What is retail regulation and
how could it work?
40. The various proposals made for the retail
regulation of roaming have focused on two overall regulatory mechanisms:
full retail regulation and a consumer protection tariff (CPT).
41. The majority of the proposals made to date
for full retail regulation have focused on absolute price caps
based on some form of mark up on purely domestic Mobile Termination
Rates and/or the wholesale regulatory tariff applied. These approaches
are relatively simple in construction and seek to impose a consistent
retail price per minute for all mobile roaming calls within the
EU.
42. As noted above, we doubt whether an appropriate
price can be set, given the very limited information on the true
costs of regulation and the rather blunt averaging models proposed
by the Commission. We note that retail regulation needs to be
set at the correct level lest it have either only a limited impact
on prices paid by consumers; or remove the incentives for operators
to set charges at anything other than the maximum level.
43. We note Ofcom's conclusions that "setting
overly restrictive retail controls will not achieve the best outcome
for consumers over the longer term, as tariff innovation and differentiation
could be severely constrained." (p 10)
44. The 'Anglo-French' proposals sought to address
some of these concerns by proposing an average retail tariff regulatory
model. In this approach, the average retail charge would be calculated
by dividing the total retail roaming revenues received by an operator
from its subscribers (for calls made and received whilst roaming)
by the total number of retail roaming minutes used (for making
and receiving calls) by subscribers, over the period specified.
This average retail charge would need to be below a target average
cap level. Witnesses in favour of absolute price caps suggested
that this approach would be too complicated and require the NRAs
to collect considerable levels of information. (Q 147)
45. Witnesses favoured no detailed retail price
cap but a higher safety net in the form of the CPT.
46. On balance, we believe that this structure
provides a better form for any retail intervention, as it allows
operators to innovate and compete through the differentiation
of their own tariffs and offers, as well as from those of their
competitors. However, we also stress the importance of base information
upon which to set the appropriate cap.
47. The CPT is proposed to be an absolute price
capped tariff which would be available to all customers. We
believe that a CPT is a logical regulatory instrument in the absence
of full retail regulation, i.e. setting a 'safety net' tariff
which would protect the most vulnerable consumers. The most
obvious application of a CPT is to a consumer who only travels
internationally on limited occasions and is seeking certainty
in his or her call costs for these periods. It therefore follows
that any CPT should be set at a level that provides this safety
net, but allows retail competition below this level.
48. There has also been debate over how consumers
would be able to select a CPT. The Commission proposes an 'opt
out' model, where all consumers would automatically have the CPT
applied unless they chose to opt out of this tariff (QQ 147,
154). Operators and the Government have suggested an 'opt in'
model, where consumers would need to select to take the tariff
(Q 121). Whilst the 'opt out' approach provides the maximum
consumer protection, it is also likely to lead to some consumers
facing higher tariffs as they inadvertently choose not to take
a lower competitive tariff (assuming no retail regulation) and
greater costs for operators. The Presidency has combined these
two options and proposed an 'opt in' model for existing customers
and an 'opt out' model for new customers (QQ 236, 239). This
approach appears to have received support from many parties, and
we endorse it.
