Operators risk wasting millions on under-threat EU roaming project

Europe's mobile operators are being forced to spend millions of pounds changing signalling and other infrastructure to support a competitive roaming market that may never happen.

By July 2014 operators must comply with the EU Roaming Regulation known as Chapter III (REGULATION (EU) No 531/2012) that outlines the creation and operation of Alternative Roaming Providers (ARPs). Operators must offer two standardised wholesale roaming access services to Alternative Roaming Providers (ARPs): Single IMSI and Local Break Out services.

Alternative Roaming Providers are the proposed entities that will offer competitive roaming services to EU mobile subscribers. The idea is that ARPs will introduce competition into the roaming services market, thereby lowering prices for consumers.

For example, a French national subscriber to Orange who travels frequently to Germany and the UK could make a separate contract with an ARP for all their services when they are travelling – instead of automatically paying Orange’s roaming charges. The service must enable the use the user’s same number and the same SIM. Additionally, all of a user’s domestic services must be supported by the domestic operator when the subscriber is attached to the ARP – that means continuity of voicemail, call forwarding, USSD and messaging support, local break out of data, regulatory control of content and so on.

Additionally, when the roamer moves out of the area of control of the ARP to a third country, systems and control must be handed back to the “home” network provider.

What that means for operators is that they must change their systems behave, so that they can deal with providing signalling, charging, billing, security and other information between their own infrastructure and the exterior ARP that is providing roaming services. A visited network will request authentication from the home network, data and voicemail addresses, monitor and control balances and so on. Support for these interfaces is to be provided through gateways or service broker platforms.

One company TMN talked to said that depending on the scale and volume required, the technical changes could run into the millions per operator.

OpenCloud’s Jonathan Bell, VP of Product Marketing, said that although the actual equipment spend is likely to be around the GBP100,000 mark, the level of integration required with billing, charging, and subscriber data elements (such as the HLR) means projects will run into the millions. There are also likely customer care costs as operators support subscribers looking to find information on or fix issues with signing up to ARPs.

Operators must make the changes or face fines. Yet there is a danger – or a likelihood depending on your view – that this is investment that is more than likely to be wasted, as the proposed ARP market is unlikely to ever happen on a large scale.

What we see since those (Kroes’) comments about zero charges is that there’s been shift of focus

ARP market thrown into doubt
The EC’s Digital Agenda has as one of its stated aims that the roaming premium will be eroded by 2015. Originally, the EC stated that it thought the best way of achieving was through the market. It proposed enabling Alternative Roaming Providers (ARPs) who would provide users with an additional contract to their domestic contract. The EC’s idea was that establishing competition for roaming spend would drive prices down.

That ARP could be one of the operators already operating in the visited country, or it could be someone operating on a pan-European basis.

However, a couple of things have happened to throw doubt on many ARPs ever making it to market. First, the Commission’s Neelie Kroes has been reported as wanting to accelerate the reduction in roaming tariffs to next year, rather than the 2015 timeline. This would likely reduce the business case for an ARP, some in the industry say, by removing the motivation for a consumer to move for a cheaper rate. In other words, if roaming tariffs are already at a mandatory low level, why bother signing up for an alternative provider?

Kroes’ camp argues that this interpretation misunderstands the fact that a wholesale roaming market is a mechanism to achieve the zero-premium roaming target. On July 9th Kroes said: “It’s not by banning roaming charges that we create a single market. Quite the opposite: it is by creating a single market that we will end roaming surcharges.”

Second, perhaps a more minor point, the EU is changing VAT laws, so that VAT must be paid at rates set in the country of origin of the user, not of the country of the service provider. That means that some ARPs that were looking at operating from low or no-VAT regimes would lose any competitive advantage.

Thirdly, there are still unresolved operational issues with actually being an ARP. Any pan-European ARP that would like to offer a tariff covering a range of countries has to deal with differing laws on data retention, content filtering and age controls, customer data integrity and so on. In fact, in some areas the mandated way of doing things in one country (say on data retention) may be specifically prohibited in another.

All of this doubt means that operators are doing the very minimum possible to meet their obligations, according to OpenCloud’s Bell. Bell said, “The operators all have RFPs out and are investigating it at the moment, and what we see since those (Kroes’) comments about zero charges is that there’s been shift of focus to comply with minimum cost with as basic a system as will be compliant, versus investment in a more telco grade thing. Geo redundancy, five nines reliability, those telco things: they’re saying that’s a Phase Two ‘in the future’ type thing we’ll do.”

Certainly, no operator is likely to want to invest in a solution that may never be switched on in operation.

Speaking to Telecoms.com, Tom Phillips, chief government and regulatory affairs officer, the GSMA, hinted at just this confusion when he was reported to have said, “The Commissioner should immediately clarify her [Kroes’] intentions with regard to roaming, to avoid the industry investing in a roaming solution that has been superseded before it is launched.”

He was surely referring there to the roaming single market and the establishment of ARPs. If the GSMA things ARPs are superceded before the system has even been launched, then operators are more than likely to agree. In the meantime operators are left with two choices: do the minimum necessary now or wait and see if this all goes away, and face a rush to meet compliance in the first half of next year.

The GSMA has its own detailed reponse to the European regulators’ body, BEREC’s recommendations, available to read here.

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