Roaming regs leave operators with dead parrot investment in competitive market

The EC's goal was simple and attractive (to consumers): a single telecoms market that would end roaming premiums within EU countries. That was its end game, the rest was just means. One of those means is by general agreement not going to work, but operators have to invest in it anyway.

The European Parliament’s approval of the proposed regulation for a “Connected Continent” (telecoms single market) is another step towards confirmation of the end of the roaming premium within and between EU countries.

Commissioner Neelie Kroes hailed the result, saying, “In 2010 I promised to end roaming charges by the end of 2015, and now we are one step away from achieving that result.”

EU member countries are set to review the regulation, and then final approval will be in place for zero roaming. The end of roaming is just one goal of the single telecoms market regulation, but few seem aware that there’s already law in place that makes it mandatory for European operators to invest in technology to support a market structure originally intended to bring about just that result – zero roaming.

This is the competitive roaming environment which was proposed as a mechanism to support the growth of an alternative roaming contract market that separates home contracts from roaming contracts.

Read more on this story on TMN:
Operators risk wasting millions on under-threat EU roaming project

Under Roaming III Regulation operators have until July 2014 to implement, at their own cost, technical support for a market structure that will, by the EC’s own words, not achieve the goal it was set up to achieve.

Let’s be clear. Although operators are being forced under law to invest in the charging, signalling, security and billing systems to support Roaming III, even the EC doesn’t think the new market will achieve the zero roaming goal by itself.

Here’s the EC’s proposal from September 2013:
“While the Roaming III Regulation with its structural measures will inject greater competition into the market it is not expected of its own to create a situation where customers can confidently replicate their consumption behaviour in their home Member State when travelling abroad and thereby to end roaming surcharges overall in Europe.”

In other words, R III R will not achieve the EC’s end goal. Yet operators have to do it anyway.

So then what? Well, then the EC offers the possibility for operators to voluntarily make deals that would let users roam at home prices.

“The proposal introduces a voluntary mechanism for mobile operators to enter into bilateral or multilateral roaming agreements which allow them to internalise the wholesale roaming costs and to gradually introduce roaming services at domestic price levels up to July 2016 while limiting the risk of price arbitrage…The proposal however requires they are notified to improve their transparency. The proposed voluntary regime is designed to induce the pass-on of such legitimate scale economies to consumers through the provision of roaming services at domestic price levels, under conditions which ensure that roaming throughout the Union is covered and that consumers throughout the Union benefit in due course from such offers.”

What this means is that operators are being offered the window and the door as a way out – a competitive roaming market and price-led controls. But the question is, what’s the point of the competitive market if operators are being “encouraged” to offer home-rate roaming (achieved via roaming alliances) in any case?

Who would try to set up as an alternative provider if cross-European roaming is being offered at home prices by “home” operators? What was the point of Roaming III?

This is a point acknowledged by Tom Phillips, Chief Regulatory Officer, GSMA, in a statement to TMN. He said, “Mobile network operators will continue to implement the complex provisions of the current roaming regulation, including the separate sale of roaming and domestic services by July this year. These pro-competitive measures risk being undermined by the successive waves of detailed and intrusive retail price regulation.”

Ryan Heath, EC spokesperson on Connected Continent, said to TMN in an email that if operators abolish roaming premiums then the “potential loss of income and customers” that comes from extra competition could be avoided. In other words, if operators offer no-premium deals then the driver for a competitive market goes away.

Heath said in an email to TMN: “The operators could simply abolish roaming premiums today if they wanted – thereby avoiding the potential loss of customers and income that come from the extra competition in Roaming III. This has already happened in France and some parts of Scandinavia to a greater or lesser extent. It’s their business choice to keep them, not an EU regulation that keeps these premiums in place.”

The EC’s goal was simple and attractive (to consumers): by 2016 there won’t be a roaming premium within EU countries. That was its end game, the rest was just means. One of those means is by general agreement not going to work, but operators have to invest in it anyway.

So let’s get this straight. Operators must invest in support for a market structure that the EC knows will have no reason to exist once those same operators have been forced to eliminate roaming charges.

One market watcher, Mark Windle, Head of Marketing at OpenCloud, a company that puts together service layer platforms in operators, puts it like this:
“ARP is already law and operators need to have a solution in place in just 3 months’ time. Originally, this was seen as a “carrot and stick” game that the EU was playing to encourage operators to reduce roaming rates – according to the proposals put forward by the European Commission, operators will be exempt from the ARP regulations if they offer phone plans that apply across at least 85% of countries in the European Union (“roam like at home”).

“Now, under the wide-ranging telecoms reforms, the cost of making a call or downloading internet data in another EU country will be the same as at home. The change is due to take effect from 15 December next year.

“As such, this ARP legislation is looking more like nonsense: Without roaming charges there would be no more reason for a subscriber to select an alternative roaming provider (ARP) than there would be to change your service provider in general.

“The other strange thing about the EU and ARP is that it is/was about giving subscribers ‘more choice’ by introducing new service providers (the ARPs) and thus increase competition. However, this now doesn’t stack up with the EU’s ambition to reduce the number of operators. Now it just looks like the EU is playing with oddly shaped sticks rather than with a carrot and stick.”

Let’s review the thinking that got us here. The EC’s goal was simple and attractive (to consumers and businesses): by 2016 there won’t be a roaming premium within EU countries.

That was its end game, the rest was just means. One of those means is by general agreement not going to work, but operators have to invest in it anyway. The EC tells us that is the operators’ fault for insisting on a roaming premium in the first place. There is much truth in that, of course, but increased competition looks to have been thrown under the bus of the creation of a single market, a single market that was intended to foster and increase competition.