Examination of Witness (Questions 180-199)
Mr Levi Nietvelt
27 FEBRUARY 2007
Q180 Lord Geddes: We have taken evidence,
as you might expect, from a number of representatives of the mobile
phone industry. To various degrees they all claim that the Commission's
proposal will stifle innovation. From BEUC's viewpoint, do you
agree with that?
Mr Nietvelt: We denounce any clear a priori
link between the legislation or the regulation and innovation.
There is one very interesting example, which is a UK example.
It is not a UK company but it is Hutchison 3G; it is a new 3G
operator. They have come out with a "like home" package,
which means that when you are abroad and you phone home to the
UK you pay only 20p, which is the same price as making the call
back home. It is only when you use their network, but such an
example shows that, if operators are able to use their own network,
innovation is possible. We are discussing prices here and operators
saying, "Prices are too low; therefore, our margins are too
small. We have the risk of these innovation offers. We need a
certain margin that is bigger than normal". However, the
offer of 3 is even lower than what BEUC is proposing. We therefore
see developments happening in the market, which are even below
our prices. In that sense, therefore, we do not think that innovation
will be limited in any case. Elaborating a little on this, if
you had a fixed, obligatory or opt-out clause, where every consumer
is protected, operators will have to advertise and say why they
are more advantageous than the tariffs that are already capped.
In that sense, what might happen because of this regulation is
that operators are forced to advertise and to come out with better
offers, and it may actually stimulate innovation.
Q181 Lord Geddes: The only problem,
if I may say so, with the example you gave is that it is dependent
on the customers using the same system, as it were, and that particular
one does not have that wide a spread of its own system. So it
sounds good, but maybe it is not quite so practical.
Mr Nietvelt: They are present in Ireland, the
UK, Italy, Denmark and Sweden.
Q182 Lord Geddes: Throughout all
those countries?
Mr Nietvelt: Yes. Hong Kong as well, and Australia.
Q183 Lord Geddes: I thought that
they were in regional pockets.
Mr Nietvelt: For example, if you take Vodafone,
Vodafone has a network which is even vaster. They are present
from their own network in 15 countries and now, through alliances,
I would say in all 27. In that sense, therefore, they could offer
their customers the same things as—
Q184 Lord Geddes: I think what you
are saying is that the Vodafone Passport, which they broadcast
like mad, is not quite as good a deal as it might be. Is that
what you are saying?
Mr Nietvelt: Yes, absolutely. We have asked
a French consultancy, Altex, which is specialised in telecom issues,
to look at the various offers. They have analysed the Orange offer,
the T-Mobile offer, and the Passport. What Vodafone also does
in the UK is they add a fixed connection fee of 75p, which makes
short calls more expensive than on their normal tariff. So it
really depends on your profile. If you are abroad and you make
long calls, depending on the various specifications, it ranges
from one minute up to three minutes before it is more advantageous.
The other thing is that you have to use the same network and it
applies to incoming calls as well. So if I am a Vodafone user
and I am called from Orange or from the O2 network, I pay the
same price as before. I do not benefit from the Vodafone Passport.
All these offers are reactions, but they do not really go to the
root of the problem. Operators are adapting and they are reacting
to the legislation, but they have had more than six years to do
so. It is only now, in 2007, that we see this. In that sense,
we think that it is time to react, to have something in place.
Q185 Baroness Eccles of Moulton:
That perhaps brings us neatly to discussing in a little more detail
how BEUC regards applying the regulations. There are a number
of variables. There is the wholesale and the retail; there is
the fixed cap; there is the averaging cap on both; then there
is the consumer protection tariff, which can be seen as a separate
thing again. What does your organisation think is the best solution
to all these various options? You do not have to have them all;
you can attack just one part of the industry and not all. Do you
have a thought-out solution?
Mr Nietvelt: We have a very clear position on
this question. What is important for BEUC is to have very simple
and clear legislation, which is easily applicable. We are talking
here about legislation which will be in force two to three years,
which is not very long. So if you have a very complicated legislation
which needs almost one or two years to be implemented, it is of
no use. Furthermore, what is important for consumers is to have
a clear signal that they will benefit from this legislation, and
that they can make calls and not be overcharged. We think that
the logic of the Commission's proposal was very good. It would
have a clear wholesale cap and then, above that, a 30 per cent
margin and a clear retail cap. We did not agree with the Commission
on the levels of the wholesale cap, because we thought that, from
a cost base perspective, it was more reasonable to have—I
would say—MTR x 2 and 1.5, instead of two and three.
Q186 Baroness Eccles of Moulton:
So you would make it lower?
Mr Nietvelt: Indeed, we would make it lower.
There is a Copenhagen-IMCO-Commission study which looked at the
prices of wholesale prices as well and, surprisingly, they arrived
at 25 eurocents, which is the same as what we are suggesting.
Q187 Baroness Eccles of Moulton:
What is that, times MTR?
Mr Nietvelt: They did not look at times MTR,
but it would be 2.1 x MTR; even a little less—2.08.
Q188 Lord Geddes: Call it 2.
Mr Nietvelt: Yes.
Chairman: About 11.6.
Q189 Baroness Eccles of Moulton:
So that is what you do on wholesale. What about retail?
Mr Nietvelt: I talked about the 25 eurocents
on wholesale cap. If you added a 30 per cent margin, which we
think is very reasonable, you would arrive at 33 eurocents for
retail. That would apply to international roamed calls. So I would
call as a Belgian, call the UK and call back home. If I am in
the UK, calling a restaurant or a friend in London, we suggest
we would even pay less. The wholesale rate would be 18 eurocents
and, again, a 30 per cent margin would bring us to 25 eurocents.
For receiving calls, from my home operator or just a connection
between my home operator and me—and my correspondent is
already paying for the call—we say that it should be the
MTR which, as was rightly said, on the wholesale level is 11.4l.
Again, the 30 per cent margin would bring us to 16 eurocents.
So we are saying 33, 25 and 16.
Q190 Baroness Eccles of Moulton:
So you would stick to the fact that if you are roaming with your
mobile, it is correct that you pay for receiving a call that you
might not even want?
Mr Nietvelt: It is a very good question. The
logic of the first proposal of the Commission followed this. However,
I talked to a journalist on the Wall Street Journal and,
for him, the root of the problem is the non-existence of the EU
telecom market. He said, "What you actually need is EU-wide
networks". But then you would need EU-wide licences instead
of having national licences, and Member States are simply not
ready to give up this sovereignty. In that sense, you can only
apply this home pricing principle if you have this EU-wide licensing,
and that is not the case. I think that we should be realistic,
look at how the market is structured, and try to have legislation
which is tailor-made for that situation. In that sense, ideally
you should not pay for a call but, in practice, because the EU
market is not the American market—
Q191 Baroness Eccles of Moulton:
what about the consumer protection tariff and the opt-in/opt-out
options?
Mr Nietvelt: As I said, we are in favour of
clear legislation—made to create a level playing field for
the operators and made to protect consumers. In that sense, first
of all we think it is logical that, if there is legislation, consumers
should automatically benefit. So we are in favour of the opt-out.
As I mentioned before, if you have legislation that applies to
all operators automatically, it is their task to show that the
offers they are giving are better than the ones the consumers
are already benefiting from. Having said that, it does not mean
that people who choose to have another offer—for example,
the Vodafone Passport, the first minute is more expensive than
the legislation will allow—if consumers opt in to such an
offer, that is perfectly okay, but they should be automatically
protected. So we are in favour of having this opt-out.
Q192 Baroness Eccles of Moulton:
We have been told that, by introducing opt-out, every single mobile
owner who has a contract with their operator will have to have
a new contract, and that the burden on the industry would be colossal.
Mr Nietvelt: We have also been looking into
this question, because we realise that, from a contractual point
of view, this legislation is important. It changes all prices
on roaming. From what we have been told by our UK member Which?,
it should not be a very big problem if prices decrease. Consumers
have to be informed but they do not have to consent. They can
also be informed by SMS, apparently. So in that sense I do not
think that it is a very big problem. The contracts do not have
to be completely rewritten, because it concerns a tariff decrease.
Q193 Baroness Eccles of Moulton:
You talked about the simplicity of the proposals that the Commission
has made and you support as creating a level playing field. Is
that absolutely right? If you have something that is as inflexible
as these fixed tariffs, both at wholesale and retail level, surely
it will benefit one part of the industry more than another: either
the very big operators or the very small operators. It cannot
benefit everybody equally, because it is not the sort of industry
where a level playing field really makes sense, is it?
Mr Nietvelt: It does, because it concerns network
industries where access to that network is crucial. It is very
clear when you compare national markets with the EU market. What
happened on the national markets is that the connection between
the networks are regulated everywhere in Europe. That is the MTR—the
mobile termination rate. It ranges from 3¢ in Cyprus up to
22¢ in Slovenia. So there are big differences there. The
main point is that it is regulated and there is a reason for it.
If you are a dominant operator and you charge an incredible amount
of money to have calls connected to your network, your competitors
simply cannot offer that service or, if they do, they go bankrupt.
On an EU-wide level, however, there is no regulating thing between
the two networks, and that is exactly what the legislation would
do. It would regulate the connection between the networks in Europe
and, as such, it does create a level playing field. Of course,
right now the bigger operators have market power and they divide
the market between them. The smaller ones in Europe—E+ in
the UK, for example, BASE here in Belgium, KPN as well—when
they do their cost-based model, if they were to offer roaming
charges around even 55 eurocents, the costs on the wholesale level
that they have to pay to the Vodafones, the Teléfonicas,
the O2s, would be higher than this 55 eurocents. They would simply
lose money. Therefore, if you have a lower wholesale level, which
takes into account costs, you would enable the smaller operators
to pay not that much for the connection and, as such, stimulate
competition in the market.
Q194 Baroness Eccles of Moulton:
You have made a very good argument for just having a wholesale
cap and letting market forces—as all these little players
will come on to the scene—control retail price, and therefore
you do not need a retail cap. That is very good!
Mr Nietvelt: Yes, but there is one thing you
have to add to this, namely that wholesale legislation does not
provide information on its own.
Q195 Baroness Eccles of Moulton:
It could be made to.
Mr Nietvelt: Yes, it could be made to, but on
its own it does not, and so as such it does not completely solve
the problem we have right now in the market.
Q196 Chairman: Could I ask a supplementary
to the point made by Lady Eccles? Looking at page 2 of your written
evidence, if you receive a call you have suggested a price cap
of 16 eurocents.
Mr Nietvelt: Indeed.
Q197 Chairman: Is that therefore in addition
or part of the 33¢? If I make an international roaming call,
I face a cap of 33¢ that I would be asked to pay. Do the
operators receive a total of 49 eurocents or just 33?
Mr Nietvelt: The 33 would be if I am calling
from the UK back to Belgium. If I am in the UK and my Belgian
friend calls me, I would pay 16 eurocents or 11p. What my friend
is paying depends completely on his domestic rate. You have to
add up in total for the two operators, their total benefit from
the call, the total cost; but it does not mean that you can simply
add up the 33 and the 16¢, but they would receive money from
my friend who calls me. That is indeed true.
Q198 Lord Geddes: The person calling,
let us say his or her tariff was 20p, in that instance the total
revenue to the operator would be 36. Is that right?
Mr Nietvelt: Yes.
Q199 Lord Geddes: It would be 20
plus 16. I see that it is not necessarily 33 plus 16, because
that depends where you are as the owner, so to speak, of the phone.
Mr Nietvelt: Indeed, yes.
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