Select Committee on European Union Seventeenth Report

CHAPTER 8: Conclusions and Recommendations

Is there a need for regulation?

59.  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. (para 17)

Is EU action appropriate?

60.  We agree that there is a clear case for regulation at a Community level. (para 21)

61.  We consider that high roaming prices have an impact on the efficiency of Small and Medium-sized Enterprises (SMEs) and their ability to conduct business when having to operate from abroad. Furthermore the lack of transparency in prices has reduced the consumer's ability to compare costs of roaming across the Single Market and between operators. (para 22)

62.  We are aware of the differences of opinion on the use of Article 95 as the legal base for the Regulation. We expect the Government to give this issue close attention. (para 24)

63.  We feel that the evidence we received on the need for action at the EU level to reduce the cost of roaming is convincing. But we do not want to see excessive regulation that will harm the operation of an otherwise healthy and innovative industry. (para 25)

Wholesale regulation

64.  We believe that wholesale regulation at the European level is an appropriate response to the regulation of roaming within the EU. There are several possible approaches to such regulation. It is important that the approach taken delivers immediate benefits to consumers; encourages market competition; and sends appropriate signals to the market to encourage competition and innovation. (para 29)

65.  We believe that the absolute price cap approach suffers from a number of defects that question its applicability to this issue. We note that the absolute price cap model:

• May remove the incentive for operators to be efficient and innovative, as the market settles on a single pricing point for all wholesale services and there are limited incentives to move away from this point (Q 64);
• Does not provide the flexibility for operators to vary their charges to reflect cost differences. Evidence from the operators suggests that they need the ability to set higher prices at peak times and lower prices when their networks are less congested, thereby sending the appropriate signals to the consumers to maximise efficient use of networks (Q 61); and
• Does not fully reflect the cost structure of the industry. We accept that costs vary across networks and that an absolute cap should not be set so as to lead to wholesale call charges that are below cost. Whilst this places some limitations on the level of an absolute price cap it does not rule out the absolute cap approach, based on the limited evidence available to us on cost differentials for networks across the EU. (para 33)

66.  We are satisfied that national regulators are capable of carrying out the necessary cost studies for this approach to be effectively targeted. (para 35)

67.  We would support an average wholesale cap of approximately 30 eurocents per minute. We believe that wholesale regulation should reflect costs, and as therefore that the cap should be on the 'tougher' end of this spectrum. (para 36)

68.  We are however concerned that the current data supporting the level of wholesale price caps is limited; and that the true cost of wholesale roaming cannot be identified with sufficient accuracy at present. (para 37)

Retail regulation

69.  On balance, we believe that the consumer protection tariff provides the best 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. (para 46)

70.  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. It therefore follows that any CPT should be set at a level that provides this safety net, but allows retail competition below this level. (para 47)

71.  We agree with the German Presidency proposal for the CPT to operate under an 'opt in' model for existing customers and an 'opt out' model for new customers. This approach appears to have received support from many parties, and we endorse it. (para 48)

Data regulation

72.  We believe that the underlying market failure that exists in roaming for voice services is every bit as evident for data services, which have even less price transparency than their voice counterparts. It is thus important that this regulatory initiative should also consider these services. However, there is even less evidence as to whether roaming charges for SMS, MMS and data services are more excessive than for voice services. (para 52)

73.  We agree with the German Presidency that a separate study of SMS, MMS and data roaming should be conducted. As with our previous recommendation to collect more data to support the regulation of voice roaming, this study must be conducted on a consistent pan European basis. We would again suggest that the Commission co-ordinates this study supported by the NRAs. (para 54)

74.  We do not believe that voice regulation should be delayed whilst this study is conducted. We would, however, suggest that if regulation is considered appropriate a similar approach as outlined for the regulation of voice (see above) should be considered. (para 55)

A Sunset clause?

75.  We agree with the suggestions of the German Presidency on the introduction and timing of a review and sunset clause for this regulatory intervention. This must be in tandem with better data collection; as such data will be critical in reviewing the success, or failure, of the Regulation. (para 58)

76.  We make this report to the House for debate.

---