Fostering regional cooperation

Transcription

1 February 2011 Fostering regional cooperation Lowering roaming charges in the Western Balkans Institute for Advanced Studies GAP Abstract Today Kosova has two mobile operators and 1.5 million telephone subscribers. The number of telephone subscribers has increased rapidly in the Western Balkans region as well. Due to competition, domestic call charges have been gradually getting lower, but roaming charges remain extremely high. For Kosovo roaming charges are up to 29 times higher than domestic calls. Other countries face the same problem. In EU member states, roaming charges are regulated by the European Commission. Western Balkan countries do not have a similar body to impose roaming caps. Mobile operators here seem uninterested to agree on having similar roaming tariffs. Hence, GAP Institute suggests that national regulatory bodies should stand up and regulate the roaming caps. Introduction Since political disputes have hindered cooperation among some of the Western Balkans countries, regional cooperation should start on other less politicized issues that would benefit all. This way, a new chain of mutually beneficial agreements should develop in order to bring these countries closer together. Telecommunication could be one of the means to foster such regional cooperation, with regulating roaming charges being the starting point of such cooperation. The telecommunication sector is one of the most successful sectors expanding rapidly in the region. It is also one of the most profitable sectors generating high revenues. Competition among mobile operators has led to better offers, thus the number of subscribers has more than doubled in ten years.

2 - Today, Kosova has two mobile operators (VALA and IPKO) both reaching 1.5 million subscribers. - Albania has three operators (AMC, Eagle Mobile, Vodafone Albania) with 4.5 million subscriber. - Macedonia has three mobile phone operators (One, VIP Operator, T- Mobile) reaching 1.9 million subscribers. - Serbia has three mobile operators (mt:s, Telenor, VIP) reaching 10.4 million subscribers. - Montenegro with three mobile operators (Telenor, T-Mobile, m:tel) has 1.1 million subscribers. - Bosnia and Herzegovina has three mobile operators (BH Mobile, M-tel BH, HT-Eronet) reaching 4.1 million subscribers. In Kosovo the mobile telephony has seen a rapid expansion especially compared to fixed line subscribers. By the end of September 2010, the number of fixed line users has dropped slightly to , out of which users belong to the alternative operator IPKO and the rest to Kosovo Telecom. One reason for such decline is the increasing number of mobile users. By the end of the third quarter of 2010, the number of mobile users has reached users, an increase of 3.41% compared to the second quarter of this year, or 18% increased compared to the third quarter of Telecommunication industry is one of the most profitable industries, generating high revenues. The total income of telecommunication services in the third quarter of 2010 was near 40 million euro, where 82% of the income was generated by mobile operators. Considering that 7,000 new users added to the mobile network during July-September period, this suggests that the penetration rate of mobile operators is also expanding. By the end of September 2010, the penetration rate has reached 74%, an increase of 11.2% compared to the same period of Nevertheless, the penetration rate is still low compared to countries in the region or EU. The table below shows the growth of mobile subscribers, market share, and penetration rate in Kosovo. Table 1: Market share of mobile operators in Kosovo Mobile Operator Subscribe rs Mark et share Subscribe rs Mark et share Subscribe rs Mark et share 2010* Subscriber s Mar ket shar e Vala 774,980 76% 822,602 63% 986,960 64% 1.029,790 67% Ipko 93,600 9% 300,000 23% 366,000 23% 445,730 29% Unlicense d Mobile operators 150,000 15% 180,000 14% 200,000 13% 61,480 4% Total 1,018, % 1,302, % 1,586, % 1,537, % Penetrati on Rate 48.5% 62.0% 75.6% Source: Telecommunication Regulatory Authority in Kosovo *Represents subscribers until the third quarter of 2010 (Q3) 100 % 1 ART Report

3 The mobile industry has been successful in other countries too. The table below shows how the number has constantly increased in most of Western Balkan countries, suggesting that the number of mobile subscribers may grow even higher. Table 2: The growth of mobile subscribers in Western Balkans Albania Bosnia Macedonia Montenegro Serbia Kosovo Subscribers (million) Subscribers (million) Subscribers (million) Subscribers (million) Subscribers (million) Subscribers (million) Year n/a 0.12 n/a 0.2 n/a n/a 2.9 n/a n/a * Source: Buddecomm Report Telecoms Market overview, statistics and forecasts 8th Edition, 2009 *Represents subscribers until the third quarter of 2010 (Q3) All these countries have at least three different mobile operators. The competition has pushed them to provide better and more competitive tariffs for their consumers with regard to domestic calling tariffs. Albania has gone even further not only by introducing the fourth operator, but also the Government has urged mobile operators to lower their tariffs. 2 Kosovo on the other hand is the only country that has only two mobile operators. Unlike the Albanian Government, the Kosovo Government has recommended the Kosovo Telecommunication Regulatory Agency (ART) no to give a license for a third mobile operator till This kind of decision does not contribute to the idea of free market, it hinders competition and it may lead toward oligopoly. Nevertheless, the objective of this paper is to deal with a common problem faced by all consumers of Western Balkan countries, which is the high roaming tariffs. This policy brief analyses the roaming charges in six countries of the Western Balkans: Albania, Bosnia and Herzegovina, Kosova, Macedonia, Montenegro and Serbia. Croatia is not included in this study. Since Croatia seems much closer to EU accession, our recommendations would not fit for it and may be considered as a step back. Therefore, the Western Balkan notion used in this paper does not include Croatia. This paper deals with the issue of roaming charges applied in the above mentioned countries. 4 Since the majority of subscribers are prepaid, this paper deals only with the roaming charges offered for prepaid users. GAP Institute believes that the status quo should be 2 See: 3 See Decision no. 06/124 of Kosovo Government, taken on May 13, Extremely high roaming charges are being applied to citizens of these countries. For instance, Kosovo citizens have to face roaming charges up to 29 times higher than domestic calling tariffs. This is much higher compared to roaming charges applied in EU countries; not to mention the differences in living standards and GDP. 3

4 changed since the welfare of consumers is at stake. The EU experience shows that it is very unlikely that mobile operators will ever reach an agreement setting roaming caps, hence GAP Institute suggests that alternative ways should be considered one of which is that national telecommunication regulatory agencies should stand up and put certain limits to roaming prices. To change the status quo, GAP Institute recommends that these countries should immediately start an awareness campaign on high roaming tariffs and then consider the following two policy options: a) join the Eurotariff zone; or b) establish a Balkantariff zone. Dealing with high roaming charges The telecom market in the Western Balkans has grown at a rapid pace. In most of the countries the number of subscribers has increased constantly, accompanied by new entrants into the marketplace, privatization of stateowned telecom companies, modern telecom infrastructure and more affordable products and services for consumers. 5 Moreover, the telecom industry has been liberalized and legislation on regulatory principles has been or is being adopted. This legislation is founded on the EU s regulatory framework for communication, which promotes competition as the most effective way to offer communication products and services while ensuring universal access. Today, Albania, Serbia, Montenegro and Macedonia have adopted the regulatory principles found in the EU s 2003 regulatory framework for communication. Kosova and Bosnia and Herzegovina are the only two countries still basing their regulatory principles on the EU s 1998 regulatory framework for communication. Kosova is also a signatory of the esee Agenda Plus a joint effort of Southeast Europe (SEE) countries to develop a benchmark based on the points and policies of the EU s i2010 strategy, which also includes an appropriate regulatory framework. Policies and actions undertaken by esee correspond to the efforts to push SEE closer to EU action plans for Information Society development, as expressed in the current i2010. The number of telephone subscribers is rapidly increasing. As Table 2 shows, each country has seen a rapid growth of telephone users during the last ten years, suggesting that the number may even further increase. Kosova too has seen a rapid increase of telephone subscribers. The number of subscribers today is more than 1.5 million; including 13% of the overall subscribers who belong to mobile operators illegally operating in Kosovo 6. Table 1 provides details of the overall market share. The increasing number of mobile subscribers and the entrance of new mobile operators have increased the competition and have resulted in more 5 Boogert, Creating a Competitive Market, latest accessed on Serbian mobile operators operating in Kosovo are not licensed by Kosovo s Telecommunications Regulatory Authority, hence they are considered as illegal. 4

5 competitive prices and packages. However, roaming charges for citizens of Western Balkan countries still remain very high. The roaming fees are usually charged on a per-minute basis and they are determined by service providers at their own discretion. There are different types of roaming, such as regional roaming, national roaming, international roaming, inter-standards roaming, etc. Western Balkan countries apply international roaming standards. Although there are cases when two or more mobile operators from different countries have reached agreements on decreasing roaming charges, there is no collective agreement. Therefore, different countries have different roaming prices. Table 3 (see in appendix) shows how mobile telecom operators from different countries charge various prices for incoming and outgoing roaming calls. The lowest roaming charges are often offered through roaming agreements between sister companies, and occasional short-term agreements between two companies usually during summer season. Mobile operators currently divide roaming charges according to zones. Zones are created for easier reference and usage control, as well as to ensure better quality and simple and favorable roaming services. Many cities can be grouped into zones in order to more easily administer different features such as prices, authentication, methods, etc. Mobile companies define their zones differently and usually they are defined by logical geographic considerations, i.e. the bigger the geographical distance, the higher the roaming charges. 7 Kosova s two major mobile operators, VALA and IPKO, who together share 85% of the telecommunication market, offer extremely high roaming prices. While VALA offers cheaper roaming prices with other countries in the region, IPKO offers better roaming prices for EU countries (See Table 4 and 5). In general, roaming prices applied by VALA and IPKO are very high. Roaming tariffs with some mobile operators in the region are above standard prices found in EU and many times higher than domestic tariffs. If a consumer does not carefully select the cheapest mobile operator in the roaming zone, he/she may end up using the most expensive services. We have identified the most expensive roaming charges applied by VALA and IPKO (shown at Table 6 and 7) which are much more expensive than domestic tariffs. For instance, VALA s roaming charges in Macedonia are 19 times higher compared to domestic calls. IPKO s roaming tariffs with Macedonia are even higher, 29 times higher than domestic calls. These charges simply do not have any reasonable economic base and are unbearable for most costumers. Considering the data presented above, the necessity to regulate roaming charges is more than evident. The best argument for this claim is the thorough transformation of the EU electronic communications sector in the last ten years since its liberalization. The liberalization of EU telecom markets proved to have driven growth and innovation, stimulated investment and competition, and the widespread availability of services to the public. 8 Moreover, since all Western Balkans countries are aiming to join the EU, it is logical for them to 7 See Table 3 note on the definition of zones. 8 Europe s Information Society, latest accessed on

6 follow a similar road map towards the liberalization and regulation of telecom markets, specifically regarding the mobile roaming market segment. Reflection on the Eurotariff model Today s problem with high roaming charges in the Western Balkans was once a problem for the EU member countries too. The European Commission had many times urged mobile operators to lower their roaming charges. Although some companies decreased their prices, they remained on average 4 times superior to domestic mobile phone calls; in some cases roaming prices went up to 12 Euros for a 4 minute call. To further highlight the problem, the European Commission launched a website on roaming tariffs in October 2005, but even this did not have a powerful impact on lowering the prices. Thus, the Commission saw no other way but to intervene by regulating roaming charges. This proposal was published in July After significant consultations, public hearings, impact assessments and negotiations the proposed EU regulation called Roaming on public mobile networks was adopted by the European Parliament in May The regulation limits the rates operators can charge each other while roaming, but also limits the tariffs an operator can charge its customers. 9 The regulation entered into force on 30 June 2007, and mobile operators in all 27 Member States had one month time to inform their customers about possible alternative tariffs, otherwise the new regulation would automatically apply from 30 September The new roaming charges became known as Eurotariff and were to be applied in all EU states plus Iceland, Liechtenstein and Norway. The agencies responsible for the implementation of the regulation were the National Regulation Authorities (NRAs). They continue to be responsible for monitoring mobile operators, and in order to better cooperate the Body of European Regulators for Electronic Communications (BEREC) was later established, which consists of 27 members representing each of the 27 national regulators. At the beginning the Eurotariff imposed a charge of no more than 0.49 euro per minute for calls made abroad and 0.29 euro for calls received abroad. However, some companies in order to compete offered even lower prices. Since 2007 roaming charges went even further down, expecting to reach 0.35 euro in Table 8 summarizes the roaming Eurotariff charges. The way forward Considering the high roaming charges, the Western Balkans countries need to come up with a policy that would not only lower currently high roaming 9 A brief history of Parliament s work on the mobile roaming proposal Press Service of the Directorate for the Media of the EU Parliament, December

7 charges but also impose a cap for the maximum roaming charges, just as the EU did. To achieve this we propose the following three policy options for consideration: a) Raise awareness on high tariffs; b) Join the Eurotariff zone; c) Establish a Balkantariff zone. Raise awareness on high roaming tariffs Before the European Commission decided to intervene by imposing the Eurotariff in 2007, in 2005 the Commission launched a consumer website on roaming tariffs. This came as a result of failure after having repeatedly urged mobile operators to lower their roaming prices. The idea of the website was to highlight the problem that roaming charges were on average four times more expensive than domestic calls. In our case, creating a similar website would be the first step towards creating the Balkantariff. The body responsible for this could be the Balkan Regulators Group (BRG). 10 The idea of website is to further highlight extremely high roaming charges, but it should not be the sole activity of BRG. Today, roaming charges remain extremely high and most of these prices go unnoticed. Many mobile operators do not reveal their high roaming prices on their website; only when they reach mutual agreements for lower roaming prices during a specific season. In our case, where roaming prices are sometimes up to 29 times higher than domestic calls, consumer protection campaigning becomes imperative. Only few people can afford calling back home for a rate of 2.92 euro/minute. This is incomparable to the Eurotariff rates of This website would also assist consumers to compare roaming charges and select the one with the best offer upon entering a roaming zone. Again, the website is not the perfect solution to lower high roaming charges, but it creates awareness of the problem and it may accelerate the process towards creating the Balkantariff. Join the Eurotariff zone The Eurotariff model was adopted by 27 EU states in June As of January 1, 2008 three states from European Economic Area (EEA), Iceland, Liechtenstein and Norway joined the Eurotariff model. This means subscribers from the EU benefit from the same price caps when traveling within EEA and vice versa. Following the same logic, we suggest that the Western Balkans as a whole join the Eurotariff zone. This means that roaming caps would be the same as within the Eurotariff zone. This way travelers from EU countries would enjoy the same roaming charges when traveling to Western Balkan 10 More explanation on BRG is provided in third policy option. 7

8 countries and vice versa. One argument for encouraging this policy option is that all Western Balkan countries aspire to join the EU, and most likely each of them will become a member of EU eventually. Hence why not transform the roaming charges as early as possible? This would also foster the EU Western Balkan cooperation and will be nothing more than a simple agreement in the range of many agreements between EU and these countries. If visa liberalization is an initial step towards approaching the EU family, joining the Eurotariff zone would be another practical step towards EU integration. Besides, by adopting the Eurotariff, citizens of these countries would enjoy much lower roaming charges not only when traveling to EU countries, but to one another s country too. Now, as most of these countries enjoy visa liberalization, more traveling by normal people is expected and hence there is more need for communication too. In order to join the Eurotariff zone, the telecommunication regulatory agencies of the six Western Balkans countries under consideration should first become members of the Body of European Regulators for Electronic Communications (BEREC). Applying Eurotariff roaming caps would eventually eliminate the currently extremely high roaming charges. Besides, a consumer would better know the roaming charges when traveling to any country in the Western Balkans or the EU. Establish a Balkantariff zone Another option to eliminate high roaming charges is to create a Balkantariff zone, similar to Eurotariff model. By following the European Commission s approach for regulating roaming charges, the Western Balkan countries should create a joint regulatory body that would impose roaming caps on all participating countries. Each country has a National Regulatory Agency (NRA) that issues licenses and monitors the activities of domestic mobile operators. In the EU case, it was the Commission that established the European Regulators Group (ERG), whose mission was to advise and assist the Commission. In the Western Balkan s case, there is no Commission to impose the new roaming tariffs; hence the countries should create the Balkan Regulators Group that would be mandated to impose roaming caps. The BRG should consist of six members, representing each NRA, namely of Albania, Bosnia and Herzegovina, Kosova, Macedonia, Montenegro, and Serbia. The role of the BRG should be to set new roaming caps, both for calls and text messages, whereas the NRA should monitor the implementation of these. In this phase we cannot suggest how high the new roaming caps should be, except that they must be lower than today s. 11 Our concern is to create limits to high roaming tariffs, not to standardize the roaming charges. Mutual agreements between two or more operators for common roaming prices could still exist, but it should not exceed the limits imposed by the BRG. Moreover, we expect that roaming prices, like in the Eurotariff model, would further 11 The initial EU caps in 2007 were 0.49 euro per minute, decreasing each year since then. 8

9 decrease over the following years. Thus, the Balkantariff would ensure consumer protection and enhance competition. We expect mobile operators to be against such an initiative just as some European mobile operators protested against the Commission s proposal for creating the Eurotariff, and if it had been for voluntary participation, most probably Eurotariff would not have existed today. In our case mobile operators most likely would prefer to keep the status quo and enjoy high roaming profits. This is why the BRG should have executive powers. Furthermore, the Balkantariff model could last till participating countries become EU members. Summary and recommendations Regional cooperation among Western Balkan countries has so far been hindered by political disputes. Today all of them aspire to join the EU family, but the accession process is a very long one. Hence, regional cooperation becomes a necessity, especially on issues that are regulated by regulatory bodies. Some Western Balkan countries have already initiated regular presidential meetings that aim to discuss issues of common interest and to foster regional cooperation. In three presidential meetings were organized, known as Vlora Summit, Ohrid Summit and Prizren Summit. The next presidential meeting, which is not scheduled yet, could be a great platform for discussing roaming tariffs. Regulating roaming charges could be a very good start that would lead to other agreements. Since high roaming prices constitute a problem shared by all people of Western Balkan countries, GAP Institute suggests the following recommendations: 1. Western Balkan countries should establish the Balkan Regulators Group (BRG) with the following structure and competences: a) BRG should consist of 6 members representing each country s National Regulatory Agency. b) BRG should immediately create a website showing extremely high roaming charges currently applied. c) The website should be considered as a campaigning tool and only as the first step towards lowering roaming charges. 2. Balkan Regulators Group then should attempt to join the Eurotariff zone and start applying roaming charges that are applied in EU countries. a) Politically, BRG should use the argument of the European Economic Area states joining the Eurotariff zone. b) Technically, BRG should first apply for membership at the Body of European Regulators for Electronic Communications. c) Logically, all Western Balkan countries will eventually join the EU and start applying the Eurotariff. 9

10 3. If due to political obstacles it is not possible to join the Eurotariff zone, BRG should create a Balkantariff zone. a) Balkantariff zone should be established by following the model of Eurotariff. b) BRG should have executive power in order to a) lower current roaming charges, and b) impose roaming caps. c) BRG should only limit roaming charges while allowing mobile operators to offer even lower roaming offers. d) National Regulatory Agencies should monitor the new roaming caps applied in each country. e) The operating formula of BRG should aim to enhance competition and consumer protection. 4. The idea of regulating roaming prices should be in the agenda of next presidential summit and other inter-ministerial meetings. 10

11 Appendix Table 3: The incoming and outgoing roaming charges according to Zones in the Western Balkans Zones Roaming Charges - Comparative table for the Western Balkans Region Monten Kosovo Albania Macedonia Serbia gro Bosnia T- VIP VIP IPKO Vala Mobile Mobile Telenor Mobile Telenor M-TEL Zone I (incoming) N/A Zone I (outgoing) N/A Zone II (incoming) N/A Zone II (outgoing) N/A Zone III (incoming) N/A Zone III (outgoing) N/A Zone IV (incoming) N/A Zone IV (outgoing) N/A Zone V (incoming) N/A Zone V (outgoing) N/A In Zone I mobile companies put the neighboring countries and any country they have special agreement with. E.g. Telenor Serbia in Zone I included all neighboring countries, plus Greece; VALA included neighboring countries, plus Hungary and Rumania. In Zone II mobile companies put usually the EU countries; e.g. Telenor Serbia and VALA do that. In Zone III mobile companies put usually the countries they have benefit with, or travel more to but they are in longer geographical distance ; e.g. Telenor Serbia included Russia, North America and Asia; VALA included USA and Canada. All other Zones include countries in a longer geographical distance; e.g. Telenor Serbia included Africa, Saudi Arabia, Central and South America, and Austria; VALA included Saudi Arabia, Asia, Africa, etc. However, all companies define their zones based on the company benefits and policies.

12 Table 4: Vala s roaming tariffs with other mobile operators in the region Operator: Vala Country Zone Operator Calling Albania 1 Bosnia & Herzegovina 1 Macedonia 1 Montenegro 1 Receiving call on peak Receiving call of peak SMS AMC Vodafon Eronet BH Telekom Cosmofon T-Mobile ProMonte T-Mobile Serbia n/a n/a n/a n/a n/a Source: VALA website Table 5: IPKO s roaming tariffs with other mobile operators in the region Operator: IPKO Country Zone Operator Calling Receiving call on peak Receiving call of peak SMS Albania 2 AMC Bosnia & Herzegovina 3 n/a Macedonia 2 other One Montenegro 2 ProMonte Serbia 4 n/a Source: IPKO website 12

13 Table 6: Comparison of the highest roaming prices with region and EU, for VALA mobile operator Difference Difference with a with a Calling domestic Receiving domestic Sending Country Vala on call (Vala Call on SMS (Vala SMS peak* to Vala) - peak to Vala) - times times higher higher Albania Bosnia Macedonia Montenegro EU Source: Official web-site of the Vala mobile operator * This table shows only the most expensive roaming charges. VALA may have agreements with selected mobile operators offering better roaming charges. Table 7: Comparison of the highest roaming prices with region and EU, for IPKO mobile operator Country Calling Ipko on peak* Difference with a domestic call (Ipko to Ipko) - times higher Receiving Call on peak Sending SMS Difference with a domestic SMS (Ipko to Ipko) - times higher Albania Bosnia Macedonia Montenegro EU Source: Official web-site of the Ipko mobile operator *This table shows only the most expensive roaming charges. IPKO may have agreements with selected mobile operators offering better roaming charges. 13

14 Table 8: The Eurotariff rates per minute (without VAT) Eurotarrif Making a call Receiving a Sending an Receiving an max price ( ) call ( ) SMS ( ) SMS ( ) while abroad Summer Free Summer Free Summer Free Summer Free Summer 2011* Free Source: *EU forecast, Europe s Information Society & EU Business Portal 14

15 Sources and suggested readings: 1. A Buddecomm Report: Telecoms, Mobile, Broadband and Forecasts For Albania, Macedonia, Montenegro, Bosnia and Herzegovina and Serbia, 8 th Edition, Cindy van den Boogert Creating a Competitive Market: European Union and Serbia Creating a Competitive Market: European Union and Serbia, Latest accessed on: boogert:_creating_a_competitive_market:_european_union_and_serbia. 52.html 3. Deutsche Welle, Business EU Panel Backs Plans to Cap Mobile Roaming Rates ; Latest accessed on: Deutsche Welle, Telecommunication EU Mobile Phone Users Benefit From Lower Prices ; Latest accessed on: Deutsche Welle, Telecommunication EU States And Lawmakers Strike Deal on Mobile Roaming Rates ; Latest accessed on EU Business, International Mobile Roaming: how will new eurotariffs reduce cost of using a mobile phone in the European Union? ; Latest accessed on Europe s Information Society, Thematic Portal How much do you pay when you use your mobile phone abroad?, Latest accessed on: dex_en.htm 8. Law on Communication, Albania, Bosnia and Herzegovina, Macedonia, Montenegro, Serbia, Kosovo 9. Mobile operators web-pages 10. Official Journal of the European Union, Regulation No 1211/2009 of the European Parliament and of the Council of 25 November 2009 establishing the Body of European Regulators for Electronic Communications (BEREC) and the Office, Latest Accessed on: :EN:PDF 11. Regional Cooperation Coucil, Structure of e-see Initiative, Latest accesed on: Statute of Telecommunication Regulatory Body, Serbia, Macedonia, Bosnia and Herzegovina, Kosovo, Albania 15

16 The Institute for Advanced Studies GAP is a leading Kosovo Think Tank. GAP s main purpose is to attract professionals by creating a professional research and development environment commonly found in similar institutions in Western countries. This will include providing Kosovars with an opportunity to research develop and implement projects that would strengthen Kosovo society. A priority of the Institute is to mobilize professionals to address the country s pressing economic, political and social challenges. GAP s main objectives are to bridge the gap between government and people, and to bridge the gap between problems and solutions. The Institute for Advanced Studies GAP is founded by: 16