International roaming in the EU : current overview, challenges, opportunities and solutions

As technology evolves and globalization continues, the need for reasonably priced roaming services has never been higher. In 2007, the European Commission (EC) introduced a first set of regulatory decisions to cap the maximal roaming fee end users have to pay for voice services. In the years after, additional price caps have been introduced for SMS and data, initially only for end users, in a later stage also for the wholesale tariff. The final step, Roaming Like at Home (RLAH), will start to take effect in June 2017; from then on end users will pay the same price (for voice, SMS and data) when roaming like in their domestic country. The effect of RLAH on the business case of each mobile operator is hard to predict, as the different national markets are extremely heterogeneous and operators face large discrepancies in terms of roaming usage and network costs due to different travelling patterns and various other reasons that cannot be harmonized (geography, economics, working force, usage history, etc.). Furthermore, competition in the telecom market will no longer be a purely national matter, as the decision to abolish roaming tariffs will fully open up cross-border competition. This paper aims at providing insights in the effect of RLAH for both the end user as well as the mobile operators. Following a literature survey approach, including an overview of the roaming regulation process from 2007 up to now, the paper discusses possible effects the RLAH initiative might trigger, going from lower wholesale prices for mobile operators to higher retail prices for end Users. Additionally, as the European Commission strives for a digital single market, this paper presents a number of technical solutions (carrier portability, software-based SIMs, cross-border IMSI, Roaming like a Local, Wi-Fi offloading) that may pose a - partial or full - alternative for roaming and explains how these may impact cross-border competition both positively and negatively. The solutions are assessed against two axes: (1) generating the best possible outcome for the end customers (in all countries) and (2) ensuring the best level playing field for (virtual) mobile operators in Europe, which will of course involve trade-offs on different levels

Challenging prospects for roam like at home. Bruegel Working Paper Issue 3 2016

On 25 November 2015, the European Union enacted new rules for international mobile roaming (IMR) under Regulation 2015/2120, which seeks to implement a Roam Like at Home (RLAH) regime among the member states of the European Union. Questions remain, however, as to whether it is possible to implement RLAH without mandating below-cost pricing and thus introducing significant regulatory and economic distortions

THE ECONOMICS OF MOBILE INTERNATIONAL ROAMING

International roaming is a hot topic in the telecommunications industry. Many countries have witnessed a downward trend in mobile domestic prices. On the contrary, international roaming prices remained reluctant to follow the domestic trend. In Europe, the service has been regulated with price cap since 2007, and regulation is maintained for years to come. The existing literature on the economics of international roaming has focused on theoretical modelling, which assumes a uniform retail price (i.e. common across visited networks). The main finding is that wholesale and retail prices rise with the number of visited networks. Additionally, vertical merger is found unprofitable; and home network steering does not cause downward pressure on wholesale prices. We found that the assumption of uniform retail pricing leads to results that are inconsistent with wholesale competition because visited networks appear in the demand as complements rather than substitutes. We present theoretical models that match the existing literature’s findings, and compare results to the case whereby the retail price is discriminatory (i.e. differs by visited networks). With discriminatory retail, substitutability of networks reduces prices, and the incentive for vertical merger exists. In a steering game, steering is found able to reduce wholesale prices; and networks alliances are formed in equilibrium. The empirical literature on international roaming is limited to few industry studies. We use an aggregated dataset on prices and quantities for networks visited by roamers from one major mobile provider whose subscribers travel a lot across the world, Etisalat. The study period witnessed a retail price shift from discriminatory to uniform. The main findings are: (1) competition, as measured by the number of visited networks, reduces wholesale price; (2) traffic steering is effective, especially towards preferred networks (alliance and cross-owned); (3) only alliance networks offer wholesale discounts; and (4) demand is more elastic than crude industry studies

Assessment of First Comer Advantages and Network Effects; the Case of Turkish GSM Market

First comer advantages and network effects are frequently stated as among the most important determinants of market structures and this is particularly relevant for network economies including telecommunications markets. Connected to this, regulatory tools such as number portability have frequently been used to reduce market imperfections resulting from these effects. Within this context, this paper aims to analyze the role of these factors in creating the current market structure of Turkish GSM sector. By examining relevant data such as development of market shares in a historical perspective and by making use of consumer surveys, it is concluded that the dominant operator has benefited from being first comer in the market and established a stable market share (power) due to network effects that are used by this firm deliberately to entrench its position especially in the form of switching costs, scale economies, brand image and tariff (on-net vs. off-net pricing) differentiation; however, it is also observed that introduction of number portability lead to reduction in switching costs, increasing market competition. --First comer advantages,Network effects,Mobile telephony (GSM),number portability,Competition,Regulation and Consumer preferences

Transparency, Technical Aspects and Data Overview related to the Proposed Regulation on Roaming

The object of the present briefing is to analyse some of the fundamental aspects of the legal proposal by the European Commission on the subject of roaming, COM (2006)382 on 12 July 2006, which proposed to modify the regulation of mobile communications, resulting in important reductions of roaming tariffs within the Community. The briefing examines the efficiency and concrete applicability of the measures introduced by the Regulation Proposal, which created the “Mechanism of the Domestic European Market” and the envisaged requirements of transparency and information on roaming costs charged by mobile network operators (MNOs). The briefing consists of four sections, analysing the following issues: Transparency, Technical Infrastructure, Overview of Existing Data, and Feasibility of Technical Implementation

International roaming in the EU : historic overview, challenges, opportunities and solutions

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A Structural Solution to Roaming in Europe

This paper suggests that international roaming markets suffer from structural flaws in the way that roaming agreements are established in Europe. The initial roaming interventions by the European Commission in 2007 have been very welfare enhancing and the transfer of producer surplus to consumers has brought significant benefits to end users. Nevertheless, there are clear opportunity costs of maintaining and/or extending the current roaming Regulation. The price for wholesale roaming services in a given country is driven principally by the amount of traffic that an operator is willing to send back to the country requesting a price offer and not on the basis of the roaming services requested. The paper suggests that by breaking the link between the prices offered in one country and the volume of returned traffic will enable the wholesale market for international roaming to operate competitively. It is further suggested that retail price regulation is unwarranted when the wholesale market can operate competitively irrespective of the issue of the retail elasticity of demand for these services. Preliminary, suggestions are put forward as to how policy makers could transition from the current regime to a future market based regime by putting a number of required enablers in place.Roaming regulation, mobile telephony, European single market

Assessing Competition in U.S. Wireless Markets: Review of the FCC’s Competition Reports

The FCC\u27s 14th and 15th Annual Wireless Competition reports review a wide variety of evidence, both direct (how firms and customers behave) and indirect (industry concentration measures) in making its competitive assessment. The reports are silent on how to interpret this evidence. In contrast, modem antitrust analysis relies far more on direct evidence. In failing to put more weight on the relevant direct market evidence to reach an informed competitive assessment, the 14th and 15th reports invite erroneous conclusions about the state of competition in wireless markets. The authors are concerned that these erroneous conclusions eventually could adversely influence regulatory policy in wireless markets. Before economists came to rely on direct measures of market power, they relied on indirect measures, such as market share in the relevant markets, the Herfindahl-Hirschman Index ( HHI ), and market definitions. The 14th and 15th reports downplayed direct evidence of competition-namely, aggressive pricing behavior, robust entry, and continued long-term reductions in price, all of which strongly support a conclusion of effective competition. Instead, the FCC focuses on inferences of market power based on market shares. To test the FCC\u27s presumed relationship between market structure and prices in the wireless industry, the authors analyzed the TNS Telecoms database of cellular telephone bills. The authors found no statistically significant relationship between a household\u27s monthly wireless bill and the HHI of the economic area in which the household resides. Thus, market concentration does not appear to have an impact on what the customer actually pays. This finding, along with the fact that wireless prices have declined over time as industry concentration has increased, undermines the structure-conduct hypothesis that undergirds the FCC\u27s market-share analysis

An Antitrust Analysis of the Case for Wireless Network Neutrality

The ongoing debate about possible implementation of regulatory rules requiring “network neutrality” for wireless telecommunications services is inherently about whether to impose a prohibition on the ability of network operators to control their vertical relationships. Antitrust analysis is well suited to analyze whether a wireless network neutrality rule is socially beneficial. Implementing network neutrality rules would be akin to using a per se antitrust rule regarding vertical relationships instead of the rule of reason analysis typically applied to vertical relationships in antitrust. Per se rules are used to prevent actions that rarely, if ever, have any pro-competitive benefits, such as price-fixing agreements. Rule of reason analysis is used when there are potential efficiency gains from the actions under investigation. Some vertical practices of the wireless carriers, such as bandwidth restrictions, may appear to be anticompetitive, but may also have plausible efficiency justifications so should be judged under rule of reason analysis. Economic examination of the wireless industry shows significant competition between networks which reduces the concern about vertical relationships, but some areas that should be monitored by antitrust and regulatory authorities. We propose several regulatory changes that would likely increase wireless competition and lessen the perceived need for prophlactic network neutrality rules while at the same time allowing efficiency-enhancing vertical relationships.network neutrality, wireless internet, antitrust,

Testing the "Waterbed" Effect in Mobile Telephony

This paper examines the impact of regulatory intervention to cut termination rates of calls from fixed lines to mobile phones. Under quite general conditions of competition, theory suggests that lower termination charges will result in higher prices for mobile subscribers, a phenomenon known as the "waterbed" effect. The waterbed effect has long been hypothesized as a feature of many two-sided markets and especially the mobile network industry. Using a uniquely constructed panel of mobile operators' prices and profit margins across more than twenty countries over six years, we document empirically the existence and magnitude of this effect. Our results suggest that the waterbed effect is strong, but not full. We also provide evidence that both competition and market saturation, but most importantly their interaction, affect the overall impact of the waterbed effect on prices.telecommunications, regulation, Waterbed effect, two-sided markets