Examination of Witness (Questions 200-217)
Mr Levi Nietvelt
27 FEBRUARY 2007
Q200 Lord Lee of Trafford: In a report
commissioned by BEUC, the offers made by operators after the Commission
announced its legislative proposals have been significantly criticised,
quoting Mr Murray's words, as "very complex, difficult to
use and with no appreciable effect on charges". What is the
evidence base for those claims of Mr Murray?
Mr Nietvelt: I am not familiar with what he
said. He said . . . ?
Q201 Lord Lee of Trafford: Just to
quote again, he said that the proposals made by the operators
were "very complex, difficult to use and with no appreciable
effect on charges". Those were the three fairly heavy points
he made.
Mr Nietvelt: It has to be put in perspective.
Operators have, as I said, reacted to the Commission proposal
and they have come up with new offers, the Vodafone Passport being
one of them. It has been said that these offers significantly
reduce roaming costs. Our consultant has looked at the offers
and, just to give you a few very clear examples, there is an Orange
offer—the French operator. What happens there is that, first
of all, it basically applies only between June and October. At
the same time, if you start to use the offer you have to finish
it within four weeks. Otherwise, you cannot benefit from the credit.
It is these kinds of things: the small print in the contract.
There is this thing with Vodafone where you have to use a Vodafone
or Vodafone Friends network, which is something that is very crucial.
As I said, in France it is only SFR France. When you are called,
which is something which as a consumer you do not have any influence
over, you still pay the high tariff. Whereas you think, if you
do not go into all the details of the contract—or you might
think—that you do not pay that much, and you use your phone
more. It is this lack of information that is not resolved by the
offers of the operators. I think that is what Mr Murray was referring
to.
Q202 Lord Lee of Trafford: Perhaps
I could ask a more general, and perhaps a fairer question from
your point of view. How would you assess BEUC's broad attitude
to the operators? Do you consider them to be pretty ruthless capitalists,
as it were, ripping consumers off, or do you think they are being
reasonably fair, or is it a state of war that you are in with
them? What is the overall assessment of the relationship?
Mr Nietvelt: Overall, BEUC supports competition.
We think that we are not the ones having to decide on prices;
the market should do that. It is the best instrument. It has proved
to be valuable on many occasions.
Q203 Lord Lee of Trafford: And that
is why you come down heavily on wholesale price and would prefer
to leave the retail?
Mr Nietvelt: We definitely come down heavily
on wholesale prices. If that were enough, we would leave it there;
but it does not solve the problem of supply information. It is
not in the paper, but personally I think that, for example, if
you have a very low wholesale cap and retail caps around 50¢
or 55¢, there is room for competition. The problem now is
that the Council is suggesting 60¢ or 70¢, which is
almost no change to what we have now. I think that if everyone
were to agree with 50¢, we would go for that—25¢
as the wholesale and 50¢ as the retail, and this 25¢
would allow for competition. Our fear is that we might end up
with very high retail caps and the legislation would have no effect
at all. We are definitely in favour of competition; however, there
is a problem of access here and a problem of information. These
two market failures have to be solved. Otherwise the market cannot
do its work.
Q204 Lord Geddes: Could I ask for
a clarification? You said the Commission was going for a retail
price of 60-something . . . ?
Mr Nietvelt: The Council. The prices that the
Council is discussing vary. The official proposal is around 50.
The French proposal, and I think the UK proposal as well, is around
66. The Irish, for example, or the Dutch proposal is around 40.
Q205 Lord Geddes: And the Commission
is 43?
Mr Nietvelt: The Commission have their three
prices, as we have as well. It is 49, 36 I think, and 16.
Chairman: I think that the Commissioner
this morning seemed to have moved off that, off the double wholesale
caps. She is now in favour of a single wholesale cap. So the figures
are as Lord Geddes has said.
Lord Geddes: I have it, I hope correctly,
in my mind that it is 33 and 43—wholesale/retail.
Q206 Chairman: Those are the implied
prices at present, based upon the MTR rates.
Mr Nietvelt: We would agree with that, with
the Commission.
Q207 Lord Geddes: You would even
agree with as high as 50 for retail?
Mr Nietvelt: If the wholesale is low enough
and if the transparency issue is tackled correctly—under
all these conditions—we think we might be reasonable as
well. The thing is that currently we fear that we might have a
very, very high retail cap, which does not change anything.
Q208 Baroness Eccles of Moulton:
Would you not be more comfortable with averaging on retail?
Mr Nietvelt: No. We have looked into this as
well. From the outside it is a very reasonable and good thing
but, if you try to think about how it would be in practice, the
first question is an average between what? Between the business
segment of the market, post-paid, and pre-paid? I think those
are the three markets. How would you do the weightings? Would
you do it in terms of volumes? In terms of number of subscriptions?
Who would calculate it? What about differences in a national market—which
are important? Should they be taken into account? How much should
the prices decrease? Business—should they decrease by a
fixed number? Should you have a percentage decrease? How much
should it be? Should you have these three segments the same—in
the pre-paid, post-paid, business? Business uses more roaming;
post-paid people as well, usually; pre-paid, less. Again, the
division between pre-paid and past-paid depends very much on the
country and the domestic tariff structure. You run into a very
complicated issue by pleading for averages. From the outside,
it is a very good proposal but, in practice, we fear that it may
not work. Furthermore, it may be challenged by operators. The
calculations might not be done correctly; the figures may not
be interpreted correctly. In that sense, we think that it is very
important to have simple, clear legislation. An average very much
complicates the whole discussion.
Q209 Baroness Eccles of Moulton:
But if you have three distinct segments that you have just described,
how can one fixed retail cap be appropriate to all three? You
have just described them as having rather different needs, so
it would seem that they would need to have different caps anyway.
Mr Nietvelt: From an operator point of view,
the costs of supplying the service through their network are the
same. It is the marketing costs which are different. To make a
call on the network, whether or not it is a mobile phone of a
business user or a mobile phone of an ordinary consumer, it is
still a mobile phone. It uses the same frequencies; it uses the
same technical connections.
Q210 Chairman: That is not strictly true
for pre- and post-paid though.
Mr Nietvelt: I agree with pre- and post-paid,
but I think the difference should not be exaggerated in any case.
The marketing is different, but it is not completely different.
Q211 Chairman: May I ask you to put yourself
in a hypothetical position? All of a sudden, you have been elected
to the House of Lords and have immediately become a member of
this Select Committee. We have quite a short time period between
now and perhaps the end of June or July, when the Presidency hopes
to see regulations agreed by the Parliament and by the Council.
So we have at best four months. If you were in our position, which
areas would you be looking at to reflect further on and to offer
advice, conclusions or recommendations? Obviously, in our case,
directly to our Parliament and to our ministers.
Mr Nietvelt: First of all, I have to try and
imagine myself being elected!
Q212 Lord Mitchell: The elected bit
is quite difficult!
Mr Nietvelt: Indeed. What I think would be important
is the effect of reduced prices on volumes. We think that if you
have a clear signal, users will make more calls and use the roaming
services more. That would mitigate the effect of the lost revenue.
In economic terms, it is the elasticities that are important here.
There is a Eurobarometer, where it turned out that, logically,
young people, almost everyone below the age of 35 has a mobile
phone now; so you have a very high penetration rate. Secondly,
young people travel almost as much as the rest of the population.
Thirdly, 60 per cent of Europeans clearly state that they would
use their mobile phone more if prices came down. That is important
to consider in that sense. If you have lower prices and if people
then use mobile phones more, furthermore they would automatically
use Internet surfing and they would also use new services. If
you want to have a healthy EU telecom market, you should stimulate
demand. Therefore, this legislation is important because it will
lower prices, stimulate demand, and basically make sure that the
EU telecom sector stays healthy.
Q213 Chairman: Is there adequate research,
in your judgment? We asked the Commissioner and she gave us four
sources this morning, looking at elasticity of demand. Do you
think more could be done to persuade the industry, the public,
Parliament, in the coming months?
Mr Nietvelt: The question of elasticities is
indeed an important one, but a difficult one as well. Research
should be done in any case, but it will take more than four months.
We know what operators say about the elasticities, and that is
what our consultant looked at. They are higher than what the operators
are saying. We are sure about that. In the long term research
is needed, but it will take more than four months in any case.
Q214 Chairman: Do you think that there
will be convergence between the Commission, Parliament and the
Council, and that we will get regulations?
Mr Nietvelt: From my point of view, as I said
at the beginning, I think that there is a tremendous political
will to have legislation. The issue has been on the table for
many years. If you take both, then I think we have a chance finally
of having legislation.
Q215 Chairman: Is there any hope that
we can get anything other than what we call in English a "haggle"
at the Council meeting over, for example—and specifically—a
wholesale cap, whether it is averaged or not? At the moment, it
is plucked out of the air. There is some broad relationship to
mobile termination rates, but that is just a proxy for the actual
costs.
Mr Nietvelt: I think that everyone would be
very interested in seeing the data of the operators, to know what
their exact costs are; but these data are simply not available,
and therefore the data we have are the mobile termination rates.
As such, I think that it is up to the operators to come up with
clear data on what it costs to them—data that can be controlled
by national regulators.
Q216 Chairman: Do you think that the
operators, the GSM, could produce data in time for there to be
a sensible discussion, based on total apportioned costs?
Mr Nietvelt: To be honest, I do not know how
the GSM association works in practice. I do not know if they dispose
of the data. I am pretty sure that operators in Europe could provide
data from their country. I think they dispose of it. It is important
for price-setting to know what it costs.
Q217 Chairman: It appears that there
are no further questions from around the table. Thank you very
much indeed for coming—at short notice, obviously—but
answering questions very clearly, if I may say so, in excellent
English, and it is very helpful for the record. We will send you
the transcript and, if there are any corrections to make, please
do so. We will print it in due course, and send you a copy of
our report.
Mr Nietvelt: Thank you very much for inviting
us and asking our opinion.
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