European Regulators Group International mobile roaming an INTUG submission to the ERG June 2005

introduction	INTUG first raised the matter of excessive prices for international mobile roaming in the late 1990s. Since then the problems have been compounded by the introduction of excessive pricing for roaming data services and some extremely high prices for pre-paid voice roaming. Europe has lost its lead in mobile telecommunications and seems to be slipping further behind East Asia and North America. INTUG had not intended to initiate a decade of economic controversy, legal wrangling, regulatory uncertainty and expensive lobbying by carriers. It seems that the abuses involved in international mobile roaming are deep rooted, persistent and remarkably difficult to eradicate, perhaps even to explain. These persistent abuses are a significant obstacle to the achievement of the Lisbon goals and the achievement of i2010. They create delays in the adoption of new technologies by businesses and they impose unnecessary burdens in charges for business users and for individual consumers. (See the full text of our presentation to the European Parliament from March 2005). The ERG Common Position on Wholesale International Roaming [ERG(05)20] is remarkably tentative in its analysis and findings. The comment in paragraph 8 that there is a "perception" of high retail tariffs might be thought to be "muted", certainly in the light of the repeated complaints made by INTUG and by the European Parliament. The 2002 electronic communications directives should have meant that the wholesale international roaming market had been analysed in all member states by late 2003. Yet, so far, no market analysis has been completed. Nor is it clear that such an analysis would lead to effective remedies. The failure to eliminate roaming abuses is little short of a disgrace.
retail markets	In the retail market, mobile telephony is purchased as a "bundle" comprising access and SMS, call origination and call termination to which some individuals add mobile Internet access and international mobile roaming. The choice by a customer of a particular domestic tariff brings with it an international roaming tariff. A few operators offer schemes with lower roaming call rates, if the subscriber will pay a monthly surcharge. Business users find roaming to be the least negotiable part of the package, with operators more likely to concede discounts on origination and termination before they will lower roaming rates. Even then, the reductions on roaming are very small or nominal. In contrast to the claims of the operators that they compete or compete fiercely and that they can obtain discounted wholesale prices, users can see no discernible evidence of this on the retail market. The moves by the self-styled alliances appear either incomprehensible or insignificant, having had no effect on the market. A few service providers had appeared briefly on the market then, with rare exceptions, disappeared. The 2005 summer "special" offers are at price levels not seen on the fixed networks for a generation.
MVNOs	One group of market players that is not addressed in the ERG document; they are the Mobile Virtual Network Operators (MVNOs). This omission is unfortunate, since their treatment indicates much about the markets concerned. As we understand it, an operator making an MVNO deal with an MNO in one member state must purchase its international roaming service from the operator providing the home service. Moreover, the MVNO is not permitted to offer a roaming service to visiting foreigners, nor can it purchase its roaming service from another operator, whether in the same country or another. These restrictions appear to arise from the GSM Association's Standard Terms for International Roaming Agreements (STIRA), which limits roaming to licensed operators. It makes the STIRA, prima facie, anti-competitive and a restriction on trade between member states. For most purposes the distinction between an individual on who is a foreign roaming customer and a domestic MVNO customer is very slight indeed. Both are visiting the network, both are being provided with services, yet they are treated and charged very differently. It may be necessary to redefine the wholesale market, if MVNOs are to be included and made part of the remedy. If MVNOs could be made competitive players on these markets, it would help to drive up competition and to drive down prices. In particular if they could combine MVNO deals in several member states they could make retail offers that were without roaming.
market definition	The national market for roaming was given as one to be analysed in Annex I of the Framework Directive (2002/21/EC). This was elaborated in various studies and somewhat modified in the European Commission Recommendation setting out the markets to be analysed. It is with this definition that regulators must now grapple. For all that the operators claim they compete, there is remarkably little evidence that they have worked to reduce retail prices or that they face pressure to do so. Despite the many studies it is far from clear that an economically rational operator has any incentive to reduce wholesale prices. The operators talk in almost mystical terms about the discounts offered on wholesale prices. Yet we can see no evidence these make any difference whatsoever at a retail level. The ERG document sheds little light on the effect of discounts on the wholesale international mobile roaming market. There is something of a mystery concerning the continuation of roaming deals by the mobile operators. It seems that they never give up any roaming agreements. Yet logically, there must be cases where they do not need the incremental coverage provided by a third, fourth or fifth operator, one whom they are otherwise trying to deprive of business, by diverting the traffic elsewhere. The incentive to maintain such contracts is unclear. The scope of the bundle of services included in wholesale international roaming seems to be in doubt. Yet it comprises access and SMS, voice telephony with optional additions of GPRS and EDGE. We are not aware of any operators offering only GPRS or EDGE roaming from a foreign operator. We understand there are technical tests to perform before roaming with GPRS and EDGE are possible. We also suspect that operators prefer to keep roaming with these technologies within their groups and alliances at least in the first instance, though whether for technical or (anti-)competitive reasons is unclear. In the absence of evidence of data-only roaming agreements, the market definition would have to include the full bundle. Operators appear to have separate agreements for UMTS roaming. There is some suggestion of geographic sub-divisions of the national market. Given the reluctance of NRAs to divide other markets on a geographic basis it is interesting that it is contemplated for roaming. However, we are unable to see any evidence for the existence of sub-national markets for wholesale international roaming. It is also worth noting that sometimes operators illegally provide roaming services to individuals in adjoining countries, most of whom have not even left their usual member state.
traffic flows	One of the big changes to the wholesale market is said be the ability of operators to direct traffic to a chosen roaming partner in a given member state. The direction of traffic appears to violate the non-discrimination clause of the GSM Association's STIRA. It favours one operator over others by removing customers already registered or who would otherwise register with that operator. The ERG document is one of many that implies that operators ought to try to compete to reduce prices. Instead of this, operators appear to try to minimise the net outflows of revenues. So that traffic may well be directed not to the cheapest operator but in order to avoid a net outpayment. Prices, or at least discounts, may also be used to contain or limit net outflows. Where operators can balance revenue flows, then the level of the wholesale prices can be ignored. This appears to be the case with a few operators for a handful of countries, but it cannot be achieved more widely. The ERG Common Position does not appear to give sufficient weight to operators behaviour in avoiding net payments for roaming.
avoiding roaming charges	When travelling abroad, mobile customers face a range of strange practices, almost all of which apply even if they remain "loyal" to the brand name of their home operator. These include high or very high charges, difficultiy in finding pricing information, the application of per minute rather than per second billing, different peak and off-peak times, and the conversion of cheap to very expensive on-net calls when two roamers call each other. INTUG has published advice on how best to avoid roaming charges. For example, by using local pre-paid SIM cards, by using calling cards and softphones for Voice over Internet Protocol. For Internet access we advise the use of hotels with broadband access for business travellers and Internet cafés and Wi-Fi hot spots for individuals. Some early adopters are already using Wi-Fi enabled phones to bypass mobile operators. In the fullness of time, but not in the present timeframe, the use of alternatives and especially VoIP will create competitive pressures to reduce roaming charges. However, there is no reason to expect these alternatives to put any significant pressure on the prices of roaming charges in the short or medium term.
conclusions	INTUG welcomes the attention the European Regulators Group (ERG) has given to international mobile roaming. However, the painfully slow progress is evident when comparing the present draft Common Position with the Competition Directorate-General's working document of December 2000. The costs to business and to individuals from the continuing failure to resolve the problem of international mobile roaming charges are considerable and unreasonable. The costs even hurt the MNOs in the longer term. On the basis of the ERG Common Position it seems inevitable that excessive roaming charges will be present on the 2G market for some years to come. Moreover, the failure to resolve the issue, means that such abusive charges are already found on 3G and are likely to persist there. It is important that the mobile telecommunications sector be made competitive in order that it properly support the Lisbon goals and the i2010 objectives. It is impossible to have a correctly functioning single market while international mobile roaming charges remain. By failing to give a lead in the resolution of a problem that was created in Europe, the abuse of roaming charges has been allowed to propagate to other parts of the world. If either the market definition or the market analysis process are not appropriate for the task, then it is imperative that the ERG say so, in order that it be considered in the forthcoming review of the 2002 electronic communications regulatory framework. In the short term, if regulators can do nothing else, then they must warm consumers of the high charges for roaming and the means to contain those costs.
INTUG	INTUG, the International Telecommunications Users Group asbl, is an association of international telecommunications users and national telecommunications users associations, based in Brussels. INTUG was founded in 1974 in Den Haag at the suggestion of Vicomte Etienne Davignon, then a European Commissioner, to act as a single voice for users of telecommunications. The mission of INTUG is to ensure that users have access to affordable, interoperable telecommunications services and that their voice is heard wherever telecommunications policy is decided. For over thirty years INTUG has argued for the introduction of competition in telecommunications and that all users must have access to the benefits of such competition.

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