EU publishes final proposal on roaming

Stefano Nicoletti, Senior Analyst

On 13 July 2006, the EU published the final draft of its proposed regulation on international roaming.

The most important elements of the EU's final proposal on roaming remain unchanged from the previous draft version released in early June 2006:

• wholesale roaming charges for local/national calls will be capped at twice the average EU mobile termination rate (about €0.24 per minute*)
• wholesale roaming charges for international calls will be capped at three times the average EU mobile termination rate (about €0.36 per minute*)
• a maximum price limit is applicable at retail level, set at 130% of the aforementioned wholesale charges (again roughly €0.31 per minute for national and €0.47 per minute for international*)

*the figures provided here are only indicative and are based on our current benchmark of mobile termination in the EU 25 countries, where the average mobile termination rate is €0.12 per minute (this average is calculated using a similar methodology to that specified in annex II of the proposal).

The two most significant changes are the re-introduction of inbound roaming fees, which were removed in the previous version of the proposal, and the introduction of a six-month delay for the application of the retail price cap.

Interestingly, the regulation also introduces transparency measures to make sure roamers will be better informed of the costs they will face, and encourages national regulatory authorities to closely monitor SMS and MMS charges in the future. All measures are subject to review two years after they come into force.

The two most relevant changes are in the favour of the mobile industry, and probably represent the pay-off of intense lobbying activity in this last month prior to the commission's vote. The six-month delay for the retail regulation may mean that consumers only benefit from the reductions from September 2007, thereby giving operators another summer in which to cash in on international tourists. However, as the commission rightly states in its press release, a large chunk of roaming business is represented by business users; we have seen studies reporting telecoms bills where roaming charges accounted for up to 60% of total. This is clearly a significant burden, particularly for small enterprises.

Despite activism within the industry and a few last tweaks to the bill, it still mandates intrusive retail rates regulation. The GSMA has expressed its disappointment over a measure that it sees as damaging the consumer interests: 'The price cap would prevent mobile operators from providing bundles of roaming minutes or other innovative tariff packages, which appeal to specific groups of customers and are an important feature of today's vibrant mobile marketplace.'

Nonetheless, the newly introduced 'sunset' clause, which will force the Commission to review the regulation two years after it comes into force, and the initial six months of 'retail price freedom' will be good opportunities for the mobile industry to demonstrate that competition is really working to the advantage of end users and enterprises through spontaneous price reductions. We believe this could convince the EU to withdraw at least the retail regulation at the next review.

Stefano is the Service Manager for the Regulation@Ovum advisory service. He is responsible for managing this service, which provides interconnect and regulation advice to more than 40 clients around the world. Stefano also contributes to projects in the area of economic regulation and interconnection.