Examination of Witnesses (Questions 240-259)
Mr Frank Krüger
27 FEBRUARY 2007
Q240 Baroness Eccles of Moulton:
Is that quite a substantial reason against going for an average
retail cap? The burden that it puts on to the national regulators?
Mr Krüger: I do not know whether it is
a substantial reason for all Member States who are not currently
in favour of an additional average regulation, but we have to
take into account the fact that the Commission is against, Mr
Rübig is against, Mr Muscat told me that he has to take the
average on board because he feels committed to the Copenhagen
Economics Institute, and half of the Member States are against
an average as well. I do not know the reason why they are all
against an average, but I think that some of them are against
an average because of the regulatory burden.
Q241 Baroness Eccles of Moulton:
Copenhagen is against the average? It is for the fixed—
Mr Krüger: No, they are in favour but,
as Muscat takes it on board, it does not make sense; because he
has an opt-out and an average, so the average is below the consumer
protection tariff. If everybody sticks to the consumer protection
tariff, you breach the average. He knows that very well, and so
my impression is that he will not stick to the average at the
very end.
Q242 Lord Geddes: He will or will
not?
Mr Krüger: He will not.
Q243 Lord Geddes: I am just trying
to get my head round this. I keep getting to a position where
I think I understand it and then I move away because it gets confusing.
If there is a move away from average, does that mean there is
a move towards fixed?
Mr Krüger: No, you do not go back to the
Commission's approach.
Q244 Lord Geddes: That is very important.
Mr Krüger: The question is only for the
consumer protection tariff, whether it is an opt-in or opt-out.
Q245 Lord Geddes: Only for the consumer
protection. Thank you.
Mr Krüger: But as regards opt-in, one may
consider whether it must be a strong opt-in or a weak opt-in.
So you can look at this consumer protection tariff and say that
you can take several steps to take it on board. Are you clearly
and transparently informed by, let us say, TV commercials or by
your invoice or by a special letter sent out, or whatever? It
is very easy to take it on board: you make three clicks on the
Internet, you send an SMS, or whatever. So you can have a very
weak opt-in and you can have a very strong opt-in, and more and
more people are taking advantage of using the consumer protection
tariff. There, we need some further discussion, when we stick
to CPT only. Currently, I cannot tell you what it will be at the
very end. I can only tell you that some Member States are in favour
and some are not in favour. In recent weeks, some Member States
who had been in favour of an additional average have indicated
that they will not support it in future. So I cannot tell you.
It is always closely linked to the figures and to the opt-in/opt-out
question, and so it is very difficult to predict what we will
have at the very end.
Q246 Baroness Eccles of Moulton:
If we assume that at the moment the Commission's position is a
fixed-cap wholesale, a fixed-cap retail, and opt-out—that
is the Commission's position—what I gather you are saying
is that those three, quite clear points would not all be sufficiently
supported by enough Member States for it to be the final solution;
or is it still possible that enough Member States would support
the Commission's position?
Mr Krüger: No.
Q247 Baroness Eccles of Moulton:
No?
Mr Krüger: No.
Q248 Baroness Eccles of Moulton:
We are pretty sure about that, are we?
Mr Krüger: Yes, because they have a mark-up
of only 30¢. Maybe some small Member States from the very
north of Europe are in favour of lower figures, but they are also
in favour of much lower wholesale figures. However, I can tell
you that it will not work in the end to have only 20¢ at
wholesale level and—whatever—45¢ at retail level.
That would not work because Spain and all the other holiday countries
would not agree—from Austria, Greece, Slovenia, Spain, France
and whatever. There are a lot of countries which would like to
have higher wholesale charges, and that means that we need a sufficient
mark-up for the retail levels. We think that what we are currently
discussing—the 37 on the wholesale and the 50/25 on the
retail—is somewhere in the middle of the proposals. In the
end, I do not know whether we will have 55 or so. We are not discussing
it now because if you ask the Member States "What is your
proposal?" you get 27 Member States answering. That is not
possible. We need external influence, from the Parliament or whatever.
Otherwise, we will not get a solution by the Member States.
Q249 Lord Mitchell: It seems to me
that the development that will be taking place in the very near
future is the transfer of data which, to me, includes music, movies,
and a whole series of media, which we do not seem to talk about
much in this process, but you will know how fast this is growing.
It will be going cross-border, with people sending pictures cross-border
from their holidays, or whatever. Does this come into deliberations
at all, or is it an annex—as I suspect?
Mr Krüger: You know that Mr Rübig
has made this proposal of an all-inclusive flat rate which covers
national voice calls as well as roaming voice calls, SMS national
and abroad, and MMS, and that every undertaking shall supply such
an all-inclusive flat rate. We have discussed this proposal within
the Member States and I think that this idea would not get any
support from the Member States, because it means that you oblige
an undertaking to supply a flat rate of—whatever—€500
or so, or maybe higher. We think that may not be feasible. It
is a concern, and I think that there is a concern in all three
institutions—the Commission, the Parliament and the Council—but,
for the time being everybody says, "Let's stick to voice
calls. Let's start with voice calls, and maybe that will have
an impact on SMS". In the Parliament there are a lot of voices
against retail regulation at all, as I said before. If you now
start to discuss regulating data, I do not think that we would
get any First Reading agreement and I do not know whether we would
get agreement until the end of this year. It would complicate
the whole thing.
Q250 Lord Mitchell: But it is clearly
going to happen, is it not?
Mr Krüger: Yes, I fully agree.
Q251 Lord Mitchell: It is so fast-growing.
Mr Krüger: It is fast-growing, yes. That
is one reason why the Commission is not in favour of regulating.
I do not know if Mrs Reding indicated otherwise, because they
think, "It's a growing market and let's wait for the development
within this market". I think that is also the reason why
we are currently a little cautious about regulating SMS and MMS,
because we think that not only do you need an additional impact
assessment and that it would take further time to discuss it,
but also let us see how it develops and let innovation develop.
Q252 Lord Mitchell: There is no doubt,
is there—certainly from our investigations—the operators
are fantastically adept at finding their niches which are not
regulated at all, and getting super profits from those areas.
It certainly seems to me that this is going to be one particular
area in the next five years where there will be tremendous traffic,
and they will be making a lot of super profits.
Mr Krüger: Yes, but we think that regulation
interest he retail market must be well founded and must be only
an exception, because normally it is not possible to regulate
the retail market. Maybe the regulation of voice calls raises
the awareness of customers that they have to pay a lot for making
voice calls abroad or sending an SMS from abroad, so they are
much more cautious and much more aware of it and it would mean
that operators would have to decrease prices there. However, we
think, "Okay, let's wait a little bit and maybe afterwards
we can bring prices down". I agree with you that they are
always looking for their niche, and that is the reason why we
have started regulating termination fees in the last two years,
because they have made a lot of turnover there.
Lord Mitchell: Has there been polling
data of awareness of consumers on roaming charges, voice charges,
SMS charges? Are people aware of it?
Lord Geddes: The Commissioner mentioned
quite a bit of polling that had been done, but that did not include
data; that was purely voice. She came out with some quite detailed
figures.
Q253 Baroness Eccles of Moulton:
The Commissioner seemed very sure that there would not be much
customer satisfaction by only applying constraints to wholesale;
that it had to be retail as well. Otherwise, it simply would not
impact on the consumer, which was her main concern; but that would
not necessarily be the case, would it?
Mr Krüger: We think that they would not
pass on the advantages, the benefits, of reduced wholesale charges
to the customer. Perhaps over a certain period of time; not as
quickly as we think should be the case. Otherwise, they would
collect the additional benefits.
Lord Geddes: That was
certainly her argument.
Q254 Baroness Eccles of Moulton:
The reason why she was so certain about it was because the industry
had not responded sufficiently to the threat that there would
be regulation. The threat of regulation and actual regulation
are two rather different things, and if they see the wholesale
regulation effect on them and know there is the threat of retail
if they did not co-operate, you would think that that would have
a far greater influence on the industry than what has happened
up until now; that they would be much more likely to make sure
that the message was getting through to the consumer; that there
was a serious reduction in the cost of roaming to the user. That
is what one would hope.
Mr Krüger: So, wholesale only?
Q255 Lord Geddes: Yes. We have had
several witnesses, admittedly from the industry, who have stressed
that it would be better to have regulation on wholesale for a
period of time—six months, 12 months, variable—to
see whether retail did come down proportionately. The Commissioner
this morning was very firm—I am paraphrasing her words—that
that effectively had been tried, because of the threat of regulation;
that the wholesale prices had come down but the retail prices
had not, and therefore she was going to insist on retail regulation
as well. I think what you are saying is that Member States are
going along that same line of thought.
Mr Krüger: I think that the UK, for instance,
has been in favour of this approach, saying, "Let's wait
and see". Now they are changing their view and saying, "Okay,
we need some sort of retail regulation", because it is possible
that prices will not come down by decreasing wholesale.
Q256 Baroness Eccles of Moulton:
The UK has not gone as far as the Commissioner in saying the retail
regulation needs to be a fixed cap. The UK's position is an average
on both wholesale and retail.
Mr Krüger: Yes. "They have been successful
at the wholesale level and let's see what happens at the retail
level."
Q257 Lord Geddes: Could I go back
to Lady Eccles' question going back to the Commissioner's stance
and the current view of the Council? The Commissioner was very
clear that she wanted fixed-cap wholesale, fixed-cap retail, opt-out.
I think what I have heard you say is that the feeling in Council
at the moment is no to all three of those.
Mr Krüger: No.
Q258 Lord Geddes: Not so?
Mr Krüger: No.
Q259 Lord Geddes: I thought you were
saying average, wholesale—
Mr Krüger: Average on wholesale and a mixed
approach on retail of opt-out and opt-in. We propose opt-out for
new customers, if you are buying a new pre-paid card or if you
are signing a new contract. You must be provided with that tariff
and you can opt out to whatever tariff package which may be more
advantageous for you, and you can switch. For existing customers,
however, we do not want to have a lot of red tape. That is the
reason why we think that there must be an opt-in; but then you
can differ between several opt-in approaches—whether it
is just laying out a leaflet, or stronger.
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