APPENDIX 5: CORRESPONDENCE WITH THE
MINISTER
EM 11724/06 COM(2006) 382 final - Explanatory
Memorandum on a European Community Document
Proposal for a regulation of the European Parliament
and of the Council on roaming on public mobile networks within
the Community and amending Directive 2002/21/EC on a common regulatory
framework for electronic communications networks and services
and Commission Staff Working Paper—Impact Assessment of
policy options in relation to a Commission proposal for a regulation
of the European Parliament and of the Council on roaming on public
mobile networks within the Community plus a Commission Working
Document—Executive Summary—Impact Assessment thereto.
Submitted by the Department of Trade and Industry
on 12 September 2006.
Subject Matter
Context of Regulation
1. This regulation has been proposed to tackle
what is perceived to be a long-running problem; namely the continuing
high price of international mobile roaming calls. The European
Commission has stated that very high international mobile roaming
charges currently affect at least 147 million EU citizens (37
million tourists and 110 million business customers). "International
roaming" is the ability of mobile phone subscribers to use
their phones whilst travelling abroad. Users can make and receive
calls using the same number as they do at home. For this, a mobile
network operator needs to conclude international roaming agreements
with operators in other countries.
2. The European Commission had previously issued
a number of warnings to mobile phone operators on this subject,
indicating that action would be taken at a European level, if
the high prices, which were perceived as threatening the efficient
operation of the telecommunications single market, were not lowered.
3. These concerns were explicitly expressed in
a series of communications by the European Commission, to a range
of audiences. Further details of these are given in Annex I.
4. In July 1999 the Commission (DG Competition)
launched a Sector Inquiry into mobile roaming charges. The investigation
covered the period from 1997 until the beginning of 2000. In December
2000, the Commission published a "Working Document on the
initial findings of the Sector Inquiry into Mobile Roaming Charges".
5. On the basis of the preliminary findings of
the Sector Inquiry, the Commission decided to carry out two separate
antitrust investigations, into the UK and German WIR (wholesale)
markets and as a result:
(a) In July 2004, the Commission sent two separate
"statements of objections" to two UK mobile network
operators (MNOs), O2 and Vodafone. The objections relate to the
rates that both O2 and Vodafone charged other MNOs for international
roaming at wholesale level. Other MNOs needed to roam on O2's
and Vodafone's UK networks in order to enable their own subscribers
to use their mobile phones while in the UK. The high roaming fees
were deemed to be detrimental to consumers travelling to the UK.
(b) In February 2005, the European Commission
sent two separate 'statements of objections' to the German mobile
network operators (MNOs) T-Mobile and Vodafone because it believed
the companies' practices might be contrary to EC Treaty rules
on abuse of monopoly power (Article 82). In particular, the Commission
challenged the high rates that T-Mobile and Vodafone had charged
other MNOs for international roaming services at wholesale level.
Foreign MNOs pay Inter-Operator-Tariffs (IOTs) for the use of
T-Mobile and Vodafone's German networks when their own subscribers
use their mobile phones when visiting Germany (so-called 'roaming').
It was believed that high IOTs hurt consumers because they were
passed on in full to the MNO's subscribers.
6. (a) In the UK investigation, the Commission
has concluded that each individual UK network constituted, at
least for the period specified (1997/1998-Sept. 2003) a separate
market, where both Vodafone and O2 enjoyed a dominant position
(100% dominance) and that both companies have abused their dominant
position by charging excessive prices within the meaning of art.
82 of the Treaty.
(b) The four proceedings are currently on-going.
7. In an attempt to provide consumers with greater
clarity about comparative roaming prices, the Commission set up
a website about the costs of mobile roaming in Europe in October
2005
(europa.eu.int/information_society/activities/roaming/index_en.htm).
The website offers general information about finding
the best deal for roaming calls, and provides a database of some
of the available tariffs.
8. The European Commission signalled their intention
to legislate in a speech by the Commissioner for Telecommunications
and the Information Society (Vivian Reding) in March 2006. This
was followed by two rounds of consultation earlier in the year
before the issuing of the proposed Regulation and accompanying
Regulatory Impact Assessment on 12 July 2006. Details of responses
to these consultation exercises are given in Annex II-IV.
Main Issues/Detailed Proposals
9. These are outlined in the Roaming Regulation
proposal (COM(2006)382 final). The regulations cover the following
key areas:
i) Wholesale pricing
Article 3 states that a "wholesale" price
cap should be introduced for the charges made between the operator
of the roaming customer and the operator of the network the customer
will use while roaming in the EU. This cap is proposed to be based
on the (so called) termination rate a mobile operator pays when
a call from a customer is made to (i.e. terminates on) another
network. This rate is already regulated within the EU. For calls
made within a country the "cap" would be twice the average
termination rate, whilst it would three times the rate for calls
made back home.
ii) Retail pricing
Article 4 states that a "retail" cap for
calls made abroad should be introduced; which would be 130% of
the maximum wholesale price.
iii) Timing of application of maximum retail
charge limits for regulated roaming calls
Article 5 states that the retail price cap on international
mobile roaming calls should be implemented six months after the
regulation enters into force.
iv) Receiving Party Pays
Article 6 introduces a cap of 130% of the average
termination rate of calls for the cost of receiving calls while
travelling abroad.
v) Transparency of pricing information
Article 7 obliges the home provider to give its roaming
customers information on the costs they will incur on request
and free of charge. In addition, the home provider must provide
new customers with full information about roaming charges when
they take out a subscription for a mobile phone service.
vi) Supervision and enforcement
Articles 8 and 9 state that national regulatory authorities
(in the UK's case, OFCOM) will be responsible for monitoring and
supervising compliance with this regulation within their territory
and for devising appropriate penalties for infringements of it.
vii) Calculation of the average mobile termination
rate
Article 10 explains the way in which this is to be
done—this rate is used for calculating the maximum price
limits in Articles 3 and 6.
viii) Articles 11-16 deal with procedural issues
relating to the effective implementation and review of the Regulation.
Scrutiny History
10. There is no scrutiny history with respect
to this proposed Regulation.
Ministerial Responsibility
11. The Secretary of State for Trade & Industry
is primarily responsible for the telecommunications issues covered
in this report.
Legal and Procedural Issues
12. The legal base for the regulation is Article
95 of the Treaty. This has been the legal base for a number of
measures in the past, which have established a community framework
for regulating electronic communications under which certain price
restrictions on operators with significant market power have been
made. However, we will need to explore the issue of legal base
further in the course of the discussions in Council on the proposed
regulation. The measure is subject to the qualified majority voting
by the Council as well as to the co decision procedure involving
both the Council and the European Parliament. In terms of impact
on UK law, EC regulations are directly applicable and there are
currently no other provisions which cover this area in UK law.
Subsidiarity
13. The European Regulators Group (ERG) stated
that, as a result of the cross-border nature of mobile telecommunications,
it was beyond the competence of each individual Member State to
legislate on the matter of international mobile roaming prices
effectively. Hence they requested that the European Commission
take action on this matter on an EU-wide basis.
Financial Implications
Administrative Costs—National Regulatory
Association (OFCOM)
It should be noted that these are draft assessments
base on the information currently to hand.
14. The additional administrative cost for OFCOM
in fulfilling the monitoring and reporting requirements in the
proposed draft Regulation will not be significant. The current
estimate is that this should be no more than £30,000-£60,000
and perhaps less if retail regulation was avoided through the
adoption of a "sunrise" clause.
Administrative Costs—Mobile Network Operators
(MNOs)
15. Based upon the feedback we have had from
the MNOs in our discussions with them, there should not be a huge
impact upon them from a 'compliance cost' point of view, as they
already gather information for their own purposes.
16. The 'transparency' measures could however
be more costly, again depending on the requirements of the final
regulation (with specific messages to customers about tariffs
every time they switch on their phones being the dearest option),
though again not necessarily worryingly so.
Operating Costs—Mobile Network Operators
(MNOs)
17. As might be expected there is a degree of
dispute between the Commission (in their draft Regulatory Impact
Assessment) and the operators on what the true economic cost of
the proposals is. The Commission—on the basis of what they
say are current roaming revenues of euro8.5 billion—estimate
that the overall benefit of their proposals could represent a
consumer surplus of up to euro6 billion. The operators argue that
this estimate is too simplistic, is based on erroneous revenue
projections, and would in fact vary between euro39 million and
euro187 million. What is clear, however, is that the thrust of
the proposal would benefit consumers who roam while affecting
the revenue (and thus the capitalisation) of the operators.
18. The current proposals (with the current retail
cap proposed in Article 4) could lead to inefficiencies and unintended
'spillover effects' in related markets, as operators seek to recover
the shortfall in their roaming costs in other ways (subscriptions,
restrictions, higher domestic rates etc). Such actions could bear
especially heavily on infrequent roamers (since they will have
least countervailing power) and especially those on pre-pay contracts,
who are often the most disadvantaged in society. Pre-pay customers
are at risk at is easier (than it is for those contracted customers)
for operators to terminate their ability to roam or (if arbitrage
in the EU market for SIMs takes place) to terminate the sale of
SIMs altogether. Arbitrage becomes a potential issue where the
regulated "roaming" price dips below the domestic price
for calls in an EU country.
19. Non-aligned operators (i.e. those without
major networks of their own) are potentially badly affected by
the introduction of retail caps since they are less able to internalise
their costs to the same extent as larger ones (e.g. Vodafone and
Orange).
Some of these may as a result be forced to exit the
roaming market altogether, with a consequence depressive impact
on competition and innovation.
Policy Implications
20. This proposed Regulation has potentially
significant policy implications. Not only does it affect a sector
already subject to Community legislation but it also is proposing
specific, and detailed, retail price controls that would be binding
on all EU mobile operators. We therefore, in our consideration
of the proposal, have to be aware of the precedent it could set,
in addition to the merits, or otherwise, of the measure.
21. The UK position during the run-up to the
issuing of the draft regulation has been that, whilst we fully
support the aim of the regulation, which is to enable consumers
to benefit from lower mobile roaming costs, we have some reservations
about the way in which the Commission has been proposing to achieve
this. The proposal the Commission consulted on in March (paragraph
8 above) was potentially flawed in a number of respects including
the prohibition on charges to a customer receiving calls while
roaming in the UK, and in equating roaming charges (for calls
made) with domestic tariffs.
22 The revised proposal, now the draft Regulation
as outlined above, is more coherent and sensible. We do, however,
have concerns; the two main ones being:
(a) whether the proposed retail price cap for
outgoing calls would have the desired effect, or whether it would
impact upon the cost of other mobile communications services,
which might disadvantage the less affluent sections of the community,
for example, by raising the cost of hand-sets or reducing the
range of services available to pre-pay customers. We therefore
favour (as made clear to the Commission prior to adoption of the
Regulation) the introduction of a "sunrise" clause,
the effect of which would be to only "trigger" the introduction
of the Article 4 (which sets the maximum retail cap) if—after
a certain time period—the operators had not reduced their
call charges to an average level agreed by member States. Clearly
the "trigger" would need to be reviewed on an on-going
basis to ensure operators maintained their reduced prices.
(b) the proposed level of the various price caps
(wholesale, retail and called party charges). There is a comparatively
small "gap" between the wholesale price of a call and
the maximum price that it is currently proposed that mobile network
operators should charge consumers. Although 30% may represent
a reasonable "mark-up", the imposition of the retail
cap as a "maximum" rather than as an "average",
would potentially have the negative affects with respect to arbitrage
and pre-pay contracts as noted above. In the current form the
retail cap would also potentially deter innovation by operators
(for example the successful "Passport" scheme introduced
by Vodafone) which would be prohibited under the proposal.
23. Subject to further inter-departmental and
Ministerial discussions we would intend to negotiate in the Council
along the above lines. The draft Regulation is unlikely to be
agreed, and thus enacted, until the summer of 2007 (during the
German Presidency), although it is likely to be discussed by Ministers
at the Telecoms Council in December.
Consultation
24. As mentioned above, two consultation exercises
(20 February to 22 March 2006, and 3 April to 12 May 2006) were
carried out by the European Commission before the draft of the
proposed regulation was produced. In the course of these DTI consulted
all the UK operators as well as the main trade associations.
25. Links to the results of these two exercises
are given below:
http://europa.eu.int/information_society/activities/roaming/roaming_regulation/first_phase/index_en.htm
http://europa.eu.int/information_society/activities/roaming/roaming_regulation/consultation/index_en.htm
26. The DTI is currently organising a consultation
exercise that will allow UK individuals and organisations to comment
upon the draft regulation. The consultation document will be distributed
to consumer and industry representative organisations, as well
as being placed upon the DTI website for more general access.
The responses, which will be available before the Council discussions
in December, will help determine the position taken in Council
and in our lobbying in the European Parliament.
Regulatory Impact Assessment (RIA)
27. Included in the package of papers is the
Regulatory Impact Assessment (SEC(2006)925) which the Commission
has carried out in relation to the proposed Regulation.
28. A link to this is provided below:
http://europa.eu.int/information_society/activities/roaming/docs/assessment_en.pdf
29. The UK is not in complete agreement with
some aspects of this RIA, and will seek clarification during the
forthcoming negotiations at European level on the regulation.
30. One of our main concerns is of the Commission's
view of a "sunrise" clause being highly complex and
raising significant procedural and legal problems. In our own
view, the sunrise clause offers an opportunity to provide the
assurance that the Commission is seeking that cuts in wholesale
prices will be passed on to consumers in the form of lower retail
prices. The details will clearly need to be worked out with care,
but there does seem to be broad support for this approach with
the European Regulators Group already expressing a preference
for this approach.
Timetable
31. The draft Regulation will be subject to discussion
in the Telecoms Council Working Group from September and in the
European Parliament towards the end of the Year (a timetable has
not yet been established). The Finnish Presidency may seek to
obtain a political consensus at their Ministerial Council in December,
with a final approval likely in June 2007 under the German Presidency.
Margaret Hodge
Minister of State for Industry and the Regions
Department of Trade and Industry
Annex I
Communications from the European Commission on the
subject of International Roaming Prices
a) 11 September 2001
Speech by Mr. Mario Monti, European Commissioner
for Competition Policy on "Defining the boundaries—competition
policy in high tech sectors
"As we found in the Sector Inquiry into roaming
last year, prices for roaming remain high, among other reasons
because of the lack of incentives to reduce prices in the current
system. Indeed, prices have in some cases increased since the
conclusion of the Sector Inquiry. I remain concerned about roaming
markets."
b) 10 December 2004
Commissioner Reding welcomes EU-wide investigation
on cost of using a mobile phone abroad.
EU mobile phone operators were sent a questionnaire
as part of an European Regulators Group (ERG) investigation into
wholesale prices for "international roaming".
c) 11 July 2005
Press release from Commission warning consumers on
cost of using mobile phones abroad and targeting lack of price
transparency.
d) 8 February 2006
Speech by Commissioner Reding to European Regulators
Group—"Towards a true internal market for electronic
communications"
In which she announced that a proposal for a new
Regulation on International Mobile Regulation would appear in
April 2006.
Annex II
The European Commission launched a first phase of
public consultation on international roaming with a call for comments
on the Commission's website from 20 February to 22 March. Responses
were received from:
(a) trade associations and representative bodies—5
(b) national/local/regional government—8
(c) private sector organisations—17
(NB. A detailed list of respondents is provided in
Annex III)
9. The European Commission launched the second
phase of public consultation on international roaming with a call
for comments from 3 April to 12 May. Responses were received from:
(a) trade associations and representative bodies—9
(b) national/local/regional government—17
(c) private sector organisations—23
(NB. A detailed list of respondents is provided in
Annex IV)
Annex III
List of respondents to First Consultation Paper
Responses were received from:
(a) trade associations and representative
bodies (BEUC—the European Consumers Organisation, European
Regulators Group (ERG), European Telecommunications Network Operators'
Association (ETNO), GSM Association, International Telecommunication
Users Group (INTUG))
(b) national/local/regional government
(Comision del Mercado de las Telecomunicaciones, Department of
Communications, Marine and Natural Resources of Ireland, Department
of Enterprise, Trade & Investment of Northern Ireland, Department
of Trade and Industry of United Kingdom, Ministry of Science,
Technology and Innovation of Denmark, Ministry of Transport and
Communications of Norway, Ministry of Transport and Communications
of Finland, Mr. Melchior Wathelet, Chambre des Représentants,
Belgium)
(c) private sector organisations (KPN
Mobile The Netherlands B.V., Meteor Mobile Communications Ltd,
Mobilkom Austria Group, Mobitel, One, Optimus, Orange Group—United
Kingdom, T Mobile, TDC A/S, Telecom e.V., Telefonica, Telenor,
TIM Hellas, Transatel, Travelling Connect B.V., Verband Alternativer
Telekom-Netzbetreiber, Vodafone.
Annex IV
List of respondents to Second Consultation
Responses were received from:
(a) trade associations and representative
bodies (Benelux Transport Concertation, BEUC—the European
Consumers Organisation, European Regulators Group (ERG), European
Telecommunications Network Operators' Association (ETNO), Federation
of Austrian Industry, FiCom—Finnish Federation for Communications
and Teleinformatics, GSM Association, International Telecommunication
Users Group (INTUG), TS—Trading Standards Institute)
(b) national/local/regional government
(Autorités françaises, Bundesministeriums für
Wirtschaft und Technologie, Comision del Mercado de las Telecomunicaciones,
Conseil Général Région Réunion, Czech
Ministry of Informatics, Czech Telecommunication Office, Denmark
National IT and Telecom Agency, Department of Trade and Industry
of United Kingdom, Ministerio de Industria, Turismo y Comercio—España,
Ministry of Communications—Israel, Ministry of Economic
Affairs—the Netherlands, Ministry of Economy—Slovenia,
Ministry of Industry—Sweden, Ministry of Informatics and
Communications—Hungary, Ministry of Transport and Communications
of Norway, Ministry of Transport and Communications of Finland,
P&T Luxembourg.
(c) private sector organisations (Bitkom,
Blueslice Networks, Breko, Colt Telecom Group, Cosmote Group,
Expert Management Consulting—Hungary, KPN Mobile The Netherlands
B.V., Meteor Mobile Communications Ltd, Mobilkom Austria Group,
OnAir, Optimus, Orange Group—United Kingdom, SFR—France,
T Mobile International, TDC—Denmark, Telefonica, Telenor,
Teliasonera, TIM Hellas, Transatel, Verband Alternativer Telekom-Netzbetreiber,
Vodafone Group Services Ltd, Wind Telecomunicazioni.
Letter from Lord Grenfell, Chairman of the Select
Committee on the European Union to the Rt Hon Margaret Hodge MBE MP,
Minister of State for Industry and the Regions, Department of
Trade and Industry
11724/06 COM(2006) 382 FINAL + ADD1 SEC(2006)
925 + ADD2 SEC(2006) 926—Proposal for a regulation of the
European Parliament and of the Council on roaming on public mobile
networks within the Community and amending Directive 2002/21/EC
on a common regulatory framework for electronic communications
networks and services and Commission Staff Working Paper—Impact
Assessment of policy options in relation to a Commission proposal
for a regulation of the European Parliament and of the Council
on roaming on public mobile networks within the Community plus
a Commission Working Document—Executive Summary—Impact
Assessment thereto
Sub-Committee B considered this document, and your
Explanatory Memorandum, at its Meeting on 16 October 2006.
We share your concern that any action by the Commission
in price capping does not have any unintended "spill-over"
consequences for consumers using other mobile services. We recognise
that this is an issue of great concern to the public, and will
consider conducting an inquiry into the proposals in early 2007.
In the mean time, we would be grateful if you kept us informed
of any progress in negotiations, particularly regarding the Government's
favoured alternative of a "sunrise clause".
We will maintain scrutiny on this document at this
stage.
17 October 2006
Letter from Margaret Hodge MP to Lord Grenfell
11724/06 COM (2006) 382 final + ADD1 SEC (2006)
925 + ADD 2 SEC(2006) 926—Proposal for a Regulation on International
Roaming
Thank you very much for your letter of 17th
October on the EM 11724/06.
I am very grateful for your timely consideration
of the Explanatory Memorandum on the Commission's proposed Roaming
Regulation and for your recognition of the importance of this
dossier. I will certainly be happy to keep you informed of progress
on the negotiations and on how our ideas (including the "sunrise"
provision) are being received in Brussels.
At present the dossier is being considered in the
Telecoms working group (under the Finnish Presidency) and has
started its process through the European Parliament with initial
"exchanges of views" in the ITRE and IMCO Committees
planned for later in the month. At the Telecoms Council in December,
at which I will represent the Government, we expect a further
general discussion on the Commission text, with perhaps some questions
posed by the Presidency. The EP timetable, with a first reading
in plenary not expected until next May, has ruled out any form
of political agreement this December. It also remains uncertain
whether sufficient progress on agreeing a text could be made for
there to be an agreement at the June Council under the German
Presidency.
On the substance, the discussion in Council has tended
to concentrate on three main aspects of the proposal; wholesale
regulation (namely the type and level of "cap" on prices
paid between operators); retail regulation (whether there should
be a retail cap and how it should be calculated) and transparency
(information available on pricing to consumers). The UK, while
supporting the need for a robust wholesale price cap and greater
price transparency, has duly tabled its retail "sunrise proposal"
(appended to this letter) in the working group where it received
welcome support from a number of delegations. Basically we believe
regulated wholesale prices should deliver reduced retail prices
without the need for formal controls.
We are, of course, furthering the UK position by
liaising with other member States and have already started lobbying
MEPs. I will forward a briefing note to you when this is finalised.
We have also recently launched a consultation of the proposed
Regulation, which I also attach for your information.
I hope the above allows you and your Committee an
oversight of the progress on this important dossier. I will, subject
to your wishes, report further after the December Council when
the intentions of the German Presidency on handling the Proposal
may become clearer.
13 November 2006
Letter from Lord Grenfell to Margaret Hodge MP
11724/06 COM(2006) 382 final +ADD1 SEC(2006) 925
+ADD2 SEC(2006) 926: Proposal for a Regulation on International
Roaming
Thank you for your letter of 13 November 2006. Sub-Committee
B considered your letter at its meeting on 11 December.
We are grateful to you for keeping us informed on
the progress of negotiations in the Council and discussions in
the European parliament. We look forward to receiving further
updates from you on the progress of the negotiations in the near
future.
Have you any estimate of the number of EU consumers
who avoid roaming charges by purchasing SIM cards locally in another
Member State when they travel?
Sub-Committee B is considering holding an inquiry
into the proposals in early 2007 and will maintain scrutiny on
the document at this stage.
12 December 2006
Letter from Margaret Hodge MP to Lord Grenfell
11724/06 COM(2006) 382 final + ADD1 SEC(2006)
925 + ADD2 SEC(2006) 926—Proposal for a Regulation on International
Roaming
Thank you very much for your letter of 12th December
on this subject in response to mine of the 13th November.
In my earlier letter I agreed to update the Committee
on developments on the dossier and, in particular, on the discussions
that took place at the EU Telecoms Council on 11th December. I
hope this brief note will suffice.
Essentially the Council was an opportunity for the
Presidency to report on the deliberations that had taken place
under their watch and to seek views of member States on the detail
of the Commission proposal. It was also an opportunity to consider
how a compromise could be found that would enable the Council
and Parliament to agree the dossier by the end of the forthcoming
German Presidency.
The debate was both constructive and informative.
It gave me an opportunity to outline the UK view and to back France
in setting out a number of high-level principles on which an agreement
should be based. I attach the paper that I and my French counterpart
(Francois Loos) sent to member States and the Commission just
before the Council. Essentially our position is to agree with
the Commission for a substantial and urgent reduction in roaming
prices but to manage the process in such a way that neither undermines
competition nor stifles innovation.
I am glad to report that the joint approach gained
considerable support from other member States, and may well be
taken up (at least to an extent) by Germany in a possible Presidency
text for next year.
I am confident that there is sufficient agreement
in the Council for an acceptable solution to be found, though
this will to some extent be determined by the views of the Parliament
which will probably not become clear until around Easter next
year. I will, of course, keep you up to date with developments.
Finally, your letter raised an interesting question
concerning SIM cards being purchased locally to avoid roaming
charges; a practice that we know is relatively commonplace. We
will endeavour to provide you with details on the extent of this
practice as soon as possible.
19 December 2006
ANNEX
Principles on Roaming
France and United Kingdom believe that the following
principles should form the basis of an efficient, balanced, consumer
protective regulation on roaming:
(1) Comprehensive information to the consumer
on the retails tariffs. This is in line with the proposal of the
Commission.
(2) A single price cap of the wholesale average
tariff between any two operators based on a multiple of the average
European termination rate enforced by National Regulatory Authorities.
The Commission proposed different price caps for the wholesale
tariffs depending on the type of call (local call when roaming
or international call). Our approach ensures a price reduction
in the wholesale market, a protection for small operators and
is easy for NRAs to enforce.
(3) A single control on average retail charges,
covering all intra-Europe roaming calls made and received, defined
in order to cover the retail costs of the operators. This will
be applied only to operators which have not voluntarily reduced
their average prices below an agreed cap within 6 months and enforced
by National Regulatory Authorities. The Commission proposed here
different price caps based on the type of call and linked the
different price caps for wholesale tariffs; we believe a single
cap is simpler. It would be based on the average retail prices
allowing competition in the offers between operators and better
offers for consumers.
(4) A "Consumer protection tariff"
for those customers who want, as a free option, to subscribe.
This option will allow customers who do not want to choose from
among the wide scope of commercial offers, that no minute will
be charged to them, when roaming, above a certain price level.
(5) A right for NRAs to exercise discretion and
set the national retail price cap below the European price cap.
In exercising such discretion, the NRA shall take into account
the specific situation of the national market.
Further discussions in the Council and the Parliament
will be necessary to define the adequate price cap levels and
protection tariff.
Letter from Lord Grenfell to Margaret Hodge MP
11724/06 COM(2006) 382 final +ADD1 SEC(2006) 925
+ADD2 SEC(2006) 926: Proposal for a Regulation on International
Roaming
Thank you for your letter of 19 December 2006, replying
to my letter of 12 December. Sub-Committee B considered your letter
at its meeting on 15 January 2007.
We were grateful to you for your update on this issue,
which will now be the subject of a short inquiry by Sub-Committee
B. We look forward to hearing your views in more detail in person
at a convenient point in the coming months.
We note the joint UK and French compromise proposal,
and agree that it is very important that any measures to reduce
roaming charges do not have the effect of stifling competition
or innovation in the market. We await with interest the possible
German Presidency compromise text which you expect. We would be
grateful to you if you could send us a copy of such a text as
and when it became available, as well as for an update on developments
in the European Parliament. We also look forward to receiving
details of the Government's estimate of the extent of the practice
of the local purchasing of SIM cards to avoid the charges.
We will maintain scrutiny on the draft Regulation
at this stage.
16 January 2007
Letter from Lord Grenfell to Margaret Hodge MP
Inquiry into the Commission's proposed caps on
mobile roaming charges: Emerging Conclusions
We understand that an informal Telecoms Council meeting
will take place on 15 March, at which there will be an "exchange
of views" on the draft Regulation (11724/06) to introduce
price caps on mobile roaming charges in the EU.
As you are aware, the EU Internal Market Committee
(Sub-Committee B) has just completed taking evidence for its inquiry
into the Commission's proposal. The Committee were grateful to
you for the evidence which you provided on 26 February, and
will produce a full report shortly. In the meantime, we felt that
we should write to you, ahead of the informal Council meeting,
with our emerging conclusions, based on the evidence we have received.
The first issue we have found it necessary to address
is whether there is a problem with the current state of mobile
roaming charges. Are these charges, in the words of Commissioner
Reding, "unjustifiably high"; and if so, is the market
alone capable of remedying this, or is a Community-level intervention
required?
In attempting to answer this question, we were struck
by the lack of coherent data on the real cost of roaming. The
evidence provided to us does show that Mobile Termination Rates
quoted to us are considerably higher than roaming costs. Whilst
this evidence is circumstantially compelling, it is by no means
comprehensive proof of unjustifiably high charges as it does not
capture the full costs of roaming. However further weight to the
argument that roaming charges were higher than they needed to
be is provided by an analysis of the actions of the telecoms industry
since the threat of this Regulation. Some price falls have been
observed but these changes are not uniform for all customers on
all networks. The industry is a changing scene and there is a
code of practice agreement in place, although it is unclear how
effective this has been so far. It certainly appears from some
of the larger price reductions that the operators' margins of
profit were much larger than originally understood.
Based on the evidence we have received, we conclude
that there is a need for some degree of legislation in the market
in order to achieve a reduction in the cost of roaming that would
benefit consumers but not hurt the industry. The nature, spectrum
and duration of the legislation are discussed below.
We recognise that roaming is fundamentally of a cross-border
nature. By definition, it involves operators and consumers in
more than one Member State. In this context National Regulators
face inherent difficulties dealing individually with the cost
of roaming and adopting and implementing measures, under their
own remit, to reduce it. Furthermore, there seems to be agreement
that the cost of roaming constitutes a barrier to the functioning
of the Single Market both in terms of the operation of the mobile
telephony market but also on the extra costs incurred on SMEs
using mobile telephony services. A co-ordinated approach at Community
level is thus required, albeit one that takes into consideration
different geographical, demographic and technical characteristics
in each Member State.
We are aware that the adequacy of Article 95 as a
legal base for the proposed Regulation has been contested by Orange
and Vodaphone[2]. There
are serious arguments which have to be addressed and we hope that
these are matters to which the Government are giving the closest
attention.
As matters currently stand, we have identified four
key areas on which we would like to comment: wholesale regulation;
retail regulation; the proposal for a sunset clause; and data
regulation.
We strongly support the need for wholesale regulation.
We believe that an approach based on average Mobile Termination
Rates is the most straightforward option; and there appears to
be a general consensus that the German Presidency's suggested
wholesale cap of 30 eurocents per minute is a sensible level,
and one which will be workable for the industry.
We are less clear on the case for retail regulation.
We have yet to receive convincing evidence that the combination
of wholesale regulation with effective retail competition will
not deliver the desired benefits to the consumer. We believe that,
rather than introduce full retail regulation at present, it would
be more appropriate to introduce a consumer protection tariff,
set at an absolute level to protect the most vulnerable consumers,
those who travel infrequently. We support the German Presidency
proposal that such a tariff be based on an opt-in model for existing
customers, and an opt-out model for new customers.
We believe that it would only be wise to introduce
wider retail regulation at a later period, if there had not been
a sufficient reduction in general roaming charges as a result
of the combination of wholesale regulation and the introduction
of a consumer protection tariff. This would, in effect, be a return
to the 'sunrise clause' advocated by the United Kingdom and France
in the December Council.
We are of the view that the Regulation should be
time limited in some way, and that it would be appropriate for
the Regulation to expire through a 'sunset clause' in three years
time unless a convincing case is made for it remaining in place.
This case would have to be supported by the collection and analysis
of comprehensive data on roaming costs and prices across the EU.
This work would have to be carried out by National Regulatory
Authorities, along the lines of consistent criteria set by the
Commission.
We are aware that political support for both the
sunrise and sunset clause appears to have waned in the most recent
negotiations on the draft Regulation, but would endorse firmly
their continued consideration.
Finally, the majority of our witnesses focussed on
the issue of voice roaming. Anecdotal evidence appears to suggest
that, if there are currently market abuses above costs, they exist
to a greater degree in the data market. There is at present insufficient
hard evidence on the costs of data roaming, and we believe that
uncovering the costs should be a priority in the cost study mentioned
above. Data is likely to become an ever more important sector
of the market, and once the research has been carried out, the
Commission must consider the extension of regulation to this class
of products.
We would welcome a detailed report from you on the
discussions in the informal Council on 15 March, and we will be
writing in similar terms to Commissioner Reding.
8 March 2007
2 We were sent two opinions on this issue, one from
Sir Francis Jacobs QC and David Murray, dated 16 October
2006, the second from Claus-Dieter Ehlerman, dated 27 March 2006. Back
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