CHAPTER 2: Is there a Need for Regulation?
9. The Commission's Impact Assessment, based
on consultation with stakeholders such as the European Regulators
Group (ERG), national regulatory authorities, national governments,
mobile operators and consumer groups, concluded that roaming prices
charged to consumers, were "unjustifiably high" and
that they had no relation to the cost of roaming born by operators.
10. The substantial, although uneven, price reductions
made by operators since the proposed Regulation was announced
has leant some weight to this argument. We agree with the Commission
that this is an indication of the scope operators had to reduce
roaming charges. (p 47)
11. The Commission also noted that, even though
the wholesale price of roaming had been decreasing steadily over
the past few years, this reduction had not been passed on to a
reduction in the retail cost of roaming. (Q 147)
12. The UK Government support the Commission's
position. Margaret Hodge, Minister of State for Industry and the
Regions, told us that "the market has not worked; there is
market failure and there is purpose for intervention". (Q 108)
13. In their evidence, Ofcom also recognised
that roaming prices were high and identified that high wholesale
prices due to general lack of competition at the wholesale level
is the primary cause for the high cost of roaming charges. The
larger mobile operators had agreed a code of conduct between them,
but this had little effect. (p 26)
14. Some of the smaller operators agreed that
roaming charges are too high. Hutchinson 3G told us that they
agreed with the Commission's position that "roaming per se
was expensive". High wholesale charges between operators
were seen as the main cause of what was described by the witness
as "a problem in the market." (Q 2)
15. Other witnesses like British Telecom and
Meteor (both Mobile Virtual Network Operators[1])
shared the view that the market is not competitive enough and
that wholesale charges set by Mobile Network Operators were too
high.
16. Larger mobile operators like Orange and Vodafone
disagreed and pointed to reductions made in retail prices; up
to 20% in the last two years. However we note that such reductions
were made possible mainly because these companies had a presence
in a large number of Member States and thus were able to offer
cheaper roaming services when a customer was roaming in one of
their sister networks. Such a possibility would not exist if a
customer was using the network of another, non-affiliated, provider.
It was also often the case that cheaper roaming rates were available,
but that the information on how to connect with cheaper local
operators was not made readily available to the consumer.
17. In our view the data used by the Commission
to calculate the cost of roaming is incomplete. Nevertheless,
from the majority of the evidence we have received there is a
circumstantially compelling case for agreeing with the Commission
that operators' profit margins, as far as roaming services are
concerned, are excessively high, compared to the wholesale cost
of roaming for operators.
1 MVNOs do not also provide network services, for which
they rely on other operators. Back
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