces
any clear a priori influence of the regulation on innovation.
First of all, there is a strong argument of increasing demand
with lower prices. As a Eurobarometer[8]
on roaming shows, almost 60 per cent of people owning a mobile
phone would make more use of roaming services with lower prices.
But, consumers should be sure that they won't be overcharged.
The advice of our Irish Member, the Consumer Association of Ireland[9]
was: "Unless you have to [phone], turn off your mobile,
or better still, leave it at home".
With a low and automatically applicable consumer
protection tariff (CPT) consumers can be sure that using their
mobile phones abroad will not result in high bills. Furthermore,
if the CPT applies to all consumers, it could serve as a benchmark
for roaming prices. Without going into the technical details of
the level of the CPT, operators will have to show that their new
offers are more beneficial than the CPT. More information would
be available, stimulating competition. With more competition,
operators will come up with new innovative packages. As the 3
"like home" package referred to under (i) shows, innovation
in line with the low capped prices is possible. With the 3 "like
home" package, international roamed calls cost 20p, below
the 22p BEUC suggests as the maximum price. Nevertheless, only
when prices are regulated, all consumers will be able to benefit
from such tariffs.
(v) Do you think that the pressure for lower
roaming charges could potentially spill-over into higher prices
for other mobile telephony services? Would you anticipate any
other unintended consequences that may affect consumers?
First of all, consumers will still pay between
16 and 33 cents a minute to make use of their mobile phones abroad.
These prices cover the costs of providing the roaming service
plus a substantial margin.
Secondly, if operators collectively decide to
increase domestic prices even though consumers pay for the full
cost of roaming, we would have a clear example of collusive behaviour.
An assessment of the proposal by Copenhagen
Economics[10],
estimated the wholesale costs to make calls around 25 eurocents.
Although we think costs are actually lower, adding a 30 per cent
margin, one arrives at 32.5 eurocents at retail level.
Operators could decide to attract customer by
offering them a hand-set or low domestic prices. We consider that
competition on the domestic market would even increase with regulated
prices, because it creates a level playing field. Smaller operators
will pay the same beneficial wholesale tariffs as the big operators.
For instance, E+ already applies a SIM-only business model and
could do this not only domestically, but also in the roaming market.
(vi) Do you think that the proposed regulation
will allow non-EU operators to take advantage of lower wholesale
roaming prices in the EU through international trade agreements
and arbitrage opportunities?
Only if access is granted on a non-reciprocal
basis, non-EU operators could take advantage of the lower wholesale
tariffs. Most trade agreements nevertheless include the principle
of reciprocity. Furthermore, there should be no fear that the
tariffs in the EU would be significant lower than in the rest
of the world. In the USA, roaming was abolished almost six years
ago. Furthermore, a comparison of the average MTRs per continent
shows that only Oceania has higher average MTRs. Asia, America
and even Africa has lower MTRs.
(vii) Is the Commission's estimate that 147
million EU citizens are affected by excessively high international
mobile roaming charges accurate? Do you have any other figures
to offer?
We don't dispose of other figures, but judging
from the Eurobarometer survey on roaming mentioned earlier, we
consider this figure a minimum estimate. 79 per cent of Europeans
have a mobile phone. Furthermore, of those having a mobile phone,
53 per cent use it when being abroad. As such, almost 64 per cent
of Europeans were indeed confronted with these high roaming charges.
As such, we think the figure of 147 million EU citizens is fairly
low especially since price decreases will increase demand and
therefore the number of consumers positively affected by the regulation
could be even higher.
(viii) Do you think that the UK and French
proposal for a sunrise clause during the initial period after
the Regulation comes into force can better achieve the desired
effect? Should legislation apply solely to wholesale fees rather
than retail tariffs?
A sunrise clause complicates the discussions
introducing national discretion and confusing consumers. Firstly,
how can one measure a "sufficient" effort to decrease
prices? Is it the average decrease for businesses, post-paid and
pre-paid subscribers or should the price in every sub-market go
down? Should the number of subscribers or the volumes be used
as weightings? And, should we define the same decrease in every
part of the market or should we have different levels? What about
the differences between each national market? Shouldn't they be
addressed separately? These questions show that the introduction
of a sunrise clause complicates the regulation without any benefits
for consumers.
Secondly, a sunrise clause would introduce national
discretion. Ultimately, the NRAs would have to decide to enforce
retail regulation with possible delays and legal uncertainty as
a consequence.
Thirdly, consumers would be confused about whether
or not they are protected. They would probably still fear high
roaming costs and abstain from using their mobile phones. Operators
will face reduced prices but at constant volumes.
Retail regulation is needed to be sure the decreases
in the wholesale tariffs are passed on to consumers. Because of
a lack of competition together with the absence of clear information,
consumers are unable to reduce retail tariffs. Wholesale regulation
on its own doesn't increase competition, nor does it provide with
clear information. Consumers will still pay too much for their
roaming services, while some operators will benefit from reduced
wholesale tariffs and increase their margins.
(ix) Do you believe that separate sub caps
for making and receiving calls should be applied or a single average
cap? Should the linkage between Mobile Termination Rates and wholesale
prices, and percentage mark-ups for determining retail prices,
be retained or should target prices simply be included in the
regulation?
Overall, BEUC supports the logic of the Commission's
proposal with separate sub caps, a linkage between MTR and wholesale
prices and mark-ups to determine the retail prices. Nevertheless,
BEUC thinks the multipliers in the Commission's proposal are too
generous, leading to high wholesale prices. For international
roamed calls, a multiplier of two is sufficient, resulting in
25 eurocents for an international wholesale roamed call. To determine
the retail price, we agree with the Commission's 30 per cent mark-up.
No one should pay more than 33 cents for an international roamed
call at retail level. For local roamed calls, a multiplier of
1.5 is enough, implying a price of 18 eurocents at wholesale level,
and 25 at retail level. Receiving calls while roaming should not
cost more than 16 eurocents.
The link with the MTR must be kept because it
represents the relation between costs for the operators to provide
the roaming service and the prices paid at wholesale level. Currently,
the MTR decreases between 10 per cent and 15 per cent yearly,
partly because of technological progress, partially because NRA's
are better informed about the true costs of terminating calls.
To allow consumers to benefit from these evolutions in the telecom
market, the link should be kept.
February 2007
2 Mobile phone survey, BEUC/X/005/2003. Back
3
FICORAs view on the regulation of international roaming charges,
PSEs public debate on mobile roaming, 11 January 2007. Back
4
Technical issues on roaming, Briefing note, IP/A/ITRE/NT/2006-17,
DG Internal Policies of the Union. Back
5
A regulated price that operators from the same country are allowed
to charge each other when connecting an incoming call from a client
of one of the domestic operators to their network. If eg a Vodafone
Germany client calls an E+ client, E+ will charge Vodafone the
German MTR. The MTR is based on costs and regulated by the National
Regulatory Authorities. It varies within the European Union, ranging
from 3 cents in Cyprus to more than 20 cents in Belgium and Slovenia. Back
6
Roaming: the potential impact of a regulation Study by Altex for
UFC Que Choisir and BEUC, February 2007. Back
7
Roaming: the potential impact of a regulation Study by Altex for
UFC Que Choisir and BEUC, February 2007. Back
8
Special Eurobarometer 269/Wave 66.1-TNS Opinion & Social November
2006. Back
9
Consumers Choice, April 2006 International roaming. Back
10
Copenhagen Economics Study on roaming An assessment of the Commission
proposal on roaming 1 February 2007. Back
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