Brussels, 12 July 2006
What is international mobile roaming?
International roaming refers to the ability to use your mobile phone when abroad on holiday or on business. Because your home network operator does not provide service in the country in which you are travelling, when you make or receive a call abroad, you are using the network of an operator in that country, i.e. you are ‘roaming’ on the foreign network. For providing this service, the foreign network operator will charge a wholesale rate to your home operator who will, in turn, charge you a retail price for using your mobile phone abroad.
Who stands to benefit from reduced prices?
Today, at least 147 million EU citizens are “roaming” – that is to say using their mobile phones while visiting another EU country. Of these, 110 million are business customers, while 37 million are travelling for leisure purposes. Consumer groups believe that the benefits of lower roaming charges would be welcomed by a very wide cross-section of consumers, including small and medium-sized enterprises (SMEs).
Are international mobile roaming charges too high?
Average retail prices for calls made whilst roaming are roughly 4 times higher than the equivalent prices for domestic mobile calls. These differences in price cannot be explained by differences in cost incurred by the operators.
Savings made over recent years by operators at the wholesale level of roaming costs have, in general, not been passed on to the retail consumer. See http://erg.eu.int/doc/whatsnew/reg_intens_wrk_intl_roaming_mtg.pdf
A further problem with roaming is that today, if you receive a call while roaming, you have to pay a substantial price for this. Operators have been charging prices 300% or 400% higher than the cost of making these calls. At wholesale level, there are no agreed inter-operator tariffs for such “received calls” so operators could have decreased the prices without the need to change any international agreements.
Consumers also often lack clear information on the charges they will pay whilst roaming. The Commission and some national regulatory authorities (followed recently by the GSM Association) have attempted to address the transparency problem by creating websites showing roaming prices, but these initiatives have not led to sufficient improvements.
What does the proposed regulation do to reduce mobile roaming charges?
In the wholesale market, the proposed regulation establishes a price cap on the charges that one operator applies to another, for handling roaming calls.
The regulation also states that the mark-up used to determine retail prices that are actually charged to consumers for making and receiving a call while roaming may not exceed 30%.
Operators are of course free to compete beneath the wholesale cap plus retail mark-up ceiling, by charging each other less for carrying calls, reducing their retail mark-up or differentiating the packages of services that they offer according to consumer demand.
The proposed regulation would also enhance price transparency, which has been a considerable problem with roaming. It obliges mobile service providers to give personalised information on retail roaming charges to their roaming customers – on request and free of charge. Each customer may choose whether to receive the information by means of an SMS (short message service) or orally, over their mobile telephone. Moreover, a customer subscribing to an operator will be able to receive detailed information on roaming and operators will have to keep the subscriber informed periodically on roaming charges.
Where will the proposed regulation apply, and when?
In general, a European regulation applies equally in all 25 Member States. It comes into effect as soon as it is adopted by the European Parliament and the Council of Ministers and published in the Official Journal of the European Union; it requires no further transposition into national law.
The Commission hopes that the new EU regulation will be approved by the European Parliament and the Council of Ministers by summer 2007. As an EU regulation enters into force as soon as published in the EU’s Official Journal and is then directly applicable in all EU Member States, it can be expected that the effects of the new EU regulation will already become visible in summer 2007 – and some operators may even choose to anticipate these effects to profit from the “first mover advantage” on the market to win new customers.
Since the EU regulation on mobile roaming is an internal market measure with relevance for the European Economic Area, it can be expected that it will also be extended to Iceland, Liechtenstein and Norway in the not too distant future.
The proposed regulation appears to apply only to voice telephony. Do you have any plans to counter price hikes for other international roaming services, such as SMS or data?
The regulation does indeed apply only to international roaming for voice services. During the public consultation process, only a few respondents identified similar issues of unjustifiably high prices with data services such as SMS and MMS.
Also national regulatory authorities have not to date called on the Commission to address potential problems of unjustifiably high prices for SMS and MMS at EU level. For MMS services, they are in such an early stage of development that for the moment, it is difficult to foresee whether the roaming prices will follow those of voice calls.
The new EU regulation would require national regulators to closely monitor developments in retail and wholesale charges for the provision of voice short message services (SMS) and Multimedia message services (MMS) in the future. This should allow national regulators and/or the EU to address any problematic developments in the future in case operators should prove unable or unwilling to solve them with determined self-regulatory initiatives.
What is the average reduction in charges that you expect to see in the sample tariffs on your web site six months from now?
The proposed EU regulation does not fix an ideal price for roaming charges, but applies a method that ensures, through price ceilings, that mobile roaming charges are not unjustifiably high than the use of the mobile phone at home.
If the EU regulation entered into force today and became fully effective, the results of this method for the consumer would be as follows:
Operators are of course free to establish prices (or to offer innovative roaming packages) that are lower than these caps, but they may not exceed them.
Is there not a danger that the new EU regulation will on the one hand bring down international roaming prices, but on the other lead to higher domestic prices for mobile communications? Will operators not seek to claw back lost profits elsewhere?
In the Commission’s assessment, raising domestic mobile call prices to offset profit losses is very unlikely to be a realistic, commercially viable, option. Competition among operators on most national mobile markets is strong and has been further strengthened by the arrival of mobile virtual network operators in almost all EU countries. Competition is generally forcing prices down on national markets. In these circumstances, a company that raised domestic prices against this trend would very likely lose customers and eventually kick itself out of the market.
The effectiveness of competition for national mobile markets is monitored by the national regulators, who have the power to “remedy” any abuse of significant market power or any other failure within the national mobile markets. The Commission will of course support national authorities in closely monitoring market developments following the entry into force of the new EU regulation.
The “claw back” argument was used by the banking industry when in 2001 the EU used an EU regulation to eliminate the price difference between domestic and cross-border bank transfers. However, studies today show that charges for domestic bank transfers were not raised following the entry into force of the EU regulation.
See for example
Did the Commission assess the impact of the new EU regulation?
As required by its “better regulation” principles, the Commission has published on 12 July one of its most comprehensive impact assessment reports, in support of its proposed regulation on Roaming. This may be found at
Did the Commission listen to the public when preparing the EU roaming regulation?
The Commission conducted a public consultation on the subject of roaming from 28 February to 22 March and 3 April to 12 May 2006. Even before this consultation, the Commission had been gathering, since October 2005, information and public responses via a website dedicated only to the subject of roaming within the EU.
Did the Commission consider self-regulation or co-regulation?
All possible options were considered, as a part of the Commission’s impact assessment. To give a brief summary: the Commission has not received any general industry proposals for self-regulation. In the case of international roaming, given that individual regulators have been unable to find a solution at a national level, and that some operators do not even acknowledge that high roaming prices are a problem, also co-regulation is unlikely to provide an effective solution.
Will the regulation address the wholesale market, the retail market or a combination of the two?
Even though in general, the Commission prefers not to regulate retail markets, the EU regulation proposed on 12 July addresses both wholesale and retail markets, due the exceptional nature of the roaming market and its atypical development. The Commission’s assessment is that market forces are still insufficient to ensure that most savings at wholesale level are passed on to consumers in the retail market. Retail regulation will however become effective only after a final transition phase of 6 months.
There is evidence that retail customers are not benefiting from wholesale savings. For example, larger operators have been able to negotiate lower wholesale rates by “steering” their roaming traffic towards pan-European operators/alliances. Figures provided by these operators indicate that the average wholesale charge (Inter-Operator Tariff or IOT) that they pay is at least 38% lower than that which charges to operators who are not within their group. Despite this significant cost saving, their average retail prices for roaming have remained high. The major operators are thus not passing the benefits of lower wholesale tariffs on to many of their customers, who continue to pay very high prices for international roaming: well in excess of €1 per minute. See also the analysis of the European Regulators Group at http://erg.eu.int/doc/whatsnew/reg_intens_wrk_intl_roaming_mtg.pdf.
Retail regulation ensures that savings are passed on to consumers and that consumers will actually benefit from the new EU regulation.
What is the European Home Market Approach underlying the Commission’s proposed Regulation of 12 July to cap mobile roaming within the EU?
The general philosophy of the “European home market approach” incorporated in the Commission’s proposed regulation of 12 July – which fine-tunes and develops the Commission’s thinking on roaming on the basis of the results of the public consultation and an extensive economic impact assessment –is that consumers should have essentially the same experience as at home, no matter where they may be (in the European Union) when making a mobile call. The mechanism for achieving this is by price capping the wholesale charges for calls made whilst roaming, and putting a 30% ceiling on retail mark-ups for making and receiving calls whilst roaming.
One big advantage of the European home market approach over other regulatory approaches is that it is relatively easy to monitor and implement, as it relies on information already being provided by the operators to the regulators.
What will be the overall economic affects of the proposed EU regulation?
The proposed regulation is likely to provide a significant economic boost to businesses, particularly small and medium sized enterprises, to those persons living close to national borders who are frequently roaming to other networks and more affluent leisure customers who also roam frequently.
Taking the estimates provided by the GSM Association of mobile operators, it can be seen that roaming prices have a direct effect on at least 147 million EU citizens or one third of Europe’s population.
It can also be seen that given the scope that still exists for further enhancing roaming penetration (roughly half of all customers travel abroad but only a third uses roaming services), there is potential for a substantial increase in the use of roaming services, once prices fall – and thus scope for new revenues for those mobile operators who move first and offer attractive roaming services which are even better than will be required by the new EU regulation.
Will consumers already benefit from the new EU regulation already during this year’s summer holidays?
Not directly. The regulation must first be approved by the European Parliament and Council. It can be expected to take effect, at the earliest, in summer 2007. However, operators have already started to respond to the prospect of regulation by agreeing to reduce or eliminate the wholesale rates that they charge each other in the months to come. If they do this, and use the savings to reduce retail prices, then at least some consumers will no doubt start benefiting already from the EU regulation before it comes into force.
This depends very much on everybody’s individual mobile phone usage and on the level of roaming charges consumers currently experience under their operator’s contract.
For calling home from abroad, consumer savings will be the greatest in countries where operators impose a very high wholesale charge. We expect these savings to be of up to 70% for making calls.
Altogether, we expect that consumers will pay around €5 billion less than they do today under the new EU regulation.
What economic impact you expect the new EU regulation to have on business? Don’t you fear you may ruin many mobile companies?
The European mobile roaming market is estimated to be €8.5 billion. Its true size is not easy to ascertain, as mobile operators are not especially forthcoming with figures.
It is fair to assume that the enormous profits that mobile operators have made from the roaming customers in recent years will be substantially reduced by the new EU regulation. However, much of this profit is made by some operators on the back of other, mostly smaller, companies. Wholesale regulation to bring down inter-operators tariffs will reduce the profits only of some operators, while enhancing commercial freedom and profitability for others. Smaller operators, in particular, generally favour wholesale regulation.
The dynamics of roaming differ according to the type of operator, its geographical location and its position in the market. Some operators are preponderant recipients of wholesale revenues. Other operators make high profits by relying principally not on wholesale revenues but on very high margins at retail level.
Retail regulation will certainly have a considerable impact on operators' profitability. However, it will depend very much on their business models whether they will suffer from the new EU regulation.
The new EU regulation will make it much more attractive to use a mobile phone while travelling abroad, by turning it from an expensive annoyance into a useful communication tool. Innovative operators will take this opportunity to widen their customer base. Reducing roaming charges will benefit the economy as a whole, by reducing the financial burden of roaming charges incurred by employees travelling abroad. Savings across the board should boost the EU's overall economic competitiveness.
What has the European Commission done so far, to address the problem of mobile roaming prices?
Besides drawing the attention of industry and the public to these prices, the Commission has taken steps to bring them down. For example, it is actively using its own investigative and enforcement powers to combat anti-competitive behaviour by specific network operators under the competition rules of the EC Treaty. In 2000 the Commission launched a wide antitrust sector inquiry into the level of retail and wholesale roaming prices in Europe because of concerns that they were excessive. This inquiry led to the opening of separate antitrust proceedings under EC Treaty rules on abuse of monopoly power (Article 82) against mobile operators in Germany and in the UK for excessive wholesale international roaming tariffs. Up to now, these proceedings have involved the issuing of a number of statements of objections (see IP/04/994 and IP/05/161) and are still on-going.
In addition, since 2004 the Commission has been looking at the two strategic alliances created to improve international roaming services (“Starmap” and “Freemove”) to ensure that that they are compliant with EC Treaty rules on restrictive business practices (Article 81). Following hearings held in June and July 2005 and a further exchange of views with the parties involved, the Commission plans to finalise its investigation in the second half of 2006, possibly with the adoption of formal decisions by the Commission.
To enhance price transparency for consumers, the Commission has published a consumer-oriented website which not only corroborates the fact that these charges are in many cases manifestly excessive, but shows a range of prices across the EU that cannot be justified in a competitive market for calls that are identical in terms of quality, time of day, and duration.
The unsatisfactory development of international roaming charges shows that firmer action is needed. The Commission is therefore now proposing an ‘internal market’ solution in the form of an EU regulation to eliminate unjustified international roaming charges.
Why does the Commission believe that the price reductions offered by some operators so far are not enough?
We believe that the reductions offered are too little, too late, and were intended mainly to head off the threat of regulation. Even the GSM Association web site launched on 10 July confirms (even though its prices are said to serve illustrative purposes only) that retail roaming prices the EU remain unjustifiably high. For example, a Belgian tourist in Spain has to pay €3 to make a two-minute call home. He also has to pay €1.58 to receive such a call. This is in line with the results already shown on the Commission's roaming web site launched in October 2005 and updated in March 2006.
Consumers will continue to have to pay unjustifiably high prices this summer. All this confirms that announcements by operators have not yet led to genuine savings for consumers and that regulatory intervention continues to be necessary.
The Commission notes that the average retail charge for a roamed call today is, at €1.15 per minute, still at least 5 times (and sometimes up to 10 times) higher than the actual cost of providing the service, and at least 4 times (and sometimes up to 16 times) higher than domestic tariffs. On received calls, operators make retail margins of 300% to 400% – and this merely because the consumer has crossed a border. This is clearly unacceptable in Europe's internal market.
Why hasn’t regulation of roaming charges at national level been successful?
International roaming services differ from virtually all other telecoms services in one respect. A customer buys the services of an operator in his home Member State. However, when he or she travels abroad, it is another “foreign” operator that provides facilities for making and receiving calls, and bills the home operator for this ‘wholesale’ service. The price of these wholesale services has traditionally been high, with correspondingly high retail charges being passed on to the customer in the bills received from his or her own operator.
It has not proved possible to address high roaming prices through existing national regulations. An international roaming service is made up of elements supplied in at least two Member States, the home country and the visited country. Due to the cross-border nature of roaming, no single national regulatory authority has the power to regulate down all components of the price. In December 2005, the European Regulators' Group therefore alerted the Commission, stating that the problem was ‘non-trivial’ and required action at EU level.
In March 2006 the European Council noted in its conclusions the importance for competitiveness of reducing roaming charges.
Is competition law not enough? Why do you need an EU regulation too?
Community and national competition law instruments only enable competent authorities to tackle anti-competitive behaviour by individual companies. They therefore cannot provide a solution that safeguards the interests of all mobile phone users and market players within the Community.
Existing EU rules on electronic communications enable the imposition of ex-ante regulatory obligations on companies that are found to be dominant on a "relevant" market under EU competition rules, in order to stimulate competition. The wholesale national market for international roaming on public mobile networks has been identified as such a relevant market. On the other hand, no retail market for the supply of such services has been identified as a "relevant" market, since roaming services at the retail level are not purchased independently but constitute only one element of a broader retail package.
Consequently, due to the specific characteristics of the markets for international roaming services, and to the cross-border nature of those services, it has not been possible for regulators to use such ex-ante obligations to remedy high charges for international roaming.
It could be argued that the EU regulatory framework does not prevent EU Member States from addressing international roaming markets via other measures, such as consumer protection legislation. However, given the cross-border nature of international roaming services, any such action by individual Member States would be ineffective and give rise to divergent outcomes across the Community, in the absence of the harmonization ensured by this proposal.
The Barroso Commission always claims to be about “better regulation”. Now you want to propose the sharpest regulatory intervention in an industry sector for many years. Is this not a contradiction?
“Better regulation” does not mean that the Commission will be inactive and never propose to legislate. It rather means that we shall propose legislation only in cases where there is a clear need to do so. This need must always be assessed in broad consultations with all interested parties and on the basis of a regulatory impact assessment.
In the case of roaming, there is a clear need to act at European level. Here, we are facing a clear internal market problem. And with Commission initiatives on roaming since 1999, we have given operators more than enough time to deal with the matter themselves – without success.
In addition, better regulation also means efficient regulation to enhance competitiveness. The new EU regulation will open the mobile market to companies with innovative pan-European services. Reducing the cost burden on small and medium-sized companies with attractive services to offer is better regulation in practice.
When will the new EU regulation take effect?
This depends on the European legislator: the European Parliament and the Council of Ministers which will have to decide jointly how and when to transform the Commission proposal into legislation. The Commission proposes an EU regulation, which is a legal instrument that enters into force immediately after publication in the EU’s Official Journal and is directly applicable in all EU Member States (and thus in the entire internal market) without the need for further implementation at national level. The Commission hopes that this could be achieved by summer 2007.
Under the Commission proposal, the wholesale cap on roaming charges as well as the cap on received calls would take effect with the entry into force of the new EU regulation. To allow for adaptations of the market, the retail cap for calls made while roaming in the proposed EU regulation would take effect automatically after a final 6 months transition period following the entry into force of the new EU regulation.
What is the Commission’s advice to consumers until the new EU regulation is in force?
The Commission’s roaming website continues to encourage consumers to seek the best possible deals when roaming and to inform themselves prior to travelling to ensure that they do not receive hefty bills.
In a nutshell the Commission’s advice to consumers for this summer is:
The EU roaming regulation, the accompanying impact assessment and further information on roaming and roaming tariffs is available at: