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Brussels, 7 November 2006
What is roaming?
Roaming is the ability to use your mobile phone when abroad. Because your home network operator cannot provide a 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, ie “roaming” on a foreign network. For this, the foreign network operator charges your home operator a wholesale rate. Your home operator then charges you a retail price for using your mobile phone abroad.
What is the cost of roaming, and what are the profits made by operators?
The additional operational cost for supporting a roaming call is less than 20 cents in most cases while the average price that operators charge consumers in the EU is around €1.15.
What are the main findings of the Eurobarometer survey on roaming published today?
The survey was conducted in September 2006 after the summer holiday period. It covered 24,575 EU citizens, taking in all 25 Member States, age groups, professions etc. As underlined in the Eurobarometer report, the findings of the survey are representative of the EU population as a whole. The main findings are as follows:
Who will benefit from reduced roaming prices?
According to the Eurobarometer survey on roaming published today, 79% of those surveyed have a mobile phone. Of these, 44% have travelled abroad for personal reasons in the past 12 months. The Eurobarometer report reveals that 35% of Europeans surveyed use their mobile phones to make calls when abroad and 30% use it mostly to receive calls. A large majority of such consumers use their mobile phones less than when at home, mostly because of the high cost involved. These consumers will clearly benefit from lower roaming charges. 59% state they would use their mobile phones even more if prices were lower. Consumer groups support this view and have said that lower roaming charges would be welcomed by a very wide cross-section of consumers, including small and medium-sized enterprises (SMEs).
The GSM Association, the mobile operators trade association, estimates that at least one third of EU citizens are “roaming”, i.e. using their mobile phones while visiting another EU country.
Are mobile roaming charges too high?
The Commission today updated its website on roaming prices, giving examples of the standard roaming tariffs on offer to consumers across Europe. This website was announced by Commissioner Reding in July 2005 (IP/05/901), launched in October 2005 (IP/05/1217) and updated in March 2006 (IP/06/386). The website can be accessed (in English, French, German, Italian, Polish and Spanish) at http://ec.europa.eu/information_society/activities/roaming/index_en.htm .
Today’s update shows, once again, that there has been little overall change in the levels of roaming tariffs since the website was first put online on 4 October 2005. On average, roaming prices are still 4 times higher than national mobile calls, differences that cannot be explained by the costs incurred by the operators.
A UK customer roaming in Spain can pay €5.92 to make a four-minute call and up to €4.48 to receive such a call. A French customer travelling in Italy could pay €4.72 while a German customer roaming in the UK can pay up to €6.36. Some customers face much more exorbitant prices: an Austrian in Malta could pay €9.51 to call home for four minutes. A Spanish customer roaming in Latvia can pay up to €9.19 and a Cypriot roaming in Belgium can pay €12.00 for the same call home. An Irish customer roaming in Malta could pay as much as €13.16 for a four-minute call home.
If you receive a call while roaming, you also have to pay a lot. Operators routinely charge their customers 300-400% more than the cost of these calls. At wholesale level, there are no agreed inter-operator tariffs for such “received calls” so operators would certainly be able to offer their customers lower prices without changing international agreements.
Savings made by operators at the wholesale level of roaming costs have, in general, not been passed on to the retail consumer. This was the joint finding of the European Regulators Group in May 2005. See: http://erg.eu.int/doc/whatsnew/reg_intens_wrk_intl_roaming_mtg.pdf
It should be noted that on 10 July 2006, just two days before the Commission proposed a regulation on roaming, the GSM Association followed the Commission’s example and started to publish “illustrative” roaming tariffs. See http://www.roaming.gsmeurope.org/
What does the European Commission's proposed regulation of 12 July 2005 do?
The EU regulation as proposed by the European Commission on 12 July 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 higher than those incurred by domestic mobile phone use.
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 ceilings, but they may not exceed them.
The proposed regulation also enhances price transparency. 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 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.
Will the proposed EU regulation address the wholesale market, the retail market or a combination of the two?
Although the Commission generally prefers not to regulate retail markets, the EU regulation proposed on 12 July addresses both the wholesale and the retail level, 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 operators who are not in their group are
charged. Despite this significant cost saving, their average retail prices for
roaming have remained high. It is therefore clear that the major operators are
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
Retail regulation ensures that savings are passed on to consumers and that consumers will actually benefit from the new EU regulation.
Why hasn’t national regulation on roaming been successful?
It has not been possible to address high roaming prices through existing national regulations because of the inherent cross-border nature of international mobile roaming. A roaming service is made up of elements supplied in at least two Member States, the home and the visited country. Since roaming is cross-border, 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 EU action.
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 roaming services, any such action by individual Member States would be ineffective and give rise to divergent outcomes across the Community, thereby leading to distortions in the internal market. This can be avoided through effective EU regulation of international mobile roaming.
Why not leave roaming to the market? Why is regulation needed?
Although some market players have begun to reduce prices (to a greater or lesser extent), this has only been under the threat of regulation from the Commission. There is no guarantee that once this threat is removed prices will fall. In addition, offers by the operators to reduce wholesale prices (i.e. inter-operator tariffs) do not mean consumers will benefit from lower retail prices. Regulatory experience with the international roaming markets shows that savings made 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
Offers by some operators to lower prices are also not necessarily of benefit to all consumers. Such packages also tend to target certain groups only, while general consumers remain uninformed. In addition, many current schemes are opt-in and users have to pay for this privilege. The Eurobarometer survey published today confirms that Europeans in general are still not well informed about roaming charges. The Commission’s proposal for a roaming regulation therefore aims to establish a more equitable solution.
Is competition law not sufficient to bring down roaming prices?
The application of EU competition law and the Commission’s proposal for an EU regulation are complementary instruments. They target different forms of behaviour, are based on different provisions of the EC Treaty and take a different legal form.
On the one hand, the EU regulation on roaming proposed by the Commission on 12 July is based on Article 95 of the EC Treaty. Its aim is to eliminate one of the last barriers within Europe’s internal market. Given public concern about international mobile roaming charges and the lack of responsiveness of mobile operators to repeated calls by the Commission for an improvement, a legislative initiative at EU level became necessary. Such an initiative also averts the possibility of regulators across the EU giving divergent regulatory responses. The EU regulation on roaming does not seek to sanction individual operators, but to establish price ceilings for all operators in the EU under which they would be free to compete in line with competition law.
On the other hand, EU competition law enables the Commission, on the basis of Articles 81 and 82 of the EC Treaty, to tackle anti-competitive behaviour by individual companies, e.g. the formation of cartels or the abuse of a dominant position. On this legal basis, a number of Commission investigations into anti-competitive practices in the international roaming markets have been underway for several years. In 2000, the Commission launched a wide-ranging 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 resulted in the issuing of a number of statements of objections (see IP/04/994 and IP/05/161) and, the cases are still on-going. In addition to this, since 2004, the Commission has been looking at two strategic alliances created to improve international roaming services (“Starmap” and “Freemove”) to ensure that these comply 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.
How much will the new EU regulation save consumers?
This depends 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 up to 70% of the cost of making such calls whilst roaming.
Altogether, we expect that under the new EU regulation, consumers will pay around €5 billion less than they do today.
Will the new EU regulation lower roaming prices but increase domestic prices?
In the Commission’s assessment, raising domestic mobile call prices to offset profit losses is very unlikely to be a realistic, commercially viable option. Most national competition among mobile operators is strong and has been further strengthened by the arrival of virtual network mobile operators in many EU countries. Competition is generally forcing prices down so that if a company raised domestic prices it would very likely lose customers and eventually see a significant reduction in its market share.
The effectiveness of competition 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 support national authorities in closely monitoring market developments following the new EU regulation.
Does the proposed regulation also cover SMS and data roaming?
The regulation, as proposed by the Commission on 12 July 2006, includes short message services (SMS) and Multimedia Message Services (MMS) in their scope, but caps the roaming prices only for voice services. The new EU regulation requires national regulators to monitor closely developments in SMS and MMS charges. The Commission believes that this is, for the time being, a sufficient warning for operators, but it closely monitors market and price developments in this relatively young market segment to see whether the roaming prices for SMS, MMS and other data services will follow those of voice calls.
What will the overall economic effects of this EU regulation be?
The proposed regulation is likely to significantly help businesses, particularly SMEs, people living close to national borders who are frequently roaming to other networks, and tourists and foreign students who roam frequently.
According to the Eurobarometer survey published today, 79% of those surveyed have a mobile phone. Of these, 44% have travelled abroad for personal reasons within the past 12 months. The Eurobarometer report reveals that 35% of Europeans surveyed use their mobile phones to make calls when abroad and 30% use them to receive calls. Taking the estimates from the GSM Association of mobile operators, roaming prices have a direct effect on at least 147 million EU citizens or 33% of Europe’s population.
Given the scope for further increases in the market penetration of roaming (roughly half of all customers travel abroad but only a third use roaming services), there is potential for a substantial increase in roaming services once prices fall. This position is supported by the Eurobarometer findings where 81% said the high cost was the most important reason for not using the phone while abroad. This creates an opportunity for new revenues for those operators who move first and offer attractive roaming services which are even better than will be required by the new EU regulation.
The mobile roaming market is estimated to be worth €8.5 billion. It is fair to assume that the enormous profits that mobile operators have made from the roaming customers recently will be substantially reduced by the new EU regulation. However, this should be compensated by a greater volume of calls and greater market penetration (see above).
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 as revealed by the findings of the Eurobarometer survey where 59% said they would use their phone more if prices were lower. 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 on employees and tourists travelling abroad. Such savings should boost the EU's overall economic competitiveness.
The suggestion that lower profitability means lower investment similarly does not hold. Profits are still to be made and other factors – competition, need to reduce costs. Consolidation within the industry sector will also influence investment.
Why does the Commission believe that the price reductions offered by some operators so far are not enough?
While the Commission welcomes every step into the right direction, we believe that the reductions offered by operators now are too little, too late, and are intended mainly to head off the threat of regulation.
Consumers continue to have to pay unjustifiably high prices as the survey findings testify. 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 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.
Also the website of the GSM Association itself confirms (even though its prices are said to be “illustrative” only) that retail roaming prices in the EU are 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 €2 to receive such a call.
How good are the new roaming deals mobile operators have started to offer,
under threat of regulation, to consumers?
In general, these new offers show that there is, contrary to what mobile operators have claimed for many years, a lot of scope for further price reductions as regards international mobile roaming. The Commission encourages operators to continue moving in the direction of reducing prices, thereby anticipating the effects of the forthcoming EU regulation. First movers on the international roaming market can be expected to be rewarded by growing consumer confidence and increasing market shares.
When will the new EU regulation take effect?
The European Parliament and the Council of Ministers have to decide jointly, under the so-called “co-decision procedure”, how and when to adopt the Commission proposal and thus to transform it into compulsory law. The Commission believes that it is desirable and possible (in view of the emerging consensus in the European Parliament and in the Council) to bring the Regulation into force by summer 2007.
Further information: The European Commission’s roaming website, which includes samples of the latest roaming tariffs per country as well as the results of today’s Eurobarometer on roaming can be accessed at: