Unbundling roaming services. An effective way to create competition for roaming services in the European Union

Transcription

1 Unbundling roaming services An effective way to create competition for roaming services in the European Union 1

2 Overview > Short summary of the solution > Key factors in choosing one structural solution > The competition perspective, incl. roaming wholesale issues > The customer perspective > The technical perspective, incl. implementation issues > The policy perspective 2

3 unbundling of EU Roaming services - a short description > Even though several structural alternatives have some strengths, only one solution is able to cumulatively fulfill all necessary pre-conditions > We call this solution unbundling of EU-Roaming : > it focuses on price competition on the retail level; > via legal, commercial and also (to the necessary extent) technical unbundling of EU- Roaming services from all other mobile services, competitive forces are fully released and will drive roaming retails prices effectively to competitive levels > the user experience while roaming is identical to today's (seamless) EU roaming experience; > All framework conditions identified so far are either manageable (e.g. technological solution) or support the solution (e.g. wholesale conditions) > overall, the solution fits for the overall EU-policy goals (potentially even drives the development towards a true mobile Common Market ) 3

4 In search for a viable structural solution, a couple of essential preconditions have to be met Preconditions Creation of effective retail competition for EU roaming services, making price regulation obsolete Viable for all customer segments (business, residential, contract, pre-paid; existing/new customers) Viable for all roaming services (voice, SMS, data both via smartphone and dongle) Customer experience as easy and seamless as today, with full accessibility under existing phone number for calls/sms received Technical solution with proportionate investments No interference in existing wholesale competition and processes Proposal: unbundling of roaming services Unbundling of EU roaming services from other mobile services fully releases customers /competitive forces All customers can make a deliberate choice for both a provider for EU roaming and a provider for other mobile phone services separately User experience is extremely close to today s experience; as far as there are deviations (e.g. two bills instead of one) they seem to be negligible 4

5 unbundling and its effects on retail competition - overview > Today, customers have to make a purchase decision on the complete bundle of mobile services > Customers take this decision based on the predominant use case - in most cases domestic mobile usage > Unbundling of EU-roaming services will release the competitive forces and introduce price competition: > On national level: between existing national MNOs and MVNOs > On international level ( transnational competition): entry into the market of new players based on EU wide (wholesale) roaming coverage > Competition will try to attract all customer segments > Business customers : via targeted offers > Residential customers: mass market (above the line communication); availability at all points of sale > No differentiation between frequent travellers and other customers at marketing communication level to be expected > However, different products (for frequent travellers and others) to be expected (bundles, etc) 5

6 unbundling and its effects on retail competition national dynamic > National competition: > With roaming prices in the focus of customers, operators would try to attract customers also via attractive roaming prices. > Especially from challengers on national markets, we expect competitive pressure to start: > As for the domestic mobile service market, challengers with own mobile infrastructure have to grow in order to become more profitable ( investment in licence&network is largely sunk cost ) > This market logic will also apply for the new segment EU roaming customers : challengers will try to grow via the capture of unbundled roaming customers > We estimate the total market revenue volume for EU roaming to be between 5-15% of the relevant market > This is a sizable segment, that allows market players (especially challengers) significant growth, even if due to price reduction (combined with under proportionate volume growth) the total EU roaming market in revenue terms will shrink. > Furthermore: the roaming only relationship is a perfect starting base for a consecutive full acquisition of the customer (billing relationship, trust, customer insight, etc) > We do not expect significant uptake of competition due to MVNO market entry: > Real MVNOs can already today conclude their own roaming agreements > Also resellers are free today to negotiate with their host MNO wholesale prices for roaming services below the wholesale caps 6

7 Retail competition could be even increased by the advent of transnational operators > Operators from smaller member states can tab into the huge customer base/potential of large member states with very little incremental effort ( growth potential) > Large operator groups are enabled to complete their footprints, use their international brands and their footprint network coverage advantages ( cost advantages) as well as address large international account customers > As the costs for customer support are the same for frequent as for infrequent roamers, such transnational operators would not just focus on frequent roamers but increase the pressure on prices for all roaming customers > An example for such a transnational operator for data roaming services (dongle use only!) is abroadband ( 7

8 unbundling has already proved to be effective e.g. for fixed international calls > Structural unbundling has already been used as regulatory measure in the context of national and international calls (introduction of CS/CPS for fixed voice calls) > From a customer point of view, CPS is comparable to EU-roaming unbundling : > Initial process & activation, > billing & customer service issues, > After CPS was introduced in 2000, prices for international calls came down significantly within a very short time > Even incumbents had to lower international call rates significantly over time due to competitive pressure > Competitive rates are much lower Incumbent operator price for an average fixed international call Source: Progress Report on the Single European Electronic Communications Market (15 th Report), Part 2, p. 63 > For example: a call from Germany to Italy via an alternative carrier costs around 1 Cent per minute while the incumbents price can be up to around 13 Cents per minute > However, even for customers not using alternative providers, average prices came down significantly 8

9 unbundling - the wholesale perspective Room for retail competition > When it comes to retail pricing, the ultimate limiting factor are the direct (i.e. underlying) wholesale costs. > As all MNOs have inbound and outbound traffic, the relevant wholesale cost is determined by the price paid for any traffic imbalance Euro Cent Retail cap official margin Wholesale cap Competitive wholesale price real margin EU/EEA average prices per minute for wholesale voice calls in Cent Average MTR Q Q Q Q average IOT Price cap > Conclusions: > Wholesale competition is effectively working > highest limiting factor for retail offers (active call) today is ~14c, further steps to be expected, however limited by 2*MTR > Plenty of room for retail competition based on unbundling solution > Discontinuation of wholesale price regulation would be the right move.

10 Focus on the customer experience: a detailed comparison Experience today The purchase decision: Customer has to buy national, international, EU and non- EU roaming services in a bundle from one operator Activation of roaming services: No specific action required Availability of roaming services: Depending on host network service availability (coverage, quality etc) Telephone number: Customer uses same number domestically and in roaming for both making and receiving a call Bill: One bill for all services (contract customers) or one prepaid account (prepaid customers) Customer care: For all services by home operator Unbundled experience The purchase decision*: Customer can buy national, international and non-eu roaming services from one operator and EU roaming services from another domestic or other EU operator separately Activation of roaming services: No specific action required (enabled via a double IMSI-SIM card); when entering a host country, handset might require to enter a separate PIN Availability of roaming services: No difference Telephone number: No difference Bill: Two bills (contract customers) or two parallel pre-paid accounts (prepaid customers) Customer care: For EU roaming services by roaming provider For all other services by home provider * New customers decide and sign for two different contracts, one for the bundle of mobile services (excluding EU-Roaming Services) and on for EU roaming services. Existing customers have the right to opt-out of their existing bundled contracts and choose a different EU-roaming provider. 10

11 The technical perspective: making a call Home Country The Customer will have two profiles stored on his SIM-Card (IMSI + Authentication codes) Profile 1: national carrier Profile 2: roaming carrier (if different to the national carrier) Visited Country Customer will keep his phone number but will have two profiles on his SIM-Card. M(V)NO for national services Home M(V)NO 1 1 Customer turns on his mobile in the visited country (and might be prompted to enter his PIN-Code for his roaming profile to be allowed to access the network) 2 Visited MNO A Roam. B MNO Visited network 2 The handset will use his Roaming profile and starts communicating with the visited network. Based on this roaming profile the visited network will select the right network. M(V)NO for roaming services Home Roaming M(V)NO 3 3 The customer gets his authentication and can start to make active calls. 11

12 The technical perspective: receiving a call A customer who is registered abroad in a host network is being called. M(V)NO for national services M(V)NO for roaming services Home Country Home M(V)NO 2 3 Home Roaming M(V)NO 4 5 Visited Country Visited MNO A Roam. B MNO Visited network The call is routed based on the MSISDN to the M(V)NO for national services. As the roaming customer is not registered with his M(V)NO for national services this network needs the information on where to route the call. So the network databases (HLR) of the roaming provider and the provider for national services have to exchange location information The call is redirected to the M(V)NO for roaming services Network communication starts between the M(V)NO for roaming services and the visited network MSISDN Mobile Subscriber ISDN Number M(V)NO Mobile (virtual) network operator HLR Home Location Register 5 Call is established 12

13 Receiving call details for national implementation Addl. Table in HLR Country 1 Country 1 RN + MSISDN Addl. Table in HLR RN + MSISDN MNO for national services HLR Update Message tbd i.e. RN + MSISDN HLR MNO for roaming services 1 IAM GMSC GMSC GMSC MSC RN + MSISDN Update Message is to be defined (i.e. Specific Routing number) Additional table in HLR to be used or implemented Standardisation body not necessary for implementation; can be handled on a national basis Specific IMSI range can be defined to simplify effort (HLR triggered on specific IMSI range) Implementation timeframe estimated to be months Process for credentials exchange on SIM-Card needs to be defined in detail to secure high security standards Roaming Network RN Routing Number GMSC Gatway MSC UL Update Location RN=Routing Number IAM=Call set-up request

14 Receiving call details for EU wide implementation Country 1 Addl. Table in HLR RN + MSISDN Country 2 Addl. Table in HLR IMSI + NR holder Network - E.164 MNO for national services HLR Update Message tbd i.e. RN + MSISDN HLR MNO for roaming services 1 IAM GMSC GMSC GMSC MSC RN + MSISDN Update Message is to be defined (i.e. Specific Routing number) Additional table in HLR: Find NR-holder network based in IMSI mapping Standardised solution preferable, however possibly handled also on national level Specific IMSI range can be defined to simplify effort (HLR triggered on specific IMSI range) Implementation timeframe estimated to be months Process for credentials exchange on SIM-Card to be defined Standardised Single Market Roaming Authentication Algorithm possible Wholesale agreement for call forwarding to be defined. Roaming Network RN Routing Number GMSC Gateway MSC UL Update Location NR Number Range RN=Routing Number IAM=Call set-up request

15 Implementation issues - overview > Customer perspective: > Relevant retail process can be defined either very explicitly in the Regulation, e.g.: > obligatory information of new and/or existing customers of the possibility to choose a different provider for EU-roaming services, > mailing of the new SIM card to the customer within xx days, > or member states are left to apply general principles (as defined in the Regulation) - comparable to MNP implementation > Technical perspective: > Production and distribution of enabled and secure SIM cards > HLR interconnection necessary in order to process location update messages, to be solved either nationally or via a standardized solution across the industry > Implementation in individual MNO HLR (dependent on solution being available from supplier) > Time for implementation: ~ months, depending on incentives for the industry to cooperate and to speed up As any other structural solution, unbundling will not be applicable from 1 st of July

16 Finally: the policy perspective Questions Answers Will unbundling lead to competitive prices? Do wholesale prices allow for sustainable competition? Are additional (safety) caps necessary? Yes, the increase in competition will reduce retail prices for roaming services to a competitive level Yes, the existing wholesale prices are not the limiting factor for lower retail prices (see previous slide) Additional safety caps are not harmful. However, continuation of (decreasing) price caps would harm price competition: only a big enough difference between wholesale and retail prices gives operators /new entrants enough room to be successful Is unbundling in line with the Digital Agenda and other broad EU policy goals? Yes, it is in line with the EuGH ruling on Roaming I, and, even more important, it is probably the biggest chance to develop a true common market for mobile services in Europe. 1 Neelie Kroes: we need a structural solution for roaming problems. I am open-minded about what the solution is, but it has to be a permanent solution ; Facilitating a competitive environment for SMEs to develop future Internet business models, Telecom Conference of the SME Union Brussels, 14 July Anthony Whelan at a meeting with GSMA ( caps tend to have effects similar to a price cartel ) 16

17 Q & A 17

18 Usage: Q & A Steering: Q: What happens if I loose coverage within my selected network while roaming? Do I have to enter the PIN-code again after I regain network coverage? A: The mobile will search for another network an will get a network connection automatically. It is not necessary to reenter the PIN-code. Q: Do I have to register with my national service provider network on my return after roaming? A: Once the mobile is switched on after in the home country the customer will be prompted to enter the PIN code. With selecting the PIN code of his national service provider he will be registered in the network. If he does enter the PIN code of the service provider for roaming services this shall not lead to the registration in the network. Q: Who is steering the call? Home-Network or visited network? A: The Home-Network is steering the call. Q: How is this steering implemented A: If signaling is received via an MSC or SGSN (Serving GPRS Support Node) from a foreign network the message will not be directly forwarded to the HLR. The message will be relayed to a dedicated server to manage the call. If this message (Update Location/Update GPRS Location request) is not sent from a preferred network, the server will decline the response with a specific error code. Q: Who is the owner of the mailbox? Does the customer has only 1 unique mailbox or does he has to call 2 mailboxes? A: The customer has only one mailbox with his home network provider. The service provider for roaming services will use the mailbox of the home network provider. 18

19 Q & A EU-Roaming: SMS Q: Can the solution be restricted to EU-countries only? E.g. calls outside the EU will be handled by the home network provider? A: Technically there are no restrictions for this limitation. In general all allowed networks can be defined with the HLR. Q: What about calls to a non-eu country while the customer is in a roaming network? A: The calls while in roaming are managed by the network provider for roaming services. As the home network provider does not get any information while the call is established, also these calls will be handled as roaming calls. Q: Does the solution bring any restrictions to the use of SMS in the originating and terminating case? Will they be handled on the same rules as voice calls? A: There are no restrictions for sending and receiving SMS within this solution. The technical basis for originating SMS is already in place. For the handling of terminating SMS an additional functionality has to be implemented on the HLR. Cost / Effort Q: Can the investment necessary for the implementation of the solution be estimated? A: The implementation will need effort and investments on the process and network side. We do estimate a low single digit million Euro figure. 19

20 Q & A Interconnection: Q: What will be the solution for interconnection with international mobile networks? Will there be the possibility for a platform solution in order to avoid multiple bilateral interconnections (e.g. pan-european database) A: A standardized solution is preferred, however the exchange of signaling messages (SCCP signaling) can be done with the existing infrastructure. Also the set-up of a pan-european database can be part of this solution. The definition for the exchange of commercial data will also be part of this solution. Q: What about service providers? Do they have to interconnect directly with MNOs or is the interconnection of their host-network sufficient? A: If the service provider does have his own infrastructure he will have to directly interconnect with the MNO. If the service provider has the role of a retailer then it is sufficient that his host network interconnects directly. 20

21 Thank you! 21