Mobile telephones/international roaming frequently asked questions (see also IP/05/161)
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1 MEMO/05/44 Brussels, 10 th February 2005 Mobile telephones/international roaming frequently asked questions (see also IP/05/161) What is international roaming? International roaming provides subscribers with the possibility to use their mobile phone outside their own country, where their home network operator has no coverage. The technology that allows such international roaming in all EU countries (and many other countries throughout the world) is based on the GSM (Global System for Mobile communications) wireless technology standards, developed since the 1990s by the European Telecommunications Standards Institute (ETSI) with the support of the European Commission. More particularly, international roaming is defined as the ability for a customer, when travelling outside the geographical coverage area of his/her home network, to automatically make and receive voice calls, send and receive data, or access other mobile services by means of using the infrastructure of a visited network. A roamer can thus make calls back to their home country, call a local number in the visited country or call a third country. At the same time the roamer can send and receive text messages, faxes, use services based on General Packet Radio Service (GPRS) and have access to any other value-added text services. In order to provide their customers with the possibility of receiving and making calls while roaming abroad, Mobile Network Operators (MNOs) need to conclude international roaming agreements with MNOs in the visited country. The technical and contractual conditions for concluding and implementing international roaming agreements between GSM operators have been standardised by the GSM Association. Thus, when a MNO offers access to its network to another foreign MNO in order to enable the latter s subscribers to make and receive calls while abroad, it provides wholesale international roaming services to the foreign MNO. The foreign MNO will then charge, at the retail level, its own subscribers international roaming charges for the usage of their phone abroad. Wholesale roaming charges have thus a direct impact on the retail prices paid by consumers when roaming abroad. What are the principles on which roaming charges are based? Under the rules of the GSM Association, when a roaming subscriber uses the services of a visited network, the roaming subscriber s home network is responsible for payment of all charges incurred for services used in accordance with the published Inter-Operator-Tariffs (the so-called IOTs ) of the visited network. Prior to 1998, wholesale roaming charges were calculated on the basis of the so-called Normal Network Tariff (NNT) of a visited MNO.
2 The NNT was based on the standard user tariff charged by MNOs at the retail level. In 1995 visited MNOs started charging foreign MNOs a multiplier up to a maximum of 1.15 to the NTT. This cap was supposed to reflect subscription charges that would otherwise have not been reflected in the wholesale roaming charges for outgoing calls. From 1998, a new wholesale roaming tariff was introduced by the GSM Association, the Inter-Operator Tariff ( IOT ), which is the tariff the visited network levies on the home network for the use of the visited network. The introduction of the IOT dissociated wholesale roaming prices from the standard retail tariffs applied by the visited network. Thus, the competitive conditions prevailing on the retail market were no longer reflected on the wholesale market for international roaming. Use of a phone abroad: is network selection when roaming predetermined or essentially random? Essentially random until very recently. A GSM operator would usually conclude roaming agreements with all operators in another country in order to ensure that its customers have the best possible coverage outside the home network. Indeed, most SIM cards would contain a list of preferred foreign networks in order to facilitate a priority selection among all available networks in a given country. However, until very recently, the way in which a handset would chose a network when switched on abroad was rather arbitrary. If the signal of the preferred network was not strong enough or unavailable, the mobile handset would pick up the signal of another network and remain on the latter without reverting back to the preferred network. When the phone was switched on and off, the phone would routinely look for its home network and then for the network it was last registered on. As a result the roaming customer was not directed towards the preferred network until his next roaming trip. Although a roaming customer could try to manually select the preferred network and thus override the automatic selection and registration performed by the SIM card, there is little evidence to suggest that roaming customers in their majority, were (or are still today) aware of or engaged in manual network selection. Therefore, network selection has been up until very recently random. The fact that foreign MNOs could not successfully direct their outbound roaming traffic onto any of the four German networks also explains why in the past MNOs had no real incentives to offer lower IOTs or discounts and generally compete on prices. Recent technological developments indicate that in the near future foreign MNOs might be in a position to effectively direct a greater proportion of their roaming traffic onto specific visited networks. Advanced SIM cards and new network functions such as Over-The-Air (OTA) programming of SIM cards in combination with more intelligent handsets might soon enable a foreign MNO to follow closely his roamers abroad and ensure that their phones are always registered with a preferred network. These recent technological developments are behind the formation last year of two strategic mobile alliances among a number of MNOs aiming to internalise roaming traffic within the alliance. The alliances counter the perceived threat coming from group companies such as Vodafone to fully internalise the highly profitable international roaming traffic. 2
3 How have individual mobile phone operators tried to cooperate at international level to provide roaming subscribers with seamless mobile services? By forming strategic alliances. On 11 December 2003, Telefonica (Spain), Telecom Italia (Italy), T-Mobile International (Germany) and Orange (France) and all their respective affiliates, including T-Mobile UK and Orange UK entered into a cooperation agreement for the creation of a strategic alliance. Under the brand name of Freemove Alliance 1, the alliance partners offer international roaming services and in particular pan-european mobile services to multinational customers. The second competing strategic alliance was launched in October 2003 under the brand name of The Starmap Mobile Alliance. It currently has nine members: Amena (Spain), Eurotel (Tschechien), O2 (Germany, the UK and Ireland), One (Austria), Sonofon (Denmark), Pannon GSM (Hungary), Sunrise (Switzerland), Telenor Mobil (Norway) and Wind (Italy). 2 Both alliances aim to provide roaming subscribers with seamless mobile services, including GPRS and MMS roaming, as well as access to familiar services such as voic and short-code dialling whilst travelling in other alliance countries. What action is the Commission taking as regards competition on international roaming markets? Apart of the investigation of the UK and German wholesale international roaming market (see IP/04/994 and IP/05/161), the Commission is also looking into the notifications made by the GSM Association with respect to the Standard Terms for International Roaming Agreements (STIRA) in relation not only to voice communications but also in relation to GPRS-based data communications including Short Message Service (SMS) and Multimedia Messaging Service (MMS). Given that wholesale international prices constitute a significant input for determining the level of the retail roaming prices paid by users of mobile services, the Commission will address complaints from consumers as to persistently very high retail roaming charges primarily at wholesale level and only failing this at retail level. The Commission expects that, as a result of these proceedings, more competition will take place and that the overall roaming charges applied to consumers in the European Union will soon be lowered to more competitive levels. Supported by the Commission, the European Regulators Group (ERG), which brings together national regulatory authorities responsible for electronic communication markets, is conducting a complementary investigation into wholesale prices for international roaming. As part of this investigation, the ERG sent a questionnaire to mobile telephone network operators across the EU in December 2004 (see IP/04/1458). According to the 10 th Annual Telecoms implementation report (see IP/04/1438) there were 379 million mobile users in the EU 25 as of 1 August The number of mobile subscribers has increased and 83% of EU citizens now have a mobile telephone
4 Europeans are travelling more and more each year and mobile subscribers are using their phones abroad as frequently as they do in their own home country. The high level however of the international roaming prices contrasts sharply with the much lower tariffs applied for domestic calls. Are National Regulatory Authorities also analysing the wholesale market for the provision of international roaming services? The Annex to the Commission Recommendation on relevant markets susceptible to ex ante Regulation 3 recommends National Regulatory Authorities (NRAs) to analyse pursuant to the new regulatory framework for electronic communications services and networks the wholesale national market for international roaming on public mobile networks. As consumers of this wholesale service are located outside the home market of an NRA, the market analysis to be undertaken by NRAs will also rely on the investigation carried out by the ERG which started in December Replies to the harmonised questionnaire sent out by the ERG will help national regulatory authorities to define the relevant markets within their own Member States, and hence to identify whether any operators have significant market power. Where such significant market power is identified, remedies need to be imposed. These should aim at achieving lower prices for consumers. The Commission s market definition in the statements of objections with regard to the German and UK market is therefore without prejudice to the market analysis that NRAs will carry out in the future. This is true both for the question whether the wholesale market for the provision of international roaming services should be defined as being network specific or as encompassing all existing GSM networks, and as to the imposition of an appropriate remedy on MNOs found to have Significant Market Power (SMP). Also, the market analysis carried out by the NRAs will (contrary to the current proceedings) deal exclusively with the future market situation. Why are the on-going roaming cases limited to the UK and German markets? As a follow up to its sector enquiry into international roaming prices carried out in 2000, the Commission choose to concentrate its efforts and investigate further the UK and German wholesale roaming markets due to the fact that wholesale roaming prices in those two markets appeared at the time to be the highest in Europe. It is clear that the outcome of these two investigations will have far-reaching effects for all mobile operators in Europe and should send a clear message to all operators whose wholesale roaming prices may also be excessive. In any event, the Commission may consider launching further investigations into other national markets should this be necessary. Is the roaming case concerning Germany limited to the past? In the statement of objections the Commission is alleges that T-Mobile and Vodafone have abused a dominant position. The Commission considers that at least until the end of 2003 Vodafone and T-Mobile held a position of dominance on their respective networks. 3 OJ L 114, p. 45 of
5 The fact that the Commission does not at this stage draw any conclusions as to the question of dominance for the period after December 2003 does not imply that interoperator tariffs (IOTs) have reached more acceptable levels after that date. Therefore, the question whether IOTs remain excessively high today is still left open. On the basis, however, of the findings made so far by the Commission in the investigation of the UK and German roaming cases, national regulatory authorities, in full cooperation with the Commission, have also started looking closely into the competitive conditions prevailing in the roaming markets. Cleary, such combined action should aim at bringing more competition into the roaming markets. 5
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