Examination of Witnesses (Questions 320-339)
Mr William McCoubrey, Dr Volker Stapper and Mr Richard
Rumbelow
5 MARCH 2007
Q320 Baroness Eccles of Moulton: Are
the charges that you charge each other conditioned by the national
conditions that exist? Can you get access on to networks in Belgium
for a lot less than you can get access in Austria for your subscribers?
Dr Stapper: The access is also determined by
the reciprocity of the traffic. Every roaming agreement is bilateral
by nature, so you will always have one operator that usually sends
more traffic, what we call a net payer for roaming and a so-called
net receiver in terms of roaming, and that is why you will usually
see that operators who are net payers have been very aggressive
in trying to negotiate discount agreements because it is in their
own commercial interest to come to these discounts.
Q321 Baroness Eccles of Moulton: So,
that is another imbalance. In a way, you have covered two imbalances
and the third imbalance will be the degree of trade going both
ways.
Dr Stapper: And that is a very important aspect
because this imbalance is the one that has stimulated competition
in this market the most.
The Committee suspended from 5.10 pm to
5.18 pm for a division in the House
Q322Lord St John of Bletso: Dr Stapper, you
mentioned the cost of 3G licences. So far, we have spoken about
the cost of voice roaming. My question is, what about the transparency
on the cost of data roaming and what scope do you think there
is for the Directive to include the cost of voice roaming?
Dr Stapper: I will ask my colleague to answer
that.
Mr Rumbelow: At this stage, the Commission proposal
does not include SMS and data roaming within the scope of its
deliberation and I think that before any consideration is given
to data and SMS roaming being included, we would need to see a
full and detailed procedural analysis undertaken by the Commission.
Given the timeframe that this current proposal could be determined
in, it is going to be very, very difficult for that detailed analysis
to be undertaken. At this stage, we do not believe that SMS and
data roaming should be included within the scope of this particular
proposal. Data and SMS roaming is still an emerging market and
therefore, to give it fair consideration, that analysis would
need to be quite thorough. Just as a point of reference—and
we have said this in our written evidence—we have already
taken a step in reducing the data roaming charge for business
customers with effect from last month and we intend to do a similar
thing for consumers in the course of the next few months. So,
we have already recognised that although the market is emerging
in terms of data and SMS, there is an ability for operators to
certainly advise the consumers and allow consumers a more attractive
retail tariff for their data roaming requirements.
Q323 Lord St John of Bletso: There have
been occasions when in fact there has been more abuse of data
roaming charges than voice roaming charges and we have heard that
voice roaming charges are coming down. You mentioned that T-Mobile's
data roaming charges have come down but is that the same situation
with the other wholesale operators? I would be interested to hear
from Mr McCoubrey as well on this issue.
Mr Rumbelow: Particularly on the data roaming
side, the market is emerging and is not in the same mature condition
as voice traffic roaming and that is partly because there are
still many technical reasons why that sort of roaming traffic
cannot be undertaken within the European footprint. It goes back
to Dr Stapper's earlier comments about the state of the market
in Europe. Not all operators have the same degree of network coverage
within their own countries and therefore, to have a consistent
pattern of data roaming facility and therefore to allow for a
true costing of that in terms of the wholesale price, it is still
in very much an emerging market. Therefore, at this stage, it
would be wrong to apply the same criteria in terms of analysis
of the data market as we are examining here, if you like, the
basic voice traffic market. As I say, the proposal we have made
as T-Mobile refers to business data customers roaming within the
T-Mobile footprint within Europe.
Mr McCoubrey: From our perspective, I would
tend to agree with T-Mobile's assessment of the situation regarding
data and SMS. It is still very much an immature service. I think
I have seen one of the European Parliamentary Committee's proposals
that this should be reviewed over a year following the regulation
being adopted and then decisions taken. I think that is the right
way. I do not think that we should be taking steps now to try
and roll data and SMS into this particular phase of the regulation
because I imagine that this will be a phased approach to regulation
and I also note that the same committee has made a proposal that,
if we cannot have the necessary protection as smaller operators
at the start of the regulation, then that is something that also
should be reviewed within one year to ensure that any appropriate
measures are put in place. There are some complex and detailed
things here that require further assessment over and above all
the analysis that is being undertaken for voice.
Q324 Baroness Eccles of Moulton: Much
earlier on, the concept of a sunset clause was touched on. How
do you see that actually being applied and managed? There are
obviously a number of different ways of dealing with a sunset
clause. First of all, if there are going to be regulation, would
you be in favour of it?
Dr Stapper: Certainly we would be because we
believe that the industry will not have any incentive to increase
prices after they have reduced them. One of the concepts, as far
as I understand it, that is currently being introduced into the
sunset clause by the German presidency in its proposal is that
there will be a review after 12 or 18 months and if this review
is sufficiently positive, then the regulation will, as planned,
expire after three years. Of course, we would like to see an earlier
sunset but I think that the sunset in itself is certainly an important
tool to make this regulation proportionate.
Q325 Baroness Eccles of Moulton: How
is it going to be possible for whoever is conducting a review
to have access to sufficient data to be confident that it is going
to be sensible to trigger the sunset 18 months later? Data seems
to be a bit of a problem.
Dr Stapper: I think that there is a great deal
of data out there. We, as operators, have collected data to show
how our code of conduct has translated into lower retail charges.
Moreover, data has already been collected by regulatory authorities
because the national authorities were actually supposed to investigate
the market and a number of these authorities have collected the
necessary data to look at the roaming market, so they are used
to judging such data. Not one of these investigations has shown
that the market was not competitive. There were concerns that
prices were too high in some cases and there was never an allegation
of market failure.
Q326 Baroness Eccles of Moulton: And
there is no concern amongst the operators about commercial confidentiality
being contravened by having to reveal certain data in order to
prove a point?
Dr Stapper: No because this data remains with
the authority and will not be disclosed to our competitors in
the market.
Q327 Baroness Eccles of Moulton: And
it does not leak?
Dr Stapper: No. We are used to disclosing extremely
confidential information in many of our businesses and so far
there has been no leakage.
Q328 Baroness Eccles of Moulton: That
is a very comprehensive answer to the sunset question. What about
a sunrise clause? Well, it would not be a clause, it would be
a sunrise delay in the regulation being applied. What would be
your view on that?
Dr Stapper: We think that wholesale regulation
should be sufficient to stimulate competition on the retail side.
A number of stakeholders to whom we have spoken say that there
is ample evidence that these wholesale savings will be passed
on to the consumer. In our view, if a sunrise clause is introduced,
such a sunrise clause should be limited to looking at data that
shows how these wholesale savings have been passed on to the consumer.
We, as an industry, have signed up to the code of conduct to actually
illustrate that such a retail price index works in practice.
Q329 Baroness Eccles of Moulton: Does
Meteor have anything to say on this?
Mr McCoubrey: On the subject of the sunset clause
and what sort of tests you would have to look at, on the basis
of national regulation, the regulators have to periodically assess
18 markets that have been established by the Commission. So, the
national regulatory authorities and the European Commission are
well versed in having a look at a market and seeing if it is functioning.
What has failed to happen in the past with the wholesale international
roaming is that it has been looked at on a national basis and,
when you look at three or four different networks appearing to
compete for some minutes, you could argue that that is competitive
on a national basis. The issue is that the wholesale market does
not work correctly and it has to be looked at from a pan-European
basis. So, if there is to be a sunset clause and test, it needs
to be that the Commission and other experts need to analyse and
demonstrate that there is an effectively functioning pan-European
wholesale market. In terms of sunrise, I would agree with my colleague,
as we do occasionally, that, if we sort out wholesale regulation—I
think that we have different views on exactly what is needed at
the wholesale level—and if we have an equal playing field
at the wholesale level that allows the smaller operators to challenge
the larger players in the retail market, I do not feel that we
need retail regulation.
Q330 Lord Geddes: That has answered my
second question in one easy motion although perhaps on that last
point—I will come on to consumer protection tariffs in a
minute—would T-Mobile like to comment on whether you would
favour wholesale or retail caps coming in at the same time or
would you rather wholesale initially and then look at retail?
Dr Stapper: We believe that wholesale should
be sufficient and the market will prove that these wholesale savings
will be passed on to the consumer.
Q331 Lord Geddes: Your reply does not
surprise me but thank you for giving it. We were in Brussels last
week taking evidence from a number of different witnesses including
the Commissioner herself and the Raconteur in the European Parliament
and there was quite a lot of discussion about the necessity or
lack of necessity for consumer protection tariffs. Would you like
to comment on that?
Dr Stapper: The consumer protection tariff has
the intention to introduce absolute price caps which in our view
is very similar to what the Commission originally suggested. So,
in order for such a mechanism, which we do not believe is necessary,
to be introduced, we believe that a number of conditions will
have to be met for the industry to be flexible which is not normally
the case under an absolute price cap. Those conditions should
be opt-in which is something that is actually being proposed by
the Council and also by some of the members of the European Parliament
and, more importantly, it needs to be a true consumer protection
tariff meaning that it only imposes a price limit which avoids
abuses by some operators. It should not be at a level which would
de facto lead to a situation where this protection tariff
will be applicable to all customers.
Mr McCoubrey: I have a certain notion of sympathy
with the consumer protection tariff in the sense that it will,
if set at the right level, establish a price above which consumers
will know they are not going to be charged. So it does, as it
says, protect the consumer. We have the same concern as smaller
operators at the wholesale level that, if you move into averaging
certain segments of the market, the smaller operators may be at
the wrong side of the averaging. If the target was, say, 30 cents
and there was an average target, the smaller operators could be
charged 40 or 50 cents and meanwhile the larger players could
give advantage to members of their group with something lower
than that to achieve the average. It is exactly the same argument
that needs to be had in terms of the retail consumer. I think
that the standard retail consumer, you and I who are not part
of large businesses, does need a degree of protection to make
sure that we are not on the wrong side of averages. So, there
has to be clear consideration both at the wholesale and at the
retail level to establishing appropriate absolute levels if we
are going to regulate both sides of the market.
Q332 Lord Geddes: I would like to come
in to the opt-in/opt-out argument. I would like to ask another
question which we have not touched on yet. Do you think it is
right that a receiver should pay as well as a sender? If you phone
me and I have no idea I am getting that call, why should I pay
for it? I may not want the call.
Dr Stapper: The rationale for this approach,
which is different from the domestic service where you do not
pay for a receiving call, is that we had to take care of the situation
that the caller does not know where you are and he should not
be charged an extra amount for a call to a foreign country that
he did not expect. The concept was that the person calling you
will only be charged for the domestic part of the call whereas
the roaming customer will be charged for the additional cost that
occurs because you are in a foreign network.
Q333 Lord Geddes: I want to challenge
you on that for a moment. The rationale that you have just put
up is that the caller does not know that the receiver is in a
different country. Therefore, what you have just said, why should
the caller pay for effectively an international call? The receiver
does not know that he is going to be called in the first place.
Why should he be charged?
Dr Stapper: Because the receiver can turn his
phone off if he does not want to make any calls plus he is aware
of the fact that he will be charged for this call because in every
price list which we have this is clearly indicated.
Lord Geddes: He is aware of it but it
is a de facto position. I am not buying that argument.
Q334 Baroness Eccles of Moulton: Let
me ask what happens if you leave a message. If you leave a voicemail
message, who pays for it? If you are in Germany and I am in England
and I am calling you and you do not answer because you have switched
your phone off and I leave a voicemail message on your phone,
presumably you pay for it when you switch on and see that there
is a voicemail message and dial 901. I am not paying for it presumably
as the caller, or am I?
Dr Stapper: You are paying for the call to the
voicemail, namely the domestic call. If the roaming customer turns
the phone back on and wants to retrieve the message, you are paying
the roaming rate—
Baroness Eccles of Moulton: You are paying
for listening and that is all right. That one is okay.
Q335 Lord Geddes: I must confess that
I am far from satisfied but I hear what you say. Could we probe
this opt-in/opt-out. Again, we have heard quite a lot of evidence
on this subject. I think what you said, if I may ask Mr McCoubrey,
is that the rationale as we understand it is that the industry
would much prefer an opt-in situation rather than an opt-out situation
and the rationale given to us is that an opt-out situation would
be unbelievably complex and very expensive. Is that correct? Is
that the sole reason why you prefer the opt-in relative to the
opt-out?
Mr McCoubrey: From our perspective, it is a
practical matter and it is more to do with where we are now. We
have the UK/Ireland special roaming arrangement that is in place.
That is going to be way cheaper than whatever the consumer protection
tariff level is going to be, I can pretty much guarantee that,
and bearing in mind that at least 50 per cent of our own customers'
roaming traffic occurs in the UK—it is the single most important
destination from the Irish perspective—for us to then have
to get everybody to opt back into what is the best deal for them
just seems impracticable and improbable. So, it is a practical
reason from our perspective why we prefer to have opt-in to consumer
protection tariff on the basis that you are going to be on the
best deal anyway.
Q336 Lord Geddes: So, if you want to
get on to it, you have to opt in.
Mr McCoubrey: Yes. If you want to pay more would
be our philosophy.
Q337 Lord Geddes: Would you go along
with that, Dr Stapper?
Dr Stapper: I think there is another reason
why we believe that opt-in is the right solution and that is because
opt-in is the way in which we do business. Our customers are used
to opting into minute bundles tariff options. So, introducing
such a regulation as an opt-in scenario would actually mirror
the way in which we do business.
Chairman: I think we are coming to the
end of our questions. Lord St John, do you have any other questions?
Q338 Lord St John of Bletso: Yes, more
on the issue of increasing customer lock-in. New technologies
such as IP multimedia subsystems, we have been told, can reinforce
the grip of mobile operators on their wholly-owned retail activities
and increase customer lock-in. Do you believe in this?
Dr Stapper: I am sorry, I am not sure I understood
the question.
Q339 Lord St John of Bletso: It is about
new technologies, IP multimedia subsystems, so basically my question
is about the lock-in of customers and open competition. Obviously
one of the problems that many customers have is they get locked
in to their mobile operators and I was looking for the inflexible
consequences of pricing. I was interested to read this in a submission
we have received by the CMA.
Mr McCoubrey: I am not a technical expert in
terms of how the networks work but my understanding of the IMS
is that it is a sub-protocol on the network that allows different
parts of the network to talk to each other. What it does is allow
greater commonality at the touch points with the edge of the network,
so a mobile network can talk in the same language with a fixed
network, with a broadcasting network, with an internet network,
so you can start to converge services. If anything, I would imagine
it should broaden the openness of the communications environment
rather than constrict and lock in a customer. As I say, I am not
an engineer.
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