Examination of Witnesses (Questions 296-299)
Mr William McCoubrey, Dr Volker Stapper and Mr Richard
Rumbelow
5 MARCH 2007
Q296Chairman: Thank you very much indeed for
coming. We are coming to the end of taking evidence for our report
into mobile phone roaming charges. We are hoping to produce a
report by 27 March. We are well aware that the informal Meeting
of Ministers is due to take place on 15 March when presumably
more haggling and an attempt to reach agreement between the various
component parts of the European Union will occur. For the record,
it would be very helpful if you, Dr Stapper, would open the proceedings
and briefly describe your role and that of the company.
Dr Stapper: My name is Volker Stapper and I
am with T-Mobile International in Bonn in Germany, which is the
holding company of T-Mobile. T-Mobile is present in a number of
countries in Europe, ie the UK, Germany, Austria, the Netherlands,
the Czech Republic, Slovakia and Hungary.
Mr Rumbelow: I am Richard Rumbelow and I am
Head of Public Affairs for T-Mobile UK.
Mr McCoubrey: My name is William McCoubrey and
I am Head of Regulatory & Public Policy at Meteor. Meteor
is a mobile operator in Ireland. We are not part of a mobile group;
we are a stand-alone mobile provider. We are third in the marketplace
in terms of market share; we currently have 17 per cent of the
market. Our nearest competitors are Vodafone and Telephonica O2
and the fourth entrant in the market is Hutchison. Up until around
three to four years ago, the market was quite stagnant on a national
basis in terms of competition with Vodafone and O2 effectively
being the monopoly. Meteor entered the market and acquired access
to national roaming rights which allowed us then to compete on
a more even footing with the operators, so we had an even footing
on the wholesale market which allowed us then to make inroads
into the retail market and we have started to deliver competition
in the Irish marketplace and competition is now starting to thrive.
Q297 Chairman: I think you have had notice
of some of the questions in which we are particularly interested
and may I begin with the first question which is that the Commission
has argued that there has been market failure in terms of true
competition in the supply of roaming charges over the last few
years and hence the need for the introduction of regulation. Do
you agree with that?
Dr Stapper: I do not. I think that there have
been movements in the market for a number of years now. If I go
back, I think the first movements that you saw were mainly focused
on price transparency. We understand that customers were very
concerned about the price they were paying when abroad and so
our initial focus was on introducing roaming rates that were transparent.
Back in 1999, we introduced a tariff which allowed customers to
roam in any network in Europe for the same price and customers
did not have to worry if they suddenly switched from Vodafone
to Wind Italy because they always paid the same price. Furthermore,
our focus was to pass wholesale savings which were achieved by
discount agreements with operators to consumers. What we initially
did was to offer promotions, particularly in the holiday season.
This then developed into reduced standard rates which we have
been offering since 2004.
Mr McCoubrey: From our perspective, the Commission
is correct to say that the industry has failed to reduce roaming
charges and there I mean that the retail prices that consumers
pay are simply too high and they have remained at shockingly high
levels for a number of years now. Where I would disagree with
the Commission is what we then go on to try and do to remedy the
situation. The Commission's focus has been very much on retail
prices but, when you step back and take an analysis of what is
actually happening in the marketplace, the issues lie at the wholesale
level. It is the charges that the wholesale operators, or the
visited network if that is a familiar term to you, charge when
our customers are roaming overseas. We have found that the larger
operators are not willing to negotiate to any significant extent
with a few notable exceptions which we will come on to later I
am sure because they are sitting beside me. For too long, the
larger players and the alliances that have formed between large
operators have dictated to the marketplace what the wholesale
prices must be. We are faced with these high wholesale prices
which are then reflected in our retail prices; hence we have to
charge quite high retail prices. If the Commission wish to address
this, which they will do to give the consumer a better deal, they
should be looking squarely at resolving all the issues in the
wholesale market by establishing price caps and also by establishing
what we call a national non-discrimination clause that will ensure
that smaller operators are able to continue to compete in the
national mobile markets.
Q298 Lord Haskel: This is a fast moving
situation. Things seem to be changing quite frequently. Would
you tell us what the industry has done since the Commission announced
its proposal in the summer of 2006.
Dr Stapper: We made a first draft proposal shortly
before the Commission came out with its proposal, which means
that we signed a code of conduct—30 operators across Europe
participated—and announced wholesale reductions in the area
of 50 per cent. We thought that this move would pre-empt regulation
but, as you can see, it did not. We are also measuring as to how
these wholesale reductions translate into lower rate tariffs and,
since we have already taken the first step on the wholesale side
back in October when we introduced a cap of 45 cents, we have
also measured the corresponding retail reductions and, if you
compare it on a year-by-year basis, it resulted in a 25 per cent
reduction. What is interesting to note is that, when we introduced
this cap, our goal was to truly have a cap which allows competition
below the cap and, if you analyse today's discount agreements
which we have signed on the basis of this cap, you will see that
the actual rates offered are below the cap because operators know
that they will not get our traffic for the capped amount but only
for an amount that is below the cap.
Mr McCoubrey: From Meteor's perspective, we
try to do what we can given the constraints that we are under
as a smaller operator. We have 800,000 customers and, as such,
in terms of a roaming base or the number of roaming minutes that
we can offer for sale in another country, we are not a large player,
we are not a large purchaser, so we do not very often see discounts.
However, there has been a considerable interest in trying to resolve
what we call inadvertent roaming along the border between Northern
Ireland and the Republic of Ireland. Our customers would like
to see an all-Ireland tariff. We worked with T-Mobile—and
we are very grateful to T-Mobile for this—to agree special
wholesale roaming rates that then allowed us to pass on significant
savings to our customers. So, it is now possible for Meteor customers
roaming in the UK to effectively pay what they would when they
are at home. So, for a pre-pay customer, if you roam in the UK
and call home, it will cost you 20 euro cents, which is the same
charge it would cost you if you call when in Ireland to another
Irish mobile operator. We were able to achieve that against a
background where there was mutual interest for T-Mobile and Meteor
to work together on this. Our competitors, Vodafone and O2, had
previously introduced their own all-Ireland tariffs to address
consumer concerns, but they did it on their own networks. So,
O2 Ireland require its customers to roam on the O2 UK network
to avail themselves of the special discounts. Meteor approached
both Vodafone and O2 UK entities and asked them if they would
reciprocate with us similar sorts of wholesale charges that would
allow us to introduce a competing retail tariff and they said
"no". T-Mobile was in a similar circumstance where they
needed to have something to offer their customers because Vodafone
UK and O2 UK were also offering these discounts. So, there was
a commercial arrangement reached due to the unique circumstances
that existed. However, we have found that typically the larger
players are unwilling to negotiate discounts that would allow
us to replicate the retail tariffs that they have introduced.
So, if you consider Vodafone that has an extensive footprint across
Europe, they have the Vodafone Passport Initiative where, when
you roam on in other Vodafone network, you will get discounted
rates. We simply cannot compete with that unless we have access
to fair wholesale rates on a non-discriminatory basis.
Q299 Chairman: What are those, in your
judgment, fair rates?
Mr McCoubrey: In terms of the actual level?
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