Roaming Rules Blamed for Increased Rates for Non-European Operators

Regulations adopted in 2007 and expanded in 2009 set retail and wholesale limits on the prices of sending text messages, making voice calls and surfing the Internet while roaming in Europe but outside their home countries. The lower prices haven’t increased traffic enough to recoup the revenue lost, however, and indications are that European operators are increasing the wholesale rates charged non-EU operators, said Sean Kennedy, Mott MacDonald principal consultant on policy and regulation.

The inter-operator tariff - the wholesale charge -- kicks in when customers use carriers outside their own countries to call another country, Kennedy said. The tariff accounts for 60 to 70 percent of the retail charge to those who roam, he said. The EU regulations may be having a “waterbed effect,” Kennedy said: Higher rates outside the EU may eventually be passed through to consumers through steeper prices to roam inside the Union from outside, he said.

Kennedy stressed that it’s difficult to measure the regulations’ effects without knowing the wholesale roaming rates that operators negotiate between themselves. The information is commercially sensitive and not publicly available. But there’s anecdotal evidence that non-EU operators are getting increased charges or decreased from EU operators for roaming, or both, he said. This probably will have ripple effects on customers who roam into the EU, he said. European regulations have done wonders for Europe, but roaming outside remains expensive, said Nagpal.

The EC dismissed claims that roaming traffic hasn’t increased. A January report by European telecommunications regulators said the volume of outgoing roaming telephone calls jumped 16 percent in the year to Q2 2008, and calls received rose 30 percent, said the spokesman for Viviane Reding, the information society and media commissioner. And the EC’s latest report on Europe’s single telecom market shows that mobile prices continue to fall across Europe, consumers paying more than one-third less than five years ago, he said. Customers probably will use services more as they learn of the reduced prices, increasing mobile operators’ revenue, he said.

Information from the European Regulators Group shows that the roaming regulations haven’t hurt operators outside the EU and that the prices consumers pay to roam outside Europe haven’t changed significantly, the spokesman said. The caps aren’t based on costs, he said: They're meant to be high enough to allow competition to develop below them. The ceilings allow providers to cover their costs and make a reasonable profit, he said. “The commission sees no need for European operators to raise their prices for other services, such as prices for roaming in non-EU countries, in order to compensate for price reductions for roaming in the EU,” he said.

‘Copycat’ Rules Coming?

Moves are afoot elsewhere for regional regulations on mobile roaming prices, Kennedy said. A South American roaming agreement is being developed by the Initiative for the Integration of Regional Infrastructure South America. The Communications Regulators’ Association of Southern Africa in May sought consultants for a regulatory impact assessment on domestic and foreign roaming.

The Arab Regulators’ Network is preparing a memorandum of understanding on international roaming rates among Arab countries. The proposal seeks to cap wholesale and retail roaming rates and require operators to make charges clearer to consumers. Regional rules are needed because of the region’s single language, culture, social values and roots, the Bahrain Telecommunications Regulatory Authority said in a presentation.

Roamers are paying “many times more” than local users, and Arab operators increasingly report that European operators are increasing wholesale prices to them “to recoup losses in revenues caused by the European regulation,” the authority said. Arab countries aren’t considering the EU model because of intra-regional differences in national regulatory frameworks, vast differences in development levels, differing market situations and the undesirability of “'cut-and-paste’ political solutions,” the authority said.

The EC is aware that third countries are interested in extending the benefits of the roaming rules outside the EU, the spokesman said. He stressed that the roaming regulation “is an instrument of the EU’s internal market that only applies” within the Union. But, he added, there’s nothing to prevent operators from the EU and third countries from negotiating commercial roaming rates that extend the benefits of the regulations, “and the commission would very much welcome such an approach.”

Europe is a “unique market in its breadth and nature” and the GSM Association wouldn’t recommend “copycat” regulation for other territories, it said. “There is no one size fits all regulation, and we would encourage regulators and policy makers to understand the individual issues carefully,” it said.

Nowhere else in the world is there a structure like Europe’s for enforcing similar roaming rules, Nagpal said. Many regional organizations see the advantages of Europe’s regime and perhaps if all the regulators in an area cooperate they can achieve something like it, he said. It might not have happened even in Europe without a strong push by Reding, he added.

The economic justification for regulatory intervention in the mobile roaming market is weak, because roaming can be seen as part of a broader bundle of services in a fiercely competitive retail market, said Kennedy. Some operators believe that the market was competitive before the regulation and its introduction and recent extension are killing their incentive to compete, invest and innovate, he said. The issue should certainly be on the agenda of operators outside Europe, Nagpal said.