Memorandum by Meteor Mobile Communications
Ltd
INTRODUCTION
Meteor Mobile Communications Ltd (Meteor) broadly
welcomes the European Commission's initiative to drive down wholesale
charges in the European international roaming market through the
application of a European Regulation.
5 MARCH 2007
For too long the pricing policy and wholesale
charges levied by the large pan-European operators and members
of roaming alliances have been allowed to dictate both wholesale
access, wholesale tariffs and retail pricing. It is time that
action is taken to ensure that this market functions effectively
at both wholesale and retail level. It is also time to ensure
that small, independent operators are in the position to provide
a real competitive challenge to the larger, more established operator.
Whilst welcoming the Regulation, Meteor would
maintain that changes are required to the current proposals to
ensure that a more effective Regulation is implemented.
Meteor would argue that, as currently worded,
the Regulation does not fully address all of the current anti-competitive
aspects of the market for international roaming services. Therefore,
if not amended to take into account access and non discrimination
requirements of smaller independent operators, the Regulation
will adversely impact the market position of such operators and
ultimately the provision of effective national competition.
To guarantee that the activities of trans-national
groups do not hinder competition at a national level, Meteor would
advocate the inclusion of a National Non-discrimination Clause.
Such a clause would ensure that the wholesale international roaming
rates agreed between group companies, should also be offered on
the same terms to independent national competitors.
We request that the following provision is added
to Article 3:
"The visited network shall not discriminate
on the wholesale charges it levies from home networks operating
in the same Member State if an entity which is part of the same
Group as the visited network is active in that Member State."
Meteor would very much welcome the opportunity
to address the Select Committee directly in order to ensure that
the concerns of smaller operators are fully debated.
1. 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?
Meteor acknowledges concern both at national
and European level regarding the generally high level wholesale
roaming charges, which have led to high retail prices, for international
roaming services.
In the face of continued high international
roaming tariffs, at both the wholesale and retail level, Meteor
would agree with the European Commission that action of a regulatory
nature is required. Such action should significantly reduce excessive
wholesale charges levied from one operator onto another for access
to a visited mobile network.
Meteor would argue, however, that the nature
and scope of such a regulation is key to realising the Commission's
goals of competitive retail offerings and subsequent lower prices
for all consumers.
2. Is it appropriate for the Commission to
introduce legislation to cap the cost of roaming?
Meteor supports the move by the European Commission
to cap wholesale voice termination charges.
As a small, independent operator, Meteor would
argue that the most significant contributor to high retail prices
are wholesale charges levied by visited networks. Access to economically
viable wholesale prices is, therefore, the driver for the development
of a healthy retail market and the ability of smaller operators
to continue to compete.
Meteor would argue that the Regulation should:
(a) Create an even playing-field at the wholesale
level through regulation.
(b) Allow sufficient flexibility for operators
to drive aggressive retail price competition.
To realise the above, it is key that the Regulation
includes a National Non-Discrimination Clause. Such a clause will
ensure that, through the application of the restrictions in pricing
envisaged through the Regulation, trans-national groups cannot
hinder competition at a national level and operators such as Meteor
are guaranteed access, on the same terms and conditions, as other
operators active within the national market.
3. 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?
Meteor accepts that, over the last number of
years, certain steps have been taken by operators to introduce
and offer consumers more competitive international roaming packages
where it has been advantageous for operators to do so. Meteor
would point out, however, that the vast majority of reduced retail
roaming packages are confined to inter-group traffic or within
European alliances.
In 2006 Meteor introduced a special roaming
agreement with T-Mobile UK. Through this agreement, Meteor is
able to offer special roaming prices to Meteor customers roaming
on the T-Mobile network throughout Northern Ireland and in the
rest of the United Kingdom. Along with highly competitive roaming
rates the deal saw Meteor, as the only operator in the Republic
of Ireland, to abolish all charges for receipt of calls when roaming.
Meteor customers now enjoy very low retail rates
when travelling in the UK, with maximum charges for pre-pay customers
at 20 Euro cent per minute for voice calls, 20 Euro cent per SMS
and the abolition of the charge for receipt of a call.
Within the context of this inquiry, it is important
to note why Meteor is able to offer lower roaming prices on a
specific network, as opposed to across all networks. The important
element in the above mentioned retail offering is access to economically
viable wholesale prices. As wholesale prices offered by T-Mobile
and reciprocated by Meteor are significantly lower than those
offered by competitors in the UK market, retail price reductions
have followed. It is access to this pricing that is key. It should
be noted that O2 Ireland and Vodafone Ireland were able to implement
discounted retail roaming rates (albeit at a higher level) before
Meteor. This is because they agreed discounted wholesale rates
with their respective sister companies in the UK but would not
offer the same or similar wholesale charges to Meteor thereby
constraining our ability to effectively compete at the retail
level. This erosion of the smaller challenger operator's ability
to compete at the retail level is not unique to Ireland/UK and
is something that must be addressed on a pan European basis through
the forthcoming Regulation.
Currently, wholesale roaming access is not guaranteed
and preferential access agreements are concluded between members
of pan-European groups and alliances.
Meteor, as a small and independent operator,
currently struggles to access pricing on the same terms as large
operators or pricing negotiated through European alliances.
4. Does the proposed Regulation risk narrowing
down the space for competition and thereby harming innovation
and investment in the sector?
Meteor is supportive of the move to introduce
maximum wholesale prices above which an operator cannot be charged.
However, Meteor would argue that the introduction
of a wholesale cap will act as a further incentive for larger
operators to internalise wholesale international roaming traffic
and discriminate against smaller operators. Such actions, as highlighted
in practical detail above, prevent smaller operators from acting
as an effective competitive constraint, and stymie their ability
to offer competitive retail offerings to their customers.
It is crucial, therefore, that if customers
of smaller, independent operators are also to benefit from the
motivation of this Regulation—lower prices for international
roaming—that a further safeguard should be applied to counter
the potential market displacement effects of the application of
a wholesale price cap.
A National Non-discrimination Clause will provide
a safeguard to ensure that independent operators can compete on
a level playing field vis a" vis other operators in their
national markets. This safeguard provision will counter the potential
for margin squeeze arising from the implementation of a wholesale
cap.
A level playing field is required at the wholesale
level to promote the provision of competitive international roaming
retail services and national mobile services more generally.
5. 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?
Yes.
Meteor would argue that without the introduction
of a national non-discrimination clause the application of the
regulation could result in margin squeeze for smaller, independent
operators.
Currently high international wholesale tariffs
are determined by large operators with power to control access
and pricing. This control is currently determined through "group"
access and alliances that control membership and traffic steering.
Meteor would argue that the Regulation as currently
drafted will result in large operators moving to recoup lost revenues
by unfair competition at the wholesale level and ultimately eroding
the ability of independent operators to exert competitive pressure
on national retail prices.
The current high retail margins of large operators
allow competitors to pay higher wholesale rates and remain competitive
at the retail level by accepting lower margins. The envisaged
Regulation reduces dramatically the wholesale margins thereby
providing an incentive to pan European operators to internalise
traffic, charging one wholesale price to group members and another
to independent operators.
As outlined above, the Regulation can only be
wholly effective if it also tackles this current anti-competitive
practice. To ensure that the market for international roaming
services develops post regulation, a level playing-field is required
to ensure healthy competition at the national level.
In many ways what Meteor is proposing is no
different to the national frameworks for mobile regulation whereby
the provision of mobile termination services are subject to price
controls and non-discrimination obligations. It should be noted,
however, that the national non-discrimination proposal is not
a blanket ban on discrimination requiring all operators to offer
the same wholesale charges to all other operators. It is a targeted
measure that will safeguard competition within a given national
market.
As mobile termination services are an important
input for the provision of competing retail services, larger operators
should not be able to discriminate in the charges they apply to
this service to the detriment of national competition.
6. 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?
Regulating wholesale roaming rates will impact
the bargaining power of operators when negotiating wholesale access
agreements with operators from outside the European Union.
Meteor's main focus, however, is to offer tariff
packages to our customers that not only match but compete with
larger operators. We cannot do this unless action is taken to
ensure access and, most importantly, economically viable access
at the wholesale level.
To ensure that Meteor continues to offers a
service and can develop a product that competitively competes
against other national operators, the Regulation is welcome albeit
with the national non-discrimination caveat.
7. 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?
Meteor is not in a position to comment on the
accuracy of European wide figures cited by the European Commission.
8. 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?
Meteor would argue that the proposed Regulation
should be restricted to wholesale level and strongly believes
that competition at the national level will ensure appropriate
pass-through to the consumer of cost savings.
Meteor would maintain, however that if there
is objective justification to regulate retail roaming prices then
more flexibility should be introduced in the retail regulation
proposals. Any Regulation imposed should ensure that innovative
pricing packages, such as the roaming package developed with T-Mobile
UK, should not be threatened. In addition, operators should be
given the space to continue to develop bespoke packages that address
specific roaming markets.
Meteor does not, however, support the proposal
for a sunrise clause as this would be an extremely complex regulatory
test to define, implement and assess.
9. 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?
Meteor would advocate the application of a single
absolute price cap for the making and receipt of a wholesale international
roaming call.
Without prejudice to Meteor's view that retail
regulatory measures are unnecessary as the smaller challenger
operators will drive reductions in retail roaming prices. As previously
noted Meteor would support measures that allow for a more flexible
approach to be adopted in respect of the retail regulatory measures.
This will allow smaller challenger operators to compete more effectively
with the incumbent mobile operators through innovative tariffing,
such as our UK roaming initiative. Consequently we would be supportive
of a single average retail cap.
We believe it would be appropriate for the regulation
to establish target charges on price per minute basis. The level
of the target retail prices may be established by reference to
the regulated wholesale prices, an appropriate absolute allowance
for retail costs and a reasonable return. We do not, however,
feel that it is appropriate to link the regulation of retail roaming
prices to mobile termination rates on a forward looking basis
as the cost drivers of wholesale termination and retail costs
are very different.
ABOUT METEOR
Meteor Mobile Communications is the 3rd operator
in the Irish mobile market. Meteor currently enjoys over 17 per
cent market share, 90 per cent of which is in the pre-pay segment.
Meteor has over 820,000 customers, 250,000 of which joined the
Meteor network in over the last year.
In the national market, Meteor competes against
major multi-national operators well established in the market:
Vodafone and 02 Telefonica, as well as a forth entrant, 3.
Meteor currently acts as a challenger brand
successfully driving competition across all market sectors. Meteor
has succeeded in creating a competitive market where a duopoly
once held 95 per cent market share. Meteor acts, therefore, as
a constraint on the "big two", driving competition with
innovative price plans and products.
February 2007
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