E N             EN  
EN 
 
E N             EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 23.9.2008 
SEC(2008) 2489 
 
COMMISSION STAFF WORKING PAPER 
 
accompanying the 
Proposal for a 
 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
 
amending Regulation (EC) No 717/2007 on  roaming on public mobile telephone 
networks within the Community and Directive 2002/21/EC on a common regulatory 
framework for electronic communications networks and services 
 
IMPACT ASSESSMENT   
{COM(2008) 580 final} 
{SEC(2008) 2490} 
 
       
 
 
EN 2            EN TABLE OF CONTENTS 
 
CHAPTER 1.  PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES ........... 5  
1. BACKGROUND ............................................................................................................................... ............ 5  
2. DEVELOPMENTS SINCE THE ADOPTION OF THE ROAMING REGULATION .................................................... 6  
2.1. Implementation of the Roaming Regulation.................................................................................... 6  
2.2. ERG Benchmar k Reports .......................................................................................................... ...... 7 
2.2.1 First ERG Benchmark Re port in Ja nuary 2008..................................................................................... ...... 7 
2.2.2 Second ERG Benchmark Report in July 2008....................................................................................... ..... 8 
2.3. Public cons ultation............................................................................................................ .............. 8  
2.3.1 Voice .......................................................................................................................... ................................ 9  
2.3.2 Per-second/per-mi nute billing.................................................................................................. ................... 9  
2.3.3 SMS............................................................................................................................ .............................. 10  
2.3.4 Data services.................................................................................................................. ........................... 10  
2.4. Meetings with inte rested parties............................................................................................... ..... 11  
2.5. Commission study............................................................................................................... ........... 12  
2.6. Developments in the market for SMS and data roaming services ................................................. 12  
2.7. Commission Services In ter-service Group .................................................................................... 12  
2.8. Development of an economic model.............................................................................................. 1 3 
2.9. Impact Assess ment Board........................................................................................................ ...... 13  
CHAPTER 2.  PROBLEM DEFI NITION ..................................................................................................... 15  
1. MARKET SIZE AND SEGMENTS ................................................................................................................. 15  
2. PROBLEM  DEFINITION:  VOICE  ROAMING ......................................................................................... 17  
2.1. Background ..................................................................................................................... .............. 17  
2.2. The nature of the problem ...................................................................................................... ....... 17  
2.2.1 Situation before the current Re gulation ........................................................................................ ............ 17  
2.2.2 The current situation.......................................................................................................... ....................... 17  
2.2.3 At wholesale level ............................................................................................................. ....................... 18  
2.2.4 At retail level ................................................................................................................ ............................ 19  
3. PROBLEM DEFINITION : VOICE BILLING UNITISATION ............................................................................... 19  
3.1. Background ..................................................................................................................... .............. 19  
3.2. The nature of the pr oblem - re tail level....................................................................................... .. 20 
3.3. Wholesale level................................................................................................................ .............. 20  
4. PROBLEM DEFINITION : SMS .................................................................................................................... 21  
4.1. Background ..................................................................................................................... .............. 21  
4.2. The nature of the problem ...................................................................................................... ....... 21  
4.2.1 Wholesale: Inter-opera tor tariffs  (IOTs) ....................................................................................... ............ 22  
4.2.2 Retail prices an d transparency ................................................................................................. ................. 23  
5. PROBLEM DEFINITION : ROAMING PACKET SWITCHED DATA SERVICES ..................................................... 24  
5.1. Background ..................................................................................................................... .............. 24  
5.2. Nature of the problem .......................................................................................................... ......... 25  
5.3. Wholesale charges .............................................................................................................. .......... 26  
5.4. Retail charges an d transparency................................................................................................ ... 28 
CHAPTER 3.  THE CASE FOR EU ACTION (SUBSIDIARITY TEST).................................................. 29  
CHAPTER 4.  OBJECTIVES..................................................................................................................... .... 31 
1. BROAD  OBJECTIVES ............................................................................................................................... .3 1 
2. SPECIFIC OBJECTIVES ............................................................................................................................... 31 
CHAPTER 5.  ALTERNATIVE POLI CY OPTIONS ................................................................................. 33  
1. SELF REGULATION ............................................................................................................................... .... 33 
2. CO-REGULATION ............................................................................................................................... ...... 33  
3. SOFT LAW ............................................................................................................................... ................. 34  
4. ASSESSMENT OF COMPETITION ASPECTS .................................................................................................. 34  
 
EN 3            EN 5. TARGETED REGULATION .......................................................................................................................... 37  
CHAPTER 6.  VOICE ROAMING OPTIONS............................................................................................. 38  
1. VOICE  ROAMING  POLICY  OPTIONS................................................................................................ 38  
1.1. No policy change............................................................................................................... ............ 38  
1.2. Duration....................................................................................................................... ................. 38  
1.3. Transparency regula tion........................................................................................................ ....... 39  
1.4. Wholesale voic e regula tion ..................................................................................................... ...... 39  
1.5. Retail voice regulation ........................................................................................................ .......... 39  
1.6. Summary evaluation and as sessment of impacts........................................................................... 41  
2. OPTIONS FOR WHOLESALE AND RETAIL REGULATION OF VOICE ROAMING SERVICES ............................... 43  
2.1. Glide path for price ce ilings.................................................................................................. ........ 43  
2.2. Maintain current  price ceilings................................................................................................ ..... 44  
2.3. Glide path option 1............................................................................................................ ............ 45  
2.4. Glide path option 2 - with wider gap be tween wholesale a nd retail ce ilings................................ 45  
3. VOICE REGULATION IMPACT ANALYSIS ................................................................................................... 46  
3.1. Consumer and industry welfa re - economic impact ...................................................................... 47  
3.2. Competition - impact on smaller operators................................................................................... 47  
CHAPTER 7.  BILLING UNITISATION POLICY OPTIONS.................................................................. 49  
1. UNITISATION AT RETAIL LEVEL ............................................................................................................... 49  
1.1. Do nothing..................................................................................................................... ................ 49  
1.2. Retail Billing Option 1 – Additi onal transparency obligations..................................................... 49  
1.3. Retail Billing Option 2 – Strict per second billing oblig ation (1+1)............................................. 50  
1.4. Retail Billing Option 3 – Modified per second billing obli gation (30+1)..................................... 50  
1.5. Retail Billing Option 4 – Further reduction of the price caps ...................................................... 51  
2. UNITISATION AT WHOLESALE LEVEL ....................................................................................................... 51  
2.1. Wholesale Billing Optio n – Do nothing ........................................................................................ 51  
2.2. Wholesale Billing Option – Per-second billing............................................................................. 51  
3. ASSESSMENT OF IMPACTS ........................................................................................................................ 52  
3.1. Consumer and industry welfa re - economic impact ...................................................................... 52  
3.2. Competition - impact on smaller operators................................................................................... 52  
4. SUMMARY EVALUATION .......................................................................................................................... 52  
CHAPTER 8.  SMS POLICY OPTIONS ...................................................................................................... 54  
1. REGULATION OF SMS  ROAMING SERVICES .............................................................................................. 54  
1.1. No policy change............................................................................................................... ............ 54  
1.2. Tariff Transparency fo r roaming SMS .......................................................................................... 54  
1.3. Wholesale regu lation only...................................................................................................... ....... 55  
1.4. Retail regula tion only......................................................................................................... ........... 55  
1.5. Wholesale and re tail regu lation................................................................................................ .... 55 
2. SUMMARY EVALUATION AND ASSESSMENT OF IMPACTS .......................................................................... 56  
3. DURATION ............................................................................................................................... ................ 57  
4. OPTIONS FOR WHOLESALE AND RETAIL REGULATION .............................................................................. 58  
4.1. Option 1 – NITA cost model..................................................................................................... ..... 58  
4.2. Option 2 - Retail price ceiling at 15  cents.................................................................................... .6 0 
4.3. Option 3 - Retail price ceiling at 11  cents.................................................................................... .6 1 
5. SMS  IMPACT ANALYSIS ........................................................................................................................... 62  
5.1. Social we lfare................................................................................................................. ............... 63  
6. COMPARISON OF OPTIONS ........................................................................................................................ 64  
CHAPTER 9.  DATA ROAMING POLICY OPTIONS .............................................................................. 65  
1. REGULATION OF DATA ROAMING SERVICES ............................................................................................. 65  
1.1. No policy change............................................................................................................... ............ 65  
1.2. Transparency regulation only ................................................................................................... .... 65 
1.3. Wholesale re gulati on........................................................................................................... .......... 66  
1.4. Retail regula tion only......................................................................................................... ........... 67  
1.5. Wholesale and re tail regu lation................................................................................................ .... 67 
2. SUMMARY CONCLUSION ON REGULATORY APPROACH ............................................................................. 67  
3. COMPARISON OF OPTIONS ........................................................................................................................ 69  
 
EN 4            EN 4. DETAILED OPTIONS FOR TRANSPARENCY REGULATION ........................................................................... 69  
4.1. Provision of basic pr icing info rmation......................................................................................... .6 9 
4.2. Cut-off and wa rning limits ..................................................................................................... ....... 70  
4.3. Real time expenditu re information.............................................................................................. .. 70 
4.4. Flat rate  offer ................................................................................................................ ................ 70  
5. DETAILED OPTIONS FOR WHOLESALE REGULATION ................................................................................. 71  
5.1. Option 1 – Aggressive Wholesale cap linked to best ma rket offers............................................... 71  
5.2. Option 2 –Wholesale cap se t at safegua rd level............................................................................ 71  
5.3. Option 3 – A new w holesale model ............................................................................................... 71 
6. ANALYSIS OF THE IMPACTS ..................................................................................................................... 72  
6.1. Transparency................................................................................................................... .............. 72  
6.1.1 Industry impact................................................................................................................ ......................... 72  
6.1.2 Consumer impact................................................................................................................ ...................... 72  
6.1.3 Administrativ e burdens......................................................................................................... .................... 73  
6.2. Wholesale re gulati on........................................................................................................... .......... 73  
6.2.1 Industry and cons umer impact................................................................................................... ............... 73  
6.2.2 Competition and impact on smaller operators .................................................................................... ...... 74  
6.2.3 Administrativ e burden .......................................................................................................... .................... 74  
7. DURATION ............................................................................................................................... ................ 74  
8. COMPARISON OF OPTIONS ........................................................................................................................ 75  
CHAPTER 10.  EVALUATION AND MONITORING ............................................................................ 76  
CHAPTER 11.  CONCLUSIONS – OVERALL IMPACTS OF THE PREFERRED OPTIONS ......... 77  
ANNEX I.............................................................................................................................. .............................. 79  
1. INTRODUCTION ............................................................................................................................... ......... 79  
2. VOICE – MARKET SIZE AND OT HER KEY PARAMETERS ............................................................................. 79  
2.1. Estimation of  volumes .......................................................................................................... ......... 79  
2.2. Estimation of  revenues ......................................................................................................... ......... 80  
3. SMS  - MARKET SIZE AND OTHER KEY PARAMETERS ................................................................................ 81  
3.1. Estimation of  volumes .......................................................................................................... ......... 81  
3.2. Estimation of  revenues ......................................................................................................... ......... 81  
4. DATA SERVICES ............................................................................................................................... ........ 81  
4.1. Estimation of  volumes .......................................................................................................... ......... 81  
4.2. Estimation of  revenues ......................................................................................................... ......... 83  
ANNEX  II ............................................................................................................................. ........................... 84  
1. INTRODUCTION TO THE MODEL ................................................................................................................ 84  
2. DEMAND MODEL ............................................................................................................................... ...... 86  
3. COST FUNCTION ............................................................................................................................... ....... 88  
4. WELFARE IMPACTS OF EC REGULATION 717/2007  (THE VOICE REGULATION ) ........................................ 90  
5. WELFARE IMPACTS OF REGULATORY OPTIONS ........................................................................................ 94  
5.1. Voice roaming regulation as  proposed in Option 1 ...................................................................... 94  
5.2. Voice roaming regulation as proposed  in this impact asse ssment – Option 2 ..................................... 96  
5.3. SMS roaming regulation as proposed by the ERG ............................................................................. .. 98 
5.4. SMS roaming regulation as prop osed in this impact assessment ......................................................... 98  
 
 
 
EN 5            EN CHAPTER 1.  PROCEDURAL ISSUES AND CONSULTATION 
OF INTERESTED PARTIES 
1. BACKGROUND  
This impact assessment (IA) report examines options arising from the Commission's review 
of the functioning of the Roaming Regulation1 pursuant to Article 11 thereof. In particular it 
examines the possible extension of its duration beyond its current expiry date of 30 June 2010 
with regard to intra-Community voice roaming services and the possible extension of its scope to cover intra-Community SMS roaming a nd/or intra-Community packet data roaming 
services. In each case it examines the impact of  these options on consumers and the industry.  
Due to the specific cross-border characteristic s and structure of the international roaming 
markets, national regulatory authorities (NRAs) we re not able to deal effectively with the lack 
of competitive pressures and the ensuing unjustifiably high prices for Community-wide roaming services. The NRAs, through the medium of the European Regulators Group (ERG), 
which has been established in order to give  expert advice to the Commission on regulatory 
issues with a single market dimension, ac knowledged this problem and called on the 
Commission to act at European  level. The Commission adopted  a proposal for a Regulation 
on public mobile networks  within the Community
2 on 12 July 2006.  
On the basis of the Commission's proposals and in  response to persistent concerns over the 
high prices paid by EU citizens when using th eir mobile phones to make and receive voice 
calls while travelling abroad in other Member St ates, and in order to ensure a high level of 
consumer protection and the smooth functioning of the Internal Market, on 27 June 2007 the 
European Parliament and the Council adopted the Roaming Regulation.  
The Roaming Regulation is based on Article 95  of the EC Treaty. It came into force on 30 
June 2007 and will expire on  30 June 2010 unless the Europ ean Parliament and Council 
decide to extend it beyond that  date, on the basis of a proposal from the European 
Commission.  
The Roaming Regulation requires mobile teleph ony network and service providers within the 
Community to offer their customers a 'Eurotariff' for voice calls made and received when roaming in other Member States which complie s with the price ceili ngs specified in the 
Roaming Regulation. These ceilings will be furt her reduced by the Roaming Regulation on 30 
August 2008 and 2009
3. The Roaming Regulation also places a ceiling on the average 
                                                 
1  (EC) No 717/2007 of the European Parliament and of the Council of 27 June 2007 on roaming on public 
mobile telephone networks within the Community and amending Directive 2002/21/EC, OJ L 171 of 29 
June 2007 p 32-40 
2  Proposal for a regulation of the European Parliament and of the Council on roaming on public mobile 
networks within the Community and amending Directive 2002/21/EC on a common regulatory framework 
for electronic communications networks and services of 12 July 2006, COM(2006)382 final.  
3  The retail charge (excluding VAT) of the Eurotariff which a home provider must offer its roaming customer 
for the provision of regulated roaming voice calls shall not exceed €0.49 per minute for any call made or 
 
EN 6            EN wholesale price that one mobile  operator can charge another for the provision of regulated 
roaming calls at wholesale level4.  
The Regulation includes requirements on mob ile roaming providers which guarantee a 
minimum level of price transparency for their customers and NRAs are charged with the task 
of monitoring and supervising compliance with  the Roaming Regulation and may intervene 
on their own initiative to  ensure compliance.  
The Roaming Regulation5 also calls on the European Commi ssion to review the functioning 
of the Roaming Regulation and re port to the European  Parliament and the Council before 30 
December 2008. In its report, the Commission is required to assess whether the objectives of 
the Roaming Regulation have been  achieved and whether, in the light of developments in the 
market and with regard to both competition a nd consumer protection, there is need to extend 
its duration and/or to amend it, taking into acc ount the developments in charges for mobile 
voice and data communicat ion services at national level and the effects of the Roaming 
Regulation on the competitive situ ation of smaller, independent  or newly started operators. 
Provided that the European Commission finds th at there is such a need, it shall submit a 
proposal to the European Parliament and the Council. 
The European Parliament and Council also  charged the Commission in the Roaming 
Regulation specifically with reviewing developm ents in wholesale and retail charges for the 
provision to roaming customers of data comm unication services, including SMS and MMS, 
and, if appropriate, including recommendations re garding the need to re gulate these services.  
Regulatory proposals in the review  of the functioning of the Ro aming Regulation are based on 
the provisions of Article  95 of the EC Treaty.  
2. DEVELOPMENTS SINCE THE ADOPTION OF THE ROAMING REGULATION  
The Commission services commenced preparations  for the review of th e functioning of the 
Roaming Regulation in the Autumn of 2007. The main elements of the Commission Services 
work in preparation for this Review, together with other significant developments, are 
summarised in this section.  
2.1. Implementation of the Roaming Regulation  
The Roaming Regulation entered into force on 30 June 2007. The obligations relating to 
wholesale voice roaming prices (Article 3 of  the Regulation) took effect on 30 August 2007, 
while the transitional period allowed for the introduction by roaming providers of the 
Eurotariff came to an end on 30 September 2007. Implementation of the Roaming Regulation, 
                                                                                                                                                         
€0.24 per minute for any call received. These ceilings shall decrease to €0.46 for calls made and €0.22 for 
calls received on 30 August 2008 and to  €0.43 and €0.19 respectively on 30  August 2009 (A rticle 4(2) of 
the Roaming Regulation). 
4  The wholesale price ceiling is set at €0.30 per minute, decreasing to €0.28 and €0.26 on 30 August 2008 and 
30 August 2009 respectively (Article 3 of the Roaming Regulation).  
5  Article 11 of the Roaming Regulation  
 
EN 7            EN and the transition to the 'Eurotariff' in partic ular went smoothly, with only a few exceptions 
noted by NRAs.  
At the end of September 2007 it is estimated that over 400  million EU citizens could benefit 
from the 'Eurotariff' which makes it the stan dard, default tariff in Europe. While per minute 
retail roaming prices in the EU in 2007 were probably sign ificantly lower than in 20056 and 
2006, in the second quarter of 2007 (the quar ter preceding the entry into force of the 
regulation) the average was €0.77  for outgoing voice calls and €0.42 for incoming voice 
calls7. Prices have now fallen to no more than  €0.49 per minute for making calls and to no 
more than €0.24 per minute for receiving voice calls (excluding VAT).8 The ERG and 
operators have also repo rted that in general the applicatio n of the new wholes ale ceilings is 
working smoothly. 
The Roaming Regulation has also ensured that  consumers benefit from more transparent 
information on roaming charges. The ERG's fi rst Benchmark Report (see below) found that 
operators have now broadly complied with th e transparency obligations set out in the 
Roaming Regulation even though some further progr ess appears to be need ed to ensure full 
compliance and to tackle problems such as "hid den charges", resulting from the use of billing 
for roaming charges by minutes instead of by the second. 
2.2. ERG Benchmark Reports   
Shortly after the adopti on of the Regulation, the ERG estab lished a project team to monitor 
the implementation of the Regulation and to  provide input to support the Commission's 
review of its functioning as we ll as input to the key policy issu es that need to be addressed. 
The main activity of the ERG in this context is an extensive six-m onthly data collection 
exercise which has formed the basis for two Benchmark Reports.  
2.2.1 First ERG Benchmark Report in January 2008  
The ERG published the first of its six-monthl y reports in January 2008 covering the 6 months 
from April to September 2007 and including data  from 150 mobile service providers in all 
Member States9. The ERG estimates that this covers  around 95% of EU consumers using 
international roaming services in January 2008. The fact that the 1st report includes data from 
before the Roaming Regulation came into eff ect gives a reference point against which the 
trend in roaming tariffs can be measured. 
                                                 
6 The average for 2005 was estimated to be around €1.10 per minute 
7 It should be noted that the EC economic model looks at actual volumes rather than to billed volumes, since this 
will allow a more precise calculation of price elasticities in future reports. Thus, the average price as derived 
in this impact assessment cannot be directly compar ed to the average price as  estimated by ERG in its 
reports of January and August 2008, in which aver age prices were derived based on billed volumes. 
 
8  For customers who have selected a 'Eurotariff'. 
9  ERG (07) 85, available at http://erg.eu.int/doc/p ublications/erg_07_85_ intl_roaming_rep.pdf  
 
EN 8            EN Given that the first reporting period only ran unt il shortly after the Roam ing Regulation's full 
effects were felt, it was still too early to draw conclusions on the overall effects of the 
Roaming Regulation in the ERG's 1st report. However, the figures  for that period already 
illustrate the positive impact of the Roaming Regulation on average tariffs. The report noted that prices for roaming calls made and receiv ed have fallen in all EU Member States.  
The report indicates that prices for data and SMS roaming services were high with a very 
diverse pattern across Member States . Average data prices in the 3
rd quarter of 2007 were 
measured at €5.24 per MB down from €5.81 in th e second quarter. The average SMS price 
(€0.29) was the same in both quarters. There we re significant gaps be tween the highest and 
lowest SMS charges with the average price in Spain being over €0.50 compared to €0.15 in 
Estonia. Poland showed the highest average ch arge per MB for data roaming at over €11 
while Austria was the lowest  at just under €4 per MB.  
In addition to the implementation of the Roaming Regulation and the levels  of prices for data 
and SMS roaming, the ERG's 1st report also covers other is sues on which the Commission has 
to report to Council a nd Parliament. These issues relate  to traffic steering, inadvertent 
roaming and actual v. billed minutes (per mi nute as opposed to per second charging).  
2.2.2 Second ERG Benchmark Report in July 2008  
The second ERG Report covers the last quarter  of 2007 and the first quarter in 2008. This 
provides evidence that national averages for wholes ale and retail Eurotariff prices were in full 
compliance with the Regulation in all Member St ates. However, average retail prices remain 
at, or just below, the cap in around two thirds of Member States . At the wholesal e level, there 
was a clear decrease in the average rate in all countries compared to the position pre-Regulation. For SMS there appears to have been little movement in prices in most Member 
States, at the retail and wholes ale levels. The average data pr ice per megabyte shows a diverse 
picture, particularly at the reta il level where the differences in  price between countries remain 
large, and some countries still have very high average prices. At  the overall level, however, it 
seems that both retail and wholesale prices fo r data roaming are following a downward trend. 
The Report also indicates that roaming minutes  billed exceeded actual elapsed minutes by a 
significant margin (typically 24% at the re tail level for calls made and 19% for call 
received
10) as a consequence of the practice of many providers of using charging intervals of 
more than one second at both the wholesale and retail levels.  
2.3. Public consultation     
The European Commission launched a wide -ranging public consultation on 7 May 2008 
asking for comments on the review of the Ro aming Regulation and on the possible extension 
to SMS and data roaming servi ces. 39 questions were raised about the general functioning of 
the roaming regulation as well as on specific issues  such as inadvertent roaming, the effect on 
smaller operators and domestic prices, the issue of actual vs. billed mi nutes and the need for 
similar rules concerning SMS roaming se rvices and data roaming services. 
                                                 
10 This is in reference to the Eurotariff. 
 
EN 9            EN The public consultation11 was made accessible via the 'Your voice in Europe' website12. This 
is the European Commission's single access poi nt to a wide variety of consultations, 
discussions and other tools, and was set up in the context of the Interactive Policy-making 
Initiative as part of the Commissi on's minimum standards on consultation. 
Although the deadline stipulated for submission of the responses was 2nd July, the European 
Commission has not rejected any su bmissions that were received later. In total, 45 responses 
were received and the submissions that have  not been marked as containing confidential 
information are available on the roaming website.13 
2.3.1 Voice 
There was strong support for the view that th e voice regulation should be extended beyond the 
2010 deadline. In particular, the European Regulators’ Group, othe r individual NRAs, 
Member States and consumer organizations have argued for retaining both wholesale and 
retail regulation. Only one Member State (C zech Republic) has expressed itself against 
extension of the regulation. The GSM Associati on and the large majority of operators have 
expressed the view that voice regulation shoul d not be extended since the objectives have 
been met and prices are not lik ely to increase in future.  
A few small and independent oper ators, including some that do not form part of alliances, 
continue to favour an extension of the re gulation at least at the wholesale level. 
In their submission, the ERG note that so far, th ere is no sufficient eviden ce of competition to 
justify lifting regulation at the retail level sin ce many operators offer the Eurotariff at or near 
the maximum caps. ERG has assumed that any extension to the regulation would be for a 
period of three years and would favour further reduc tions in the glide paths of 2-3 cents at the 
retail level on the basis of cu rrent cost trends. A higher reduction might be justified for 
incoming retail calls. More over, they also indicate that the ceiling could be reduced by 2 cents 
each year at the wholesale level. 
Consumer organizations are also of the opinion  that it is still too early to withdraw the 
Regulation and note that wholesal e regulation alone is not sufficient to ensure that there is 
pass-through of the benefits  to retail consumers. 
2.3.2 Per-second/per-minute billing 
The issue of per-minute and pe r-second billing was also raised  by most respondents. The ERG 
believes that urgent action is n eeded to deal with what they call the ‘hidden charge’ issue. 
While the regulators acknowledge that retail billing units of 1 second would undoubtedly 
provide consumers with the most transparent solu tions, they also state that a two-part tariff 
would not be an unreasonable stru cture given that fixed costs are incurred in setting up a call.  
                                                 
11  Available at http://ec.europa.eu/inform ation_society/activities/ro aming/roaming_regulation  
/consultation_may08/index_en.htm  
12  http://ec.europa.eu/yourvoice/consultations/index_en.htm 
13 http://ec.europa.eu/information_society/activities/roam ing/regulation/consult08/contributions/index_en.htm  
 
 
EN 1 0            EN Consumer organizations, such as BEUC and th e Finnish Consumers Association, have called 
for per minute pricing to be banned. INTUG, which protects the intere sts of business users, 
has noted that per minute (or 30 seconds) are common for new plans and several per second 
plans are being discontinued. 
The GSM Association, however , points out that billing itemization is indicative of 
competitive differentiation. To address this issu e in the regulation would constitute micro-
regulation and erode competition. Many of the operato rs note that this issue should be left to 
the market and the large majority of operators that replied have stresse d that they have not 
changed their billing practices as a result of  the Roaming Regulation. However, two operators 
suggested that per second billing should apply at the wholesale level since per minute billing 
at the wholesale level puts a constraint on th e ability of an operato r to price on a per-second 
basis at the retail level. Vodafone, in its non confidential submission no tes that by 1 October 
2008, its operators in different Member States w ill all move to ’60 plus  1’ unitization for the 
Eurotariff which would mean that the vast majo rity of their customers would have the same 
unitization for roaming as for their domestic services. 
2.3.3 SMS 
The ERG has noted that there appears to be litt le movement in SMS retail roaming prices up 
to April 2008, despite strong calls from National Regulatory Authorities a nd political pressure 
to bring down prices. They have therefore r ecommended the introduction of a price cap on the 
average wholesale rate charged by any one operator to any othe r operator for SMS roaming, 
and the amendment of the Eurotariff obligation to  include an offer of SMS roaming at a retail 
rate not greater than a specified maximu m cap. The ERG recommended that wholesale 
charges could vary from 4 to 8 cents while re tail caps should be set at a maximum of between 
11 cents and 15 cents since such levels would be sufficient to allow full recovery of costs 
together with a reasonable return. Both NI TA, the Danish NRA, and UKE, the Polish NRA 
have submitted opinions in favour of wholesale and retail regulation of  SMS. As for voice 
services, the Member States th at responded to the public cons ultation were in  general in 
favour of regulation of SMS at wholesale and re tail level while only the Czech Republic was 
against. 
Consumer organizations have also expressed th emselves in favour of SMS regulation at both 
wholesale and retail level. 
On the other hand, the GSM Asso ciation and mobile operators are generally against such 
regulation. The GSM Association notes that there are few consumer complaints and a number 
of operators have lowered roaming prices or  introduced SMS bundles. Pr ices have fallen by 
18% up to April 2008 and there is a similar price ratio between a voice call and an SMS in the 
domestic market. The large majority of mob ile operators are agains t any form of price 
regulation at wholesale a nd retail level with the main argume nts being that prices are not high 
and that there are very few consumer complain ts. However, four operators have expressed 
themselves in favour of wholesale regulation for SMS since this is the only way retail 
competition is possible. 
2.3.4 Data services 
In the responses to the public consultation, there was almost a general consensus on the desire 
to eliminate ‘bill shock’ and to this exte nt, many operators have introduced, or will be 
introducing, transparency measures  to deal with  this issue. 
 
EN 1 1            EN The ERG recommends a more cautious appro ach concerning regulati on of data roaming 
compared to the case of voice and SMS. Th ey suggest that ther e are some signs of 
competition at both the retail and wholesale levels. The latest collected data paints a heterogeneous picture of the evol ution of rates per MB  at retail level. Wh ereas some countries 
show a decrease in prices, in other Member States prices ha ve remained unchanged or even 
increased. It noted there are two special concerns  that need to be further investigated when 
considering price regulation. Firs t, it is concerned that lowe r wholesale charges should be 
available to smaller, newer and more indepe ndent operators. Lower w holesale charges are a 
prerequisite to lower retail rates (although not a guarantee). Second, it notes the progress 
made by certain operators in re ducing their wholesale and retail costs but this is not the case 
in all Member States. 
The ERG believes that "immedia te, formal regulatory action"
14 is required to improve 
transparency and eliminate bill shock. 
The Danish and Polish NRAs have  indicated that wholesale and retail regulati on is necessary. 
On the other hand, the Portuguese government and the Czech government have expressed 
themselves against price regula tion while the Maltese government  has left the issue open but 
said that transparency measures might  not be enough to solve the problem.  
Consumer organizations have also expressed themselves in favour of  regulation at both 
wholesale and retail levels. BEUC notes roundi ng of unitization can have big impact on bills 
and called for a protective cap which could be  a price per day subject to a maximum usage 
limit. INTUG said that data roaming tariffs are prohibitively high and th at transparency is a 
must but is not sufficient for lo wering charges. For the EU to be competitive, mobile data 
access is essential but the current tariffs repres ent a tax on doing business in Europe, dissuade 
use and prevent the development of data services in the EU. 
The GSM Association, and the ma jority of operators have expressed themselves against price 
regulation noting that these services are still being developed, investme nts in infrastructure 
are still being made and prices have been falling.  Operators also point to alternative forms of 
competition to data roaming services such as Wi fi hotspots and access to internet from hotels. 
Some operators have called for wholesale regu lation to enable competition at the retail level 
while two operators have in particular suggest ed possible changes to the wholesale charging 
structure to take into account the changes that  are taking place in data usage. For example, 
one suggestion was to move from a per MB ch arging mechanism to a per minute/hour basis 
while an alternative charging m odel would be to move to a pure wholesale model which could 
be based on a yearly volume commitment by the home network. 
2.4. Meetings with interested parties 
As with the consultations conducted during the preparation of the Commission's initial 
proposal for a regulation on intra-Community  voice roaming services, the Commission 
services have remained open to contacts with interested parties throughout the process. The 
services have listened to and taken note of a ll views expressed, and have gathered as much 
information as possible from different players and stakeholders. Meetin gs with operators and 
representatives of the ERG, whic h established a special international roaming project team to 
                                                 
14  ERG opinion  p.12 
 
EN 1 2            EN monitor implementation of the Roaming Re gulation and develop the ERG's collective 
position on the review of the Regulation, in the li ght of market developments, have continued 
during the process of drafting the pr esent impact assessment report.  
2.5. Commission study    
The Commission also commissi oned a study by independent c onsultants, Connect2Roam, on 
"Roaming Data Services". This study focuses on:  
• analysing the principal characteristics of mobile data roaming services; 
• the commercial and economic features of the wholesale and retail markets for data 
roaming; 
• technical infrastructure needed to offer these services; and  
• prices at wholesale and retail levels. 
The consultants' final report on this st udy, dated 24 June 2008, has been published by the 
Commission on 27 June 2008 at the following address:  
http://ec.europa.eu/information_society/ac tivities/roaming/docs/ study_data.roaming.pdf  
2.6. Developments in the market for SMS and data roaming services     
Commissioner Reding warned the industry in Fe bruary 2008 at the GS M World Congress in 
Barcelona that prices for SMS and data roaming needed to be  reduced by early  July 2008 in 
order to avoid regulation15.    
On 4 June 2008 Commissioner Reding wrote to th e CEOs of all mobile operators in the 
European Union, requesting information on thei r price offerings for SMS and data roaming 
services in the EU as well as on transparency m easures taken for those services, as at 1 July 
2008. Operators were given till 30 June 2008 to reply to this letter.   In total, 82 operators have 
replied to the letter and the result of thei r responses is available on the Roaming Website16.  
 
 
2.7.  Commission Services Inter-service Group 
In order to support the prepara tion and drafting of this Imp act Assessment, a Commission 
Services inter-service group was establishe d. The following Commission Services were 
invited to participate: Secretar iat General, Legal Service, Ente rprise and Industry, Health and 
                                                 
15  See Commissioner Reding's public comments at the GSM World Congress in Barcelona at 
http://ec.europa.eu/information_society/activities/roam ing/docs/dataroamingcomments.pdf: "I have no 
appetite at all for regulating again. But to avoid regulati on, the industry will have to show its responsiveness 
to consumer concerns by credible reductions of the cost for data roaming both at the wholesale and at the 
retail level and by transparent offers compatible with the spirit of the single market. The market situation on 
1 July 2008 will be decisive for whethe r regulation will be necessary or not." 
16 (http://ec.europa.eu/information_society /activities/roami ng/tariffs/index_en.htm ) 
 
 
EN 1 3            EN Consumer Protection, Internal Market and Serv ices, Competition, Employment, Social Affairs 
and Equal Opportunities, Economic and Financ ial Affairs and Trade.  There were three 
meetings of this group (o n 27 May, 3 July, 24 July). 
2.8. Development of an economic model 
In addition to the general data gathering exercise undertaken by ERG, all NRAs have 
provided directly to the Comm ission the operator-specific data which was gathered by them 
as part of that general monitoring exercise . This comprehensive data has enabled the 
Commission Services to construct an economic model which provides estimates of the impact 
of the current Regulation as well as the economic impact of the policy options set out in this 
report.  This model is explained in detail in Annex II.  
 
2.9. Impact Assessment Board 
On 1 September 2008 the Impact Assessment Board (IAB) in its final opinion recommended 
the following improvements in summary:   
The IAB indicated that the conclusion that  competition is inadequate needs more 
explanation and the use of competition policy measures should be analysed for at least the data roaming market. Furthermore the report should add key facts/information 
about the mobile telecoms i ndustry and assess the costs of the transparency measures 
proposed. In particular the report should expl ain the rationale for analysing roaming as 
a market in its own right, as opposed to  viewing the purchase of a mobile phone 
package as the relevant market. With regard  to prices the repor t should not merely 
present minimum and maximum prices but give a fuller overview of the spread. 
The report should assess where possible the impact on revenue (in absolute numbers 
and as a percentage of revenues and profit) th at operators have faced  as a result of the 
existing Regulation and the additional impact  that they will f ace under each of the 
policy options analysed, and present these figures in a clear overview table.  
 
A more detailed elaboration as to why competition is inadequate and an evaluation of the use of competition policy measures is provided in Chapter 5 on alternative policy options. This 
also includes an elaboration on the rationale fo r analysing roaming as a market in its own 
right, as opposed to viewing the purchase of a mobile phone pack age as the relevant market.  
 In relation to the use of competition law instrume nts, the Impact Assess ment associated with 
the current Regulation referred to the Co mmission's sector inquiry which covered inter alia 
national and international roaming services. Based on the results of this enquiry, the  
Commission carried out an in-depth investigatio n which resulted in statements of objections 
which set out the Commission’s preliminary pos ition, according to which four operators had 
infringed Article 82 of the EC Treaty. Following hearings held in June and July 2005 and a 
further exchange of views with the part ies involved, the Competition DG subsequently 
concluded its investigation while pointing to the Roaming Regulation. Ho wever, it should be 
stated that any regulatory in itiative under Article 95 of the Treaty does not preclude the 
possibility of action under EU competition law.   
 
EN 1 4            EN  
In relation to the economic impacts (Annex I), these have been expanded to include more 
detail on the impact of the Roaming Regulati on upon industry and in particular on how voice 
roaming revenues have developed following entry into force of the Regulation including how 
these are projected to develop over the fo llowing years. The impacts of the Roaming 
Regulation on revenues and profit s are also now expressed in relative percentage terms over 
time as well as in relation to the value of the mobile sector as a whole.   
In terms of administrative burden, the Regulati on is largely self-enfor cing which means that 
the administrative burden should not be high  and therefore not significant. Regarding 
compliance costs, these are most likely to arise in the area of transparency where some market 
players have indicated that th ey will be implementing such m easures in any case. As shown 
on page 75 (section 4.4) the question of the proportio nality of transparency measures for data 
roaming has been considered and the potentia lly more onerous requirements have been 
discarded. 
It is considered that the length of this document is reasonable in light of the need to carry out 
a full assessment on three distinct roaming services i.e. voice, data and SMS.  
 
EN 1 5            EN CHAPTER 2.  PROBLEM DEFINITION  
1. MARKET SIZE AND SEGMENTS17 
The EU market for mobile roaming services can be divided into voice services, SMS and 
broadband data services. The three segments to gether in 2007 accounted  for €6.54 billion in 
revenues.18 This corresponds to approximately 4.7% of  the total EU mobile market, which in 
the Commission's 13th implementation report was estimated at €137 billion.19 While in terms 
of revenues roaming services are thus of less importance to the mobile industry than domestic services or wholesale mobile termination servic es, the roaming share of an operator's revenue 
pie is still significant, and typically more attrac tive than other services from a profit-margin 
perspective.        
Voice services constituted 79.1% (€5.17 billion)  of the overall roaming market in 2007, SMS 
12.3% (€0.80 billion) and broadba nd data 8.6% (€0.56 billion). 
                                                
 
17 All figures in this section are derived from a detailed data-collection exercise undertaken by the national 
regulatory authorities and the European Commission. Data were collected from 27 NRAs on an individual per-operator basis, and were then aggregated by means a bottom-up a pproach. See the annex for a detailed 
explanation.  
18 The market size figure for 2007 is es timated on an as-if-basis, i.e. corr ecting for the effect of regulation on 
prices in Q3:2007 and Q4:2007. In other terms, the figure shows what the size of the EU roaming market in 
2007 would have been  in the absence of the roaming regulation (re tail price caps mostly came into effect on 
30 September 2007). It should also be noted that it is difficult to compare the 2007 figure, which is derived from a comprehensive set of firm-level data, to the figures given in the impact assessment of 2006, which 
had to rely on other sources.
 
19 Progress Report on the Single European Electronic Communications Market 2007 (13th Implementation 
Report) , COM (2008) 153,  19/03/2008, p.3  
 
EN 1 6            EN Chart 1:  
    
Voice and SMS roaming service growth largel y reflects the maturity of these market 
segments; growth for data roaming services is however very dynamic and at least in line with 
domestic mobile data services growth20. The data segment is thus expected to overtake SMS 
to become the second-biggest roaming segment in one or two years.  
                                                 
20 Domestic data services are growing at more than 40 % p.a. As for roaming data services, according to EC 
estimates, data volumes grew sequentially over 20% in each quarter of 2007, ranging from 24.6% (Q3:2007 
to Q4:2007) to 49% (Q2:2007 to Q3:2007). Market Size and segments
(Euro, million ) 
Voice; 5173.28SMS; 804.32  Data; 559.15
 
EN 1 7            EN  
2. PROBLEM  DEFINITION:  VOICE  ROAMING  
2.1. Background 
In its report on the functioning of the Ro aming Regulation, the Commission must assess 
whether, in the light of developments in the market and with regard to both competition and 
consumer protection, there is a need to exte nd the duration of the Regulation beyond the 30 
June 2010 or to amend it. In considering this issue the Commission has to take into account 
developments in charges for mobile voice servi ces at national level and the effects of the 
Regulation on the competitive situation of smalle r, independent or newly started operators.  
A key question is whether consumers would benefit from competitive retail roaming rates in 
the long term if the Roaming Regulation were  allowed to expire on 30 June 2010. Such a 
scenario would imply that the market and te chnological conditions which gave rise to the 
need for regulation in the first place have altered so that sust ainable competition at wholesale 
and / or retail levels is likely from June 2010 onwards.  
2.2. The nature of the problem 
2.2.1 Situation before the current Regulation 
The Commission's impact assessment accomp anying Roaming Regulation identified the 
absence of a meaningful relationship between prices for EU-wide roaming at both wholesale 
and retail level one the one hand, and the underlying costs of serv ice provision on the other as 
one of the key problems the regulation was designed to address.21 In addition to tackling the 
excesses which prevailed in the pricing structure for many years,  the regulation also sought to 
increase transparency of prices and offeri ngs for consumers, thereby leading to more 
competition between operators on this service.  
The challenges proposed by the EU market for roaming services were unique in that they 
could not be addressed by existing regulatory to ols. Having studied and analysed the market 
carefully, national regulatory authorities alerted the Commissi on that the problem was ‘non-
trivial’ and that it required acti on at EU level. Due to the cross- border nature of the service, a 
common EU approach for the internal market as a w hole had to be adopted.  
2.2.2 The current situation 
By setting wholesale and partial re tail price caps (the latter are partial because the Eurotariff 
does not apply to all mobile consumers) a nd by imposing transparency obligations on 
operators, the regulation arguably succeeded to  tackle the challenge explained above. The 
Commission's monitoring of implementation suggests that obligations imposed by the 
Regulation are being met, and consumers now have access to a Eurotariff at or below the 
                                                
 
21 Impact assessment of policy options in relation to a Commission Proposal for a Regulation of the European 
Parliament and of the Council on roaming on public mobile networks within the Community COM (2006) 382  final 
p.17 
 
EN 1 8            EN price caps permitted by the Regulation. As a result, consumers under the Eurotariff on 
average save 36.4% for outgoing calls and 42.9%  for incoming calls when compared to the 
prices for EU roaming services prevailing in early 2007.22 
However despite these gains, it appears that th e structural problems with this market have 
remained intact. While voice roaming services may be an important source of revenues and profits for a mobile operator, from the point of view of consumers prices for voice roaming 
are perceived as prices for only one element of a larger mobile bundle purchased – and as a 
less important element of this bundle tha n, say, domestic voice, domestic SMS or a 
(subsidized) mobile device included in the mobile  price plan. This mitigates the ability of 
operators to use attractive ro aming prices as an efficient tool for customer acquisition. 
Furthermore, the presence of switching costs and the lack of adequate substitutability of voice 
roaming once the customer is abroad  reduce the degree of expected competitive rivalry on 
this service. Both of these stru ctural characteristics suggest, th eoretically, that there might be 
good reasons for continued regulatory intervention. 
Based on the Commission's comprehensive data  collection and analysis, the evidentiary 
record since adoption of the regulation confirms this. In  its response to the public 
consultation, the ERG confirms that the funda mental problems which existed prior to the 
current Regulation remain. According to its submission, consumer surveys indicate that 
consumers pay little attention to  roaming tariffs when making their initial choice of network 
operator.  Nor are they likely to switch networks in response to prices changes for roaming 
tariffs. There is some competition generated by independent service providers, for example by companies marketing host-country SIM-cards for use while abroad.  But these offers have 
made relatively small inroads into the market. 
The current wholesale and retail voice roaming caps were set by Parliament and Council so as 
to allow all market players to recover efficiently incurred cost s (with a contribution to joint 
and common costs as well as reta il costs) and to make a profit on service provision. In other 
terms, the caps were designed with the intention to allow price competition below the Eurotariff price caps. A key question is thus the extent to which such competition has indeed occurred. 
2.2.3 At wholesale level 
The average wholesale cap for the period of 30 August 2007 - 30 A ugust 2008 is €0.30 per 
minute for the provision of a regulated (outgoing) roaming call.  It applies to the average of 
the charges between any two ope rators over a twelve month period. ERG Benchmark Data 
Reports indicate that average wholesale charges (between n on-group companies) have been 
decreasing steadily and markedly from 46€c  pre-Regulation (Q2:2007), to 39€c (Q3:2007), 
27€c (Q4:2007) and 25€c (Q1:2008), an overall re duction of 46% (the charges negotiated for 
2008 are likely to take into account the Augus t 2008 reduction in the wholesale cap to 28€c 
per minute). Eight countries reported an averag e charge that is 5€c or less than the 2008 
average 28€c cap. The distribut ion of average charges by c ountry has narrowed since the 
Regulation has come into effect. While these de velopments are encouraging, there are still a 
large number of Member States where the wholesale cap is still on average very close to the 
                                                
 
22 See Annex I for a discussion of price levels in 2007. The percentages are based on the Eurotariff price caps of 
€0.49 and €0.24 valid until mid-2008; Individual savings (as well as savings in coming years) may be 
significantly higher. Similarly, savings compared to prices in 2005 or 2006 may be more significant. 
 
EN 1 9            EN ceiling set in the Regulation. In addition to the objective of harmonisation, it is also essential 
to ensure that smaller operators do not suffer ma rgin squeeze and can continue to compete in 
this market.  
 
2.2.4 At retail level 
The second ERG Benchmark Data Report fo r October 2007 – March 2008, the first six 
months of full implementation of  the Roaming Regulation, found Eurotariff offers for making 
and receiving calls below the maximum caps in around one third of the relevant countries 
which means that in two thirds of countries th e Eurotariff offers are at the maximum caps. Of 
the one third of countries below the maximum caps ,  a third of these repo rted an average price 
at least 5€c below the 4 9€c cap for making calls.  
While these developments are clearly encouragi ng, prices do not yet vary sufficiently from 
the Eurotariff cap to provide evidence of healthy innovation and competition. Despite the 
recent declines in wholesale tariffs there is so  far no evidence that these cost reductions are 
being passed onto consumers in all Member States. Rather, many operators offer the 
Eurotariff at or near the maximum caps, while al ternative tariffs account for a relatively small 
share of total traffic. The fact that more th an 400 million EU consumer s were protected by the 
Eurotariff, making it the standard default retail roaming offer, suggests that there is little 
evidence of a significant impact  of non-Eurotariff innovative offe rs, thus further corroborating 
the initial decision to introduce reta il as well as wholesale caps.  
3. PROBLEM DEFINITION : VOICE BILLING UNITISATION  
3.1. Background 
The Roaming Regulation imposes price limits on intra-Community voice roaming services 
which are expressed in terms of a specified monetary amount expressed on a "per minute" 
basis, in accordance with normal industry and re gulatory practice. The re levant provisions of 
the Regulation did not however sp ecify explicitly what should be the minimum units of time 
by reference to which the prices for wholesale and retail roaming voice services were to be calculated when it came to billing for the re gulated roaming calls made or received.  
Indeed, the ERG benchmark data report for Se ptember 2007–March 2008 estimated that per-
minute billing practices add around 24% to a typi cal retail bill for calls made and 19% for 
calls received using the Eurotariff
23. The ERG's first report also estimated there was a smaller 
difference at the wholesale level. This reflect ed the ‘unitisation’ practices of the mobile 
carriers, under which charges are not necessarily  billed by reference to the actual number of 
seconds that a call has lasted , but rather by reference to ho w many units of time (e.g. per 
minute), or parts thereof , have been consumed.   
There are various different unitisation practices in place, for wholesale roaming services as 
well as for retail services.  
                                                 
23  It should be noted that several providers were unable to provide accurate information on the difference 
between actual minutes and billed minutes. For the purposes of the ERG Benchmark Data Report, where data for 
actual or billed minutes has not been provided, the ERG has sought estimates.  
 
EN 2 0            EN At wholesale level a minimum charge or a minimum duration of 60 seconds are very 
common. The subsequent billing interv als range between 1 to 60 seconds. 
At retail level there may be a call set-up ch arge or a charge set by reference to a minimum 
duration. The subsequent billing intervals also  range from 1 to 60 seconds. The model 60+60 
is common, that means 60 second minimum duration then billing at 60 second intervals. Another approach is to allow a minimum initia l charging interval (e.g. 60 seconds) followed 
by per second billing for all subse quent periods (the '60+1' model). 
3.2. The nature of the problem - retail level 
It has become apparent that due to the uniti sation practices of some operators the billed 
minutes may exceed the regulated Eurotariff caps and by doing so they would dilute the 
effects of the EU roaming regulation.
 In response to a recent ERG questionnaire to National 
Regulatory Authorities on intern ational roaming (April 2008), 4 NRAs reported an  increase in 
intervals to per minute billi ng in their Member States. 
 Divergent legal requirements and practices to billing for the Eurotariff by mobile operators 
undermine the original aim of the Regulation which was to provide a common price ceiling 
across the Community.  Some Member States have  taken different nation al measures in this 
area (e.g France, Spain, Portugal and Lithuania) while others have taken no measures at all. 
These measures would also affect roaming pr ices. This creates a situation where varying 
national legal measures result in  different approaches to implem entation of the price ceilings.   
   The costs which the end-user has to pay may vary significantly depending on the unitisation 
model which the operator applies. A 61 second call, for example, would be much more 
expensive when the 60+60 model is applied th an if a 60+1 model was applied. However, it 
was the objective of the Regulation to guarantee comparable prices within the Single Market. 
Until now the Roaming Regulation lacks a provision on the unitisation issue which would enhance comparability and clea rly and unambiguously prevent operators from diluting the 
positive effects of the Regulation for consumers by means of increasing their billing units.   
 
3.3. Wholesale level  
Wholesale roaming charges are normally charge d with a minimum charge of one minute; 
subsequent intervals are commonly between one and fifteen seconds.  By  contrast, ERG notes 
that other wholesale interconnec tion charges are normally charge d per second. Furthermore, it 
seems that the fixed costs of setting up the call at the wholesale level are already taken 
account of in regulated termination charges. On that  basis, it is hard to see any justification for 
anything other than billing for the actual volume of wholesale roaming services used.  The 
possibility for divergent approaches to whol esale billing potentially distorts competition 
conditions for operators when viewed from a single market perspective.    
 
EN 2 1            EN 4. PROBLEM DEFINITION : SMS 
4.1. Background 
As stated in the Impact Assessm ent for policy options in relatio n to the Commission's original 
proposal for a Regulation on Roaming, of Ju ly 2006, some respondents to the Public 
Consultations held in 20 06, identified similar issu es of unjustifiably high  prices for non-voice 
roaming services such as SMS as were identifi ed for voice roaming services. However, at that 
stage, national regulatory authorities had not in general analysed the market for SMS roaming services. In June 2005 ERG launched a pub lic consultation on a common position on the 
wholesale market for international roaming on public mobile networks (market 17) which was 
at the time included in the Commission’s Reco mmendation on relevant markets. This market 
did not include SMS roaming services
 which meant that the focus of ERG at that time was on 
voice roaming services. Consequently ERG had not called on the Commission to address the 
problem at EU level.  
Nevertheless, the perceived problems with the le vel of prices for SMS roaming services and 
their disassociation from underlying costs were  sufficiently clear dur ing the legislative 
process leading to the adoption of the Roaming Regulation in June 2007 for the legislators to 
introduce wording in Article 11 calling on the Commission spec ifically to address the 
question of the need to regulat e intra-Community SMS roaming se rvices in its review of the 
Regulation and to make recommendations accordingly. 
4.2. The nature of the problem 
SMS is based on SS7 signalling which consists of  routing, transaction a nd status and control 
information. SMS is a very simple and mature  service, which has a large acceptance across 
Europe.   Considering the figures below, it can  be seen that intra-Community SMS roaming 
prices have an impact on millions of EU citizens. SMS services are particularly used by younger consumers. In fact, 77% of young people
24 (between 15 and 24 years of age) send 
texts while using their mobile abroad. With in this group of consumers, 38% of the 
respondents answered that as far as mobile co mmunications are concerned they use only text 
messages when abroad. 
 
                                                 
24 Eurobarometer survey n° 269 – November 2006 
 
EN 2 2            EN 
 
In a recent study pr epared by ARCEP25 it is stated that over 95% of the French consumers 
between 11 and 24 years old are SMS users (at a domestic level). Thus, high prices for SMS roaming services are likely to have a stronge r impact on young people, such as students, who 
generally have a lower income when  compared to older consumers. 
Based on the data gathered by NRAs on inte rnational roaming, the European Commission 
services estimate that the SMS roaming mark et within EU/EEA was worth around €0.8 billion 
in 2007, which corresponds to approximately 12,3%  of overall roaming revenues within the 
same period. In the same period over 2.5 bill ion text messages were sent by roaming 
customers in the EU. 
4.2.1 Wholesale: Inter-operator tariffs (IOTs) 
The level of the wholesale charges for sending an SMS while roaming within the Community 
does not appear to be justified by the underlyi ng costs and as in the case of voice roaming 
services, there appears to be insufficient comp etitive pressures on opera tors to bring prices 
down.  
In relation to the underlying costs, according to a study carried by the Danish Regulator, 
National IT and Telecom Agency
26, in an effective market, the IOT charged should be no 
higher than 0.80 cent. Some operators claim that SMS prices have been falling and will fall 
even more as competitive forces continue to  play. However, according to ERG figures this 
does not seem to be the case. In fact, accord ing to these figures, the average IOT charged 
                                                 
25 "Rapport sur les évolutions tarifaires des prestations de SMS et de transmission de données sur les réseaux de 
téléphonie mobile français", July 2008 
26 "Analysis of Prices and Costs for Mobile Data Services Abroad" – June 2008 
 
EN 2 3            EN within the EU has clustered ar ound 16 cent from the second Quarter 2007 to the first Quarter 
2008.  
In 2006, ARCEP notified the European Commission, the analysis of the wholesale SMS 
termination in mobile networks  market (notification FR/2006/0413) . In this notification, some 
cost elements relative to the provision of a domestic SMS were presented. This notification confirms the low level of such cost. 
In the negotiations for roaming agreements, mo bile operators often fo cus their attention on 
voice services, as the revenues of such services constitute s almost 80% of the roaming 
market. SMS agreements are often included as an appendix to the roaming agreement. This 
may indicate that the market pressure for price decrease in the SMS roaming wholesale 
market is even weaker than in voice.       
Currently no wholesale SMS termination charge  is levied by the vi sited network operator 
when a roaming client receives an SMS.  
4.2.2 Retail prices and transparency 
The average EU SMS retail price for Q1 2008 is around 28.5
27 cent which is (if at all and not 
only due to statistics) only a very slight decline on the figur e of 29 cent published by ERG for 
Q2 200728. According to the Commission data, SMS prices have shown only very limited 
progress, with retail prices as high as 80 cent in one case. Most operators' prices seem to be in 
the 20 to 30 cent range.  
On the contrary, at domestic level, SMS bund les are generally offered by operators. These 
bundles often include a large number of SMS for a monthly fee. Recently in some countries, 
unlimited SMS offers are becoming widespread . According to the above mentioned ARCEP 
study, in 2005, mobile operators  started to introduce unlimited domestic SMS offers. 
According to the same study, 28% of consumer s have subscribed su ch type of unlimited 
offers. Similar SMS bundles are seldom offe red for roaming. And even when bundles are 
offered, the price per SMS is still high (e.g one operator in the UK offers 90 SMS for €25, or 
€10 for 30 SMS by one Dutch operator). Only on e operator in Austria is offering 100 bundled 
text messages at €0.10 per roamed message.   
It is worth mentioning that ERG, in its submis sion to the Public Consu ltation stated that the 
difference between domestic and roaming prices appears to be no better than for voice and 
that those differences are unlikely to be just ified on the basis of ro aming-specific costs.  
 
In fact, prices at retail leve l seem to bear no relation to cost. The above mentioned study 
developed by the National IT an d Telecom Agency of Denmark, st ates that in an effective 
market retail price for a SMS sent abroad shou ld not be higher than  4,2 cent (including 25% 
VAT).  
According to the consumer organisation BEUC, a nother way of looking at  the costs versus the 
price is to look at the regulated SMS terminat ion rates (in France). BEUC point out that the 
costs of termination ranges from 3.0 to 3.5 ce nt, depending on the oper ator.  Comparing the 
                                                 
27 GSM Association have indicated that the aver age SMS roaming price in Q1 08 was 28 cent 
28 ERG 2nd data collection 
 
EN 2 4            EN cost of 3.5 cent with th e average roamed SMS price of 29 cent  yields a mark-up of more than 
an 800%.  
It is worth reflecting on why th e issue of very high roaming pr ices has not been addressed by 
market forces. Similar to the situation for voi ce services, one of the reasons for high SMS 
roaming prices is the fact that when choosing a mobile operator, consumers do not take these 
prices into consideration. As a result, consum ers often only become aware of the high prices 
charged when the service is used.  Compared to  voice roaming services, lack of transparency 
of SMS charges is easier to address, because of  the fact that SMS se rvices are provided on a 
per message basis. Nevertheless,  the provision of ade quate information on prices charged for 
SMS roaming services is of the utmost importance. 
The European Commission has published prices for voice, SMS and data roaming services on 
its dedicated roaming website29. This information not only help s raise consumer awareness of 
prices, but also highlights the hi gh levels of prices charged as well as the variation in those 
charges across the Member States. 
 
5. PROBLEM DEFINITION : ROAMING PACKET SWITCHED DATA SERVICES  
5.1. Background 
Data services, other than SMS, which is tr eated separately, include Multimedia Message 
Service (MMS) and internet browsing (as well as access to email) from mobile phones and 
laptop devices. The use of data services can take place throu gh a number of devices such as 
mobile phones (smart phones), Blackberry devices, PDAs or laptop computers. 
Data roaming rates have been high and the situation has become more pronounced over the 
past year since the arrival of high-speed intern et access or mobile broadband, particularly for 
laptop users. Such users normally make use of  high volumes of data traffic, which when 
coupled with a lack of flat-rate offers, or li mited flat-rate offers fo llowed by per MB charges 
has led to ‘bill shock’ which at times have reached thousands of Euros for customers. 
In the previous impact assessment30, it was stated that it was difficult to foresee, in relation to 
MMS services and data services how these would develop and that at their stage of 
development, there were clearly significant ri sks of applying inappr opriate regulation which 
could hinder the development of this market. 
However, concerns as to the level of charges for data roaming services were raised in the 
political discussions that preceded the adoptio n of the Roaming Regulation. It was finally 
agreed that the Commission would specificall y analyse this issue when reviewing the 
Roaming Regulation. 
                                                 
29  http://ec.europa.eu/information_society/activities/roaming/index_en.htm 
30 SEC (2006) 925 Commission Staff Working Paper, Impact Assessment of policy options in relation to a 
Commission Proposal for a regulation by the European Parliament and of the Council on Roaming on Public 
Mobile Networks within the Community. 
 
EN 2 5            EN To some extent the underlying core problem with data roaming services is similar to that for 
voice and SMS in that the customer generally ha s not been sensitive to the prices for data 
roaming when purchasing mobile services. This may be further complicated by the fact that 
prices for data roaming services derive from  the generally low use of roaming services 
compared to domestic services. Nevertheless pr ices for EU-wide data roaming services at 
both wholesale and retail levels  are unjustifiably high when compared to the charges for the 
equivalent domestic services and to the unde rlying costs of providing the services.   
ERG considers that the costs of provision of data roaming (including a reasonable allowance 
for common costs and returns) are likely to repr esent a fairly small percentage of typical 
current charges. This problem has been compounde d by lack of transparency  of prices at retail 
level (where consumers, particularly laptop user s, are not aware of the price and usage limits). 
This makes it very difficult for consumers to understand how much they are going to pay for 
the service and over the past year or so has created the problem of ‘bill-shock’. For some 
customers, performing relatively simple tasks that would not prove ex pensive at home, can 
lead to extremely high bills compared to domestic rates.   
5.2. Nature of the problem 
Usage of mobile data services is growing rapidly in the Eur opean Union albeit starting off 
from very low volumes. Based on data collected  by the European Commission, it is estimated 
that the total size of the data roaming mark et, excluding SMS revenues, was €559 million for 
2007. The contribution of data roam ing services to roaming has also increased considerably 
and has nearly doubled from Q2 2007 to Q1 2008. Volumes are also increas ing as can be seen 
from the graph below. 
Growth in volumes
0100000002000000030000000400000005000000060000000
Q2
2007Q3
2007Q4
2007Q1
2008Series1
 
There has also been a drop in  average retail prices betw een Q2 2007 and Q1 2008. The 
average retail price per MB has decreased from €5.81 to €3.65. A price reduction is observed 
in wholesale prices, at least for non-group companies which have gone down from €3,22 to 
€2.00 for the same period31. This suggests that there is a higher likelihood of pass-through of 
wholesale price reductions to end users than is  the case for voice or SMS roaming services. 
                                                 
31 The average retail price is blended between group and n on-group companies. For the wholesale average, the is 
blended non group average is taken. 
 
EN 2 6            EN Data roaming services may be subject to greate r competitive constraints at retail level, for 
example, from WiFi services.  Laptop users have the possibility  to make use of Wifi hotspots 
which are often are found in airpor ts, stations, hotels, cafés and re staurants. This possibility is 
also available to a growing number of handset s which are also enabled with Wifi technology. 
Therefore, to some extent at least, Wifi hots pots and access to the inte rnet in hotels may be 
considered as providing an alte rnative to mobile operators fo r the provision of roaming data 
services. These can be available either free of ch arge or charged for periods of time (per hour 
or per day for example). As of end June 2007, it was estimated there were more than 50,000 
hotspots in Western Europe  out of 113,000 worldwide32. However, data on usage and volume 
is not available. 
Another option is for the roaming customer to  use a local domestic mobile broadband SIM 
card which is a more attractive option than for voice or SMS because there is no numbering constraint associated with the usage of data se rvices i.e. the customer  is not worried about 
losing their number. The fact that data serv ices are not linked to a mobile number also 
increases the possibility that customers w ill shop around for more at tractive data roaming 
packages without severing service with  their current domestic provider.  
 
The ERG also come to a similar conclusion stati ng that in contrast to voice, there appears to 
be some real commercial incentives to cut rate s, irrespective of re gulatory pressure since 
domestic mobile data services are growing fa st, probably driven to a significant extent by 
recent price cuts in domestic tariffs and in creased consumer access to related technology. 
The most recent offers from mobile operators fo r roaming data services may reflect similar 
flat-rate charges for Wifi, although the mobile  operators' offers include maximum capacity 
limits of 50MB for example. Nevertheless, su ch offers remain cons iderably higher than 
equivalent national prices.  
5.3. Wholesale charges 
The relationship between wholesal e charges and retail charges is  complex, in particular when 
operators choose to have one retail price per Member State. The fact that operators will have to pay non-discounted high IOTs (the wholesal e charge one operator charges another for 
enabling roaming), may hinder the development of cheap retail offers. The ERG report that 
wholesale charges have fallen by around 60-70%  since 2002-2003 with the average wholesale 
rate being €2.00 for Q1 2008 though they still exceed costs by far. 
While it is becoming evident that discounted prices for wholesale data roaming services can 
normally range from 25 cents to 75 cents per MB (though the price per MB could be lower for higher volume sessions), problems at the whol esale level still remain for non-discounted 
prices. The majority of operators  have indicated a movement from  the standard prices per MB 
to discounted prices based on volume discoun ts which apply on a re ciprocal basis.  
There is strong evidence that competition at w holesale level for data se rvices is still very 
limited mainly because traffic steering techni ques are not yet effective. Because home 
operators only have limited success in steeri ng traffic onto preferred networks they are 
therefore forced to pay extremely hi gh rates on non-preferred networks. 
                                                
 
32 Source: Confidential submission from an operator in the public consultation. 
 
EN 2 7            EN  
These 'non-preferred' network charges which in  many cases can be even higher than €10 per 
MB, can create considerable problems. While ho me operators can negotiate relatively low 
rates with their preferred networks, they co ntinue to face extremely high non-preferred 
network charges thus pushing up the average wholesale price paid by a home network 
provider even if only a very small proportion of  the traffic goes to a non-preferred network. 
 
 The fact remains that significant volumes of traffic go to non-preferre d networks. Rates on 
such non-preferred networks are extremel y high, thus pushing up the overall average 
wholesale charges to unjustifiably high levels. 
Traffic steering for data roaming is not as eff ective as it is for voice since it is constrained by 
the network coverage and quality  of service issues. Moreover, operators prioritise traffic 
steering for voice services onto networks which might not be the most appropriate for data 
services in terms of price or data transfer speeds. 
 
  This affects all operators in the market, but  especially smaller operators with weaker 
bargaining power. The end result is high averag e wholesale prices whic h creates uncertainty 
for operators and hinders their ability to co mpete at retail level with transparent and 
competitive retail packages.  Therefore, until such high wholesale standard  prices are reduced, the development of 
competitive retail offers will be hindered as shown in the examples in the box below.   
Example A: 
An operator has a negotiat ed rate of 25 cents pe r MB. The standard rate  with other operators 
is at €10 per MB. If 80% of traffic is steered to the preferred networ k, the average price per 
MB would still be €2.20 even though  the operator has a wholesale rate of 25 cents per MB for 
the large majority of traffic. 
Example B: 
An operator has a negotiat ed rate of 25 cents pe r MB. The standard rate  with other operators 
is at €1 per MB. If 80% of tr affic is steered to the preferre d network, the average price per 
MB would be 40 cents. 
While the case for wholesale intervention on voice is clear, the case for intervention for 
wholesale data is even stronger. This is not on ly because of less effec tive traffic steering, but 
also because the much higher differential which exists between wholesale data rates on 
preferred and non-preferred networks, as compared  with the differential that existed for voice, 
considerably raises the average wholesale cost s an operator incurs which translates into 
extremely high retail charges.  
 
 
EN 2 8            EN 5.4. Retail charges and transparency 
With the introduction of 3G services including 3G  roaming, prices for wholesale data services 
have started to become more important in roami ng negotiations particularly in view of the fact 
that users have become accustomed to low monthly domestic fees for data services (e.g. €10 in Austria and €13 in the United Kingdom
33). Retail data roaming charges ranging up to more 
than €15 per MB are leading customers to recei ve bills that can run into hundreds if not 
thousands of Euros. The ERG notes that the average retail price per MB is €3.65 for Q1 2008 
but the spread of retail prices is very wide a nd in eight Member States  it averaged between €8 
and €11. Even though there has been a decrease in  retail prices, access to the internet while 
roaming is, in many cases, prohibitive.  
However, with usage of data services increa sing, significant problems have emerged related 
to lack of transparency and ‘bill  shock’ as a result of the high per MB charges that may apply. 
In general, users are less likely to understand a price per MB of data than a price per SMS or a 
per minute voice call. Laptop users may receive une xpected data downloads such as software 
maintenance downloads, spam etc. Moreover, it  is difficult to manage data volumes being 
transmitted. For example, if your email progra mme is switched on, it might be impossible to 
block receipt of a large document unless the programme is disconnected. 
At the moment, there are very few operators that have effective means in place for monitoring 
the amount of data being used by consumers or fo r consumers to control the choice of tariff in 
real-time. Flat-rate data roaming offers wh ich have emerged over recent months are a good 
starting point to tackle the problem. However, for a very light user, or for someone who is 
surfing the internet from a mobile phone or accessing emails from a Blackberry device, a flat-
rate daily charge might not be suitable even though the per MB charge would be considerably 
higher. 
 Moreover, operators are only now starting to introduce transp arency measures aimed at 
solving the problem of ‘bill shoc k’. In its response to the Co nsultation, the GSMA noted that 
the GSMA and its member operators have be en working over the past few months on the 
development of data monitoring usage tools for people accessing mobile se rvices via a laptop 
computer through a data card or dongle. Some operators have been able to implement indicative solutions while others  are working to offer real time solutions. However, the 
majority of respondents, apart from industry, ha ve highlighted that transparency remains an 
issue and that measures shoul d be formulated requiring co mpanies to introduce effective 
measures to control bill shock. 
 
                                                
 
33 Source: GSMA Press Release 11th June 2008 
 
EN 2 9            EN CHAPTER 3.  THE CASE FOR EU ACTION (SUBSIDIARITY 
TEST) 
As mentioned in Chapter 1, given the cross-borde r nature of the international roaming market 
the NRAs were unable to act and deal effectively with the lack of competitive pressures in this market. Furthermore, NRAs which are re sponsible for safeguarding and promoting the 
interests of mobile customers who are resident within their territo ry are not able to control the 
behaviour of the operators of the visited network situated in other Member States. This led the 
NRAs to call on the Commission to act at European level. In December 2005
34, the ERG 
alerted the Commission to its concern that m easures being taken by NRAs would not resolve 
the problem of high prices. It also made it cl ear that it was committed to working with the 
European Commission to develop an appropr iate and more complete solution. The ERG 
described the problem as ‘not trivial’. It furt her noted that roaming creates an exceptional 
instance where an apparent case of consumer detriment is not prospectively solved by the 
application of the regulatory framework. ERG has confirmed in  its response to the public 
consultation that nothing has changed in that respect in the meantime . 
It was also noted in the Impact Assessment a ssociated with the current Roaming Regulation 
that in the absence of any su ch action to address this problem there would be persistent 
pressure on Member States to take measures to  address the level of EU -wide roaming charges. 
However, any such measures would create di vergent results across the European Union and 
be ineffective, given th e particular cross-border characteri stics of the services concerned.  
As far as the options outlined in this Impact Assessment for the continued regulation of voice 
roaming services are concerned, precisely the same considerations apply as did when the 
current Roaming Regulation was fi rst proposed. Indeed it is for this reason that the ERG has 
called on the Commission, in its  response to the public consu ltation, to propose an extension 
of the Roaming Regulation in time, so that it continues to apply a solution at Community 
level for the continuing problem of Commu nity-wide voice roaming services, both at 
wholesale and retail levels.  
Similarly, the very same special characteris tics that apply to the Community-wide voice 
roaming markets (and warranted Community ac tion under the current Roaming Regulation) 
also apply to the provision of Community-wid e SMS and data roaming services. For these 
services too action by the Member States would not be effective in resolving the problem of 
unjustifiably high prices, given th e cross-border nature of the services and the fact that 
competitive pressure is limited by the fact that these roaming services are also not purchased 
independently but as part of a wider retail pack age. This is implicitly acknowledged in Article 
11 of the current Roaming Regulation, which called on the Commissi on to include data 
communications, including SMS, in its review of the functio ning of the Roaming Regulation 
and, if appropriate, make recomm endations regarding the need al so to regulate those services 
at the EU level.  
                                                 
34  ERG letter to the Director General of the Commi ssion’s DG Information Society, Mr Fabio Colasanti, 
December 2005   
 
EN 3 0            EN It is for this reason too that the ERG, in its response to the public consultation on the review 
of the Regulation has called on the Commission to act at European level with regard to SMS 
roaming and data roaming services35.  
Consequently, it is necessary to consider action at EU level to ensure an effective response on 
a cross-border basis in relation to Community-w ide SMS and data roaming services, as well 
as with regard to the conti nuing regulation of voice roaming, a nd to ensure that divergent 
approaches by Member States do no t constitute an obstacle to th e realisation of the internal 
market or distort the competitive conditions for roaming services across the Community. As is 
the case for the current Regulation, any regulator y proposals arising from this review will be 
based on Article 95 of the EC Treaty. 
A concrete example of the risk of divergent approaches in the abse nce of harmonised rules 
can be seen in relation to the issue of the unitisation of billin g for voice roaming services, one 
of the elements under considera tion in this Impact Assessment.  A number of Member States 
(e.g. Spain, Portugal, Lithuania and France) have already impos ed varying requirements with 
regard to per second billing on th eir operators as a matter of na tional law, while others have 
not so far done so. This create s divergent conditions for operato rs in different Member States 
which, in the context of a cr oss-border activity  such as Community-wide roaming, is not 
conducive to the completion of a single market for electronic communications. 
It is also worth noting that the Commission' s proposals for the revision of the 2002 regulatory 
framework for electronic communications, cu rrently under discussion in the European 
Parliament and Council, have not altered the ke y principles applicable  to the assessment of 
significant market power in the electronic comm unications markets, since these remain valid 
and the most effective means of promoting co mpetition and maximising consumer welfare in 
the vast majority of markets. International roaming services however remain an exceptional 
case, in which the specific characteristics of th e market require a more targeted approach. The 
continued application of the regulatory fram ework for electronic co mmunications, modified 
and updated where appropriate following the Commission's Re view proposals, should not 
prevent the adaptation of the specific rules cont ained in the Roaming Re gulation in line with 
other considerations, so as to ensure the most effective means of achieving a high level of 
consumer protection whilst improving the functio ning of the single market with regard to 
Community-wide roaming services.  
  
                                                
 
35  See also Ed Richards' comments on text a nd data roaming in the EU, 29 January 2008 at 
http://www.ofcom.org.uk/media/speech es/2008/jan/stakeholdermeeting : "national regulators are unable to 
address these issues unilaterally." 
 
EN 3 1            EN CHAPTER 4.  OBJECTIVES 
1. BROAD  OBJECTIVES  
The general objective of EU action is to promot e the further development of the single market 
for electronic communications services, wh ich include voice telephony, SMS and data 
services, for users of public mobile telephone networks for EU -wide roaming services when 
travelling within the Community. In concrete terms,  the objective is to ensure that prices paid 
by users of public mobile tele phone networks for EU-wide roam ing services when travelling 
within the Community are not unjustifiably highe r than the charges payable by that user when 
calling, sending SMS or transferring data within his home country.  
The general objective is fully in line with the horizontal EU level strategies, in particular the 
Commission’s i2010 initiative wh ich stresses the crucial role of information and 
communication technologies (ICT)  in achieving the growth and jobs objectives of the 
renewed Lisbon strategy. In the area of elect ronic communications, the i2010 initiative aims 
to create a Single European Information Space by  2010 that offers affordable and secure high 
bandwidth communications, rich and diverse content and di gital services. It is also consistent 
with the 'Europe of Results'. Furthermore, th e general objective is also compatible with 
objectives of the existing regulatory framework for electronic communications, which aims to 
create an open and competitive single market for electronic communications services and 
networks in Europe and encourage innovation.  
2. SPECIFIC OBJECTIVES  
The general objective translates into a number of specific objectives of an EU action in the 
area of mobile roaming services. These objectiv es are intended to tackle the problem of 
excessive prices of mobile roaming commu nications, the underlin ing problem drivers 
(insufficient competition), the need for a consistent approach across the EU, improved transparency and low administrative burdens. Concerning the links between the specific 
objectives, they are complementary and they al l support the general obj ective of strengthening 
the single market in mobile communications.   The following specific objectives have been identified:   
 
1. To ensure that there is no return to th e excessive retail and wholesale voice roaming 
prices that existed before the Regulation. 
 
2. To ensure that there is a meaningful relationship between retail voice, SMS and 
roaming prices and the underlying costs of pr oviding these services as well as between 
these prices and equivalent domestic prices. 
 
3. To ensure adequate transparency for mobile users of prices for voice, SMS and data 
roaming services so that customers can be empowered to control their expenditure and 
avoid shock bills.  
 
EN 3 2            EN  
4. To ensure customers do not pay for more than they consume (taking account of 
reasonable set up charges) and that there is a consistent approach  to the billing of 
voice roaming services across MS.  
 
5. To ensure the maximum number of customer s can avail of reasona ble tariffs for voice, 
SMS and data roaming services in the shortest possible time. 
 
6. To ensure that mobile operators can comp ete by differentiating their roaming services 
on the basis of quality and ease of use (transparency). 
 
7. To ensure that operators can avail of whol esale rates for voice, SMS and data roaming 
services which will enable them to compete in the retail roaming market.  
 
8. To ensure that any policy initiative does not hinder market  and technological 
developments which may ultimately render regulation unnecessary in the longer term. 
 
9. To minimise the administrative burden fo r market players and national regulatory 
authorities associated with implem entation of any policy initiative. 
 
10. To ensure maximum simplicity of any pol icy initiative in accordance with the 
principles of Better Regulation. 
 
11. To ensure consistency of approach across Member States in relation to pricing at 
wholesale and retail levels, transparency measure and roaming billing approaches. 
 
12. To ensure coherence of any initiative with  principles contained in the Telecoms 
Regulatory Framework. 
 
 
EN 3 3            EN CHAPTER 5.  ALTERNATIVE POLICY OPTIONS 
Regulation should always be used as  a last resort and only when it  is clear that market forces 
will not bring about the desired objective. Fo r example, regulation could be avoided if 
acceptable and effective self-regulation proved to be an option. It is necessary therefore to 
consider the potential impact of regul atory and non-regulatory approaches.   
1. SELF REGULATION  
Self-regulation is defined as th e possibility for economic operato rs, the social partners, non 
governmental organisations or associations to adopt amongst themselves and for themselves common guidelines at European level (particularl y codes of practice or sectoral agreements). 
As one of its responsibilities, the Commission scru tinises self-regulatory pr actices in order to 
verify that they comply with the provisions  of the EC Treaty. The Commission notifies the 
European Parliament and the Council of the se lf-regulatory practices that it regards, on the 
one hand, as contributing to the attainment of the EC Treaty objectives and as being 
compatible with its provisions  and, on the other, as being satisfactory in terms of the 
representativeness of th e parties concerned, sectoral and geographical cover and the added 
value of the commitments given. 
While it is understood that some operators within the industry have explored possibilities for a 
more structured approach to wholesale data  charging, these initia tives have not proved 
successful and, even if they had, they may ha ve raised issues under EU competition law. 
The success of self-regulation would depend on how  effective the industry can be in ensuring 
compliance by members. The complexity of voic e, data and SMS roami ng charges means that 
assessing compliance is extremely challeng ing and would require significant industry 
resources. The absence of effective sa nctions could prove to be a problem. 
In view of past experience and the underlying structural limitations on competition in the 
roaming markets, leaving the problems to be addressed by means of self-regulation does not 
seem to be a viable solution. 
2. 
CO-REGULATION  
The co-regulation approach implies a regulator y framework in which the overall objectives, 
the deadlines and mechanisms for implementati on, the methods of monitoring the application 
of the legislation and any sancti ons are set out. The re gulator also determines to what extent 
defining and implementing the measures can be le ft to the concerned pa rties. Such provisions, 
for example sectoral agreements, must be compat ible with Community law and must be in the 
interests of the public. Co-regulation must be tr ansparent. Members of the public must have 
access to the act and to the implementing provisions.  
This approach was not considered appropriate as an alternative to the current Regulation, 
which, as explained above, has been largely su ccessful in addressing the problem of high 
voice roaming charges. Co-regulation is likely to  be more effective than self-regulation but 
 
EN 3 4            EN the fact that specific goals are broadly defined could prove to be a problem when it comes to 
measuring compliance. As in the case of self -regulation, clearly any collective industry action 
or agreements in relation to prices for voice, SMS or data roaming services could raise competition concerns. It is therefore considered  that Co-regulation is not an appropriate 
approach.  
3. 
SOFT LAW  
Under this approach, the Commission could issu e a Recommendation to Member States with 
guidelines on appropriate rates for voice, SMS and data roaming charges. An exercise of 
benchmarking SMS roaming and data roaming prices  could be established on the basis of best 
practice prices across the Community. Such an approach would not bind Member States or 
operators but would rather act as a form of encouragement or  target to be achieved. Such 
benchmarking would also increase transparency by highlighting the extent  to which operators’ 
voice, SMS and data roaming pri ces are out of line with best practice prices in the EU.  
However, given the relative lack of response from the industry to calls for lower SMS 
roaming charges and the potential for widely diffe ring approaches at natio nal level (to what is 
a cross-border problem) and the fact that no one NRA has the necessary regulatory tools to address the problem at both the wholesale and the retail levels, it is considered unlikely that 
such a soft law approach would be sufficient to  address the enduring problems that have been 
identified as underlying the roaming markets. 
4. 
ASSESSMENT OF COMPETITION ASPECTS  
When the Commission in the summer of 2006 fi rst proposed to regulate the market for 
international roaming services in the Communit y, the wholesale segment of this market was 
listed in the Recommendation on relevant markets36 as a market susceptible to ex ante  
regulation. The reason for ha ving listed this market as a market susceptible to ex ante  
regulation was that the Commissi on, after due performance of the three-criteria test, came to 
the conclusion that this market was in need of sector-specific forward re gulation rather than of 
mere ex post  oversight under general competition policy. 
 Several national regulators started to review this market but were unable to identify any 
operator with significant market  power (dominance) and to impose appropriate remedies to 
reduce high roaming charges.  The competition law principles embedded in the EU regulatory framework (i.e. that a market 
is defined in accordance with supply and de mand characteristics and that regulatory 
interventions should remove distortions of co mpetition on identified product markets) govern 
the present analysis. While mobile services are typically sold as a bundle,  it is often necessary 
based on competition law principles for the regulator to analyze individual supply and 
demand peculiarities of each elem ent. For instance, in the past , regulators have looked at 
possible anti-competitive effects of on-net/off-net domestic call price differentials; at possible 
                                                
 
36 Commission Recommendation of 11 February 2003, 2003/311/EC 
 
EN 3 5            EN distortions arising from mobile call terminati on; or again at the economic characteristics of 
domestic SMS termination. Similarly, as regard s international mobile roaming services,  
voice, SMS and data services in their respectiv e wholesale and retail as pects may be regarded 
as separate product markets and require careful a nd separate analysis in order to arrive at a 
thorough understanding of  the issues involved.37 
 This impact assessment examines various policy options designed to harmonize the 
prospective regulatory treatment of mobile ro aming services in the Community. In this 
respect, it posits that the structural characteristics – in conjunction with its cross-border nature 
and importance for the internal market - pertai ning to the market for voice roaming services 
(which necessitated the inclus ion of this market in Reco mmendation 2003/311/EC) hold true 
in analogous fashion for SMS roaming se rvices, and, albeit to a lesser extent
38, for mobile 
data roaming services.  
Could competition policy alone ta ckle high data roaming prices? 
It is conceivable that the inst ruments of EU competition policy alone could be used to address 
some of the issues discussed in chapter 9 belo w. In particular, one can imagine a situation 
where a finding of dominance on the wholesale market for mobile data roaming services 
might be the basis for a further finding of abusive (excessive pr icing) behaviour and 
subsequent fines. However, any such i nquiry would be compli cated by the current 
ineffectiveness of traffic steering (raising quest ions of collective dominance and/or collusive 
behaviour), questions relating to substitution of data roaming by other access forms, such as 
WiMax, and the incentive-distorti ng cross-border nature  of the service which suggests that the 
application of a competition law approach w ould be difficult and rather time consuming. 
Moreover, competition law procedures could only tackle individual operators' pricing 
behaviour whereas the proposal tries to address a situation where a larg e number of operators 
pursue a policy of excessive prices. A sector-spe cific approach is thus favoured here.    
 
It should be stressed at the outset that ha rmonizing the regulatory treatment of mobile 
roaming services in the Community  is not tantamount to an atte mpt to simulate a hypothetical 
competitive process or outcome. The difficulties for a regulator to specify the price for a product or service which would be the outcome  of a hypothetical competitive equilibrium 
situation are well-known. First, though in a static  setting (where investment is the exception 
and there are no economies of scale) the competi tive outcome would be that prices are equal 
to marginal or incremental costs, such outcome is difficult to be computed by the regulator in practice because of imperfect information. Seco nd, in a dynamic setting (where fixed costs are 
high and where there are barriers to entry), the competitive outcome may well be higher than incremental costs. In fact, the only thing that coul d safely be asserted in such a setting is that 
the competitive level will result in prices somewhere between incremental costs and stand-
alone costs. It is therefore not the task of this impact assessment to make a judgment on a 
hypothetically competitive price for roaming services.       
                                                
 
37 This is not to say that the impact of potential regulation does not need to be read in the larger context; see the 
annex for a comparison of some of the potential financial impacts on industry stemming from the regulation 
of roaming services with overall market parameters.    
38 Substitutability, the nature of price vs. quality competiti on and the stage of market development differ for this 
service. See chapter 9 below. 
 
EN 3 6            EN Rather, the Commission's impact assessment accompanying Regulation (EC) No 717/2007 
identified the 'absence of a meaningful relati onship between prices fo r EU-wide roaming at 
both wholesale and retail level one the one hand, and the underlying costs of service provision 
on the other' as one of the key problems the regulation was designed to address. In other 
terms, it emphasized the disconnection between th e cost structure and th e observed prices in 
the EU for voice roaming services. For exampl e, it was argued that while the costs of 
producing an outgoing roaming call could be appr oximated by applying a two or three times 
multiple of the average EU mobile termination rate (MTR), the actual price charged was 
several times higher, and thus arguably not reflective of economic value. This analysis 
remains valid today and, mutatis mutandis , applies to today's SMS and mobile data roaming 
prices.  The same is true for other parameters such as profit margins. While elsewhere in the mobile bundle competition has driven av erage profit margins to EBITDA
39 levels of often below 40 
percent, the margin made on roami ng services is s ubstantially higher.40 Furthermore, it is also 
true that since the adoption of the voice ro aming regulation (and indeed during many years 
preceding it) there was no signific ant actual or potential entry which could have constrained 
existing pricing practices. Indeed, no such en try should be expected barring significant and 
unforeseen technological progress – despite the a ttraction of potentially high profit margins in 
the absence of regulation.  Overall, it would be a strong signal for em erging competition on roaming services if a 
significant number of operators could be obser ved to engage in price competition below the 
regulated caps, or if market forces were gradua lly to drive down roaming prices to the level of 
comparable, i.e. domestic, services. In the current implementation period of the voice 
regulation, no such thing could however be observed. Only a minority of EU mobile 
customers has been offered a Eurotariff below th e regulated price caps, and alternative offers 
still have to gain traction.   The lack of competition signalled by the above considerations, the cross-border nature of 
roaming services as well as their importance to the completion of the internal market, are thus 
central to the proposal to impose transparency ob ligations and to set cer tain price ceilings for 
voice, SMS and data roaming services, which allow operators to compete by offering better 
terms and conditions at both th e wholesale and retail levels.  
 For the sake of completeness, one may finally as k whether there is a point at which the market 
would be deemed to be competitive. On this issue, competition has clearly both a process-dimension (such as market entry/exit or the number of players) and a performance-dimension 
(such as resulting prices or profit margins). It would therefore be reductionist for the regulator 
to set an artificial milestone (such as a hypothetica lly correct price or a 'fair' profit margin for 
industry), which, if reached, would trigger th e end of regulation. Rather, the competitive 
dynamics of the market, including the behaviour  of participants and the evolving market 
structure, should be carefully followed in the period going-forward to evaluate whether 
                                                
 
39 Earnings before interest, taxes, depreciation and amortization (EBITDA).  
40 For instance, the margin on SMS roaming services by some measure can be estimated to be close to a multiple 
of 8.5 of the cost base. Similar findings apply to data  roaming. Nor are these margins readily justifiable by 
some simple reference to Ramsey pricing (as o ccasionally submitted by so me industry players).     
 
EN 3 7            EN regulation remains, all things considered, the be st available option availa ble from an internal 
market perspective.  
         
5. 
      TARGETED REGULATION  
The following chapters examine options for regulatory intervention to address the main 
problem areas identified in Chapter 2. Asse ssment of possible ways of addressing the 
problems of the mobile roaming market is re latively complex. For this reason and for the 
reason of proportionality, options are formulated at  different levels (gen eral options and more 
detailed sub-options) and their assessment is carri ed out in two stages.  In the first phase, all 
options (apart from those that are discarded al ready at the beginning) wi ll be assessed against 
a predefined set of five assessment criteria. Th ese criteria are closely linked to the specific 
objectives identified in section 4. In the second stage (an in -depth quantitative and qualitative 
impact analysis) is provided on ly for those options that score best in terms of achieving the 
objectives.  In the final comparison stage, th e detailed sub-options will be benchmarked 
against the same five assessment criteria taking in to account the results of the in-depth impact 
analysis and final conclusions will be  drawn. The criteria are as follows: 
Effectiveness  – the extent to which the options achieve the main objective of reducing the 
mobile roaming charges. This criteri on relates to objectives 1 to 5.  
Competition  – the extent to which the options impr ove competition on the mobile market and 
strengthen competitive pressures. This criterion relates to objectives 6-8.  
Efficiency  – normally measures the extent to which the objectives can be achieved at least 
costs. The cost of any proposed measure woul d include administrative  costs (link to the 
objective 9), compliance costs for mobile opera tors (e.g. cost of implementing regulatory 
measures) and the expected loss in profits (in case of  price regulation).  For options where 
existing data and evidence allows quantitative modelling of costs and benefits, a full cost-
benefit analysis will be performed and the crit erion will measure the difference between costs 
and benefits in terms of the overa ll social welfare.        
Consistency  – the extent to which the options provide for a harmonised outcome and prevent 
market fragmentation. This criterion re lates to the objectives 10 and 11.  
Coherence  – the extent to which the options are cohe rent with the genera l principles of the 
electronic communications regulator y framework and EU law in ge neral. This criterion relates 
to the objective 12.  
 
 
EN 3 8            EN CHAPTER 6.  VOICE ROAMING OPTIONS 
1. VOICE  ROAMING  POLICY  OPTIONS 
1.1. No policy change 
Before taking action, regulatory or  otherwise, to resolve a partic ular problem the possibility of 
‘doing nothing’ should be considered. This is a base case against which other forms of action 
can be assessed. For the purposes  of voice roaming services, th e option of 'no policy change' 
would effectively mean allowing the Regulation to expire on 30 June 201 0, with the resulting 
removal of all the regulatory obligat ions currently contained in it.  
As noted in the section on voice problem defi nition, the evidence suggests that given the 
structural characteristics of the voice roami ng market and the evidentiary record of the 
regulated period, removing either wholesale or retail price regulation for voice would not be 
an effective option.  There is a significant risk that the underlying lack of competitive 
pressures in the voice roaming market and the incentive for mobile operators to maximise 
their roaming revenues would transl ate into a return to higher re tail and wholesale prices for 
intra-Community roaming if the pricing obligations in the Regulation were to disappear on its expiry in 2010. For this  reason it is conclude d that the Regulation s hould be extended beyond 
2010.  
In the longer term market and technol ogical developments may render regulation 
unnecessary. For example, Voice over IP (int ernet protocol) has to a certain extent 
revolutionised fixed telephony, pavi ng the way for cheaper voice se rvices and the provision of 
innovative services. The advent of 3G networks  and Wi-Fi hotspots is leading to interesting 
developments in mobile services. New mob ile handsets which are capable of providing 
mobile over IP are also emerging. However, IP  mobile telephony is set to become a reality 
only in the medium term. It is predicted that voice traffic won’t significantly move to VoIP 
until around 2013 – 2015, after the period cons idered for extension of the Roaming 
Regulation..
41 
The Regulation should therefore be extended in duration. This section addresses the options 
for extending the Regulation includi ng its duration and structure.  
1.2. Duration 
The Regulation should be extended over a reason able period which will ensure continuation 
of the benefits while providing sufficient time to assess the extent to which real competition may have developed in the meantime. In light  of the expected timing for future market 
developments, an extension of one or two year s would not be sufficient for that purpose. The 
Commission services believe that a further period of three years from 30 June 2010 is 
                                                
 
41 See Analysys Research, “Forecasting the Commercial Impact of Wireless VoIP in the USA and Western 
Europe”, 2006. But by 2015 Analysys predicted that 33 % of mobile voice traffic in Western Europe will be 
carried using VoIP. ‘Western Europe’ is not defined in the report.   
 
EN 3 9            EN required in order to ensure that consumers con tinue to benefit from reasonable roaming rates 
while at the same time providing sufficient time fo r competition to develop and a review to be 
carried out.  
1.3. Transparency regulation  
The transparency measures for voice roaming se rvices are an indispensable element of the 
current regulation. However, just as was the case for the current regulation  (and in light of the 
fact that the underlying structural problems which justified voice regulation are still present) it 
is considered that transparency measures alone will not be effective.  
1.4. Wholesale voice regulation  
For the current Regulation, the ERG had indica ted that it was not pos sible for any national 
regulatory authority to addre ss effectively the high level of wholesale Community-wide 
roaming charges because of the difficulty in identifying undertakings with significant market power in view of the specifi c circumstances of internatio nal roaming, including its cross-
border nature. National regulators continue to hold this view, and have indicated that the 
Regulation should be extended at  wholesale level. Moreover section 2.2.3 above has shown 
that, while there has been some progress, in many Member States whol esale are still around 
the maximum allowed price ceilings, and that competition below these levels is limited. Wholesale voice regulation should be maintained for this reason alone. 
A further consideration for why wholesale regu lation was deemed necessary in the Regulation 
was to avoid the risk of disr upting the orderly functioning of the roaming market by putting 
smaller operators at a dramatic competitive disa dvantage in particular where retail regulation 
is imposed (margin squeeze created by retail ob ligations combined with the absence of 
sufficient commercial bargaining power to be able to purchase adequately priced wholesale inputs). In particular, it should be noted that larg e groups are able to internalize large parts of 
their wholesale costs either by relying on trans actions with fully-owned subsidiaries or by 
negotiating agreements with other large groups to form alliances (in which wholesale traffic is 
exchanged at massively discounted price levels ). Smaller operators do not have access to 
either strategy; nor have larg er operators used their superi or competitive positioning and 
lower cost-base to undercut sign ificantly the Eurotariff price caps at retail level (see section 
below). 
A removal of wholesale caps in this setting is likely to be damaging to competition because it 
would seriously hinder the ability of smaller oper ators to compete with larger players. It is 
considered therefore that continued wholesale regulati on is necessary.  
1.5. Retail voice regulation 
Section 2.2.4 above has shown that the regu lated wholesale caps an d the transparency 
obligations contained in the Regulation have so far failed to prompt operators to engage in 
significant price competition below the Eu rotariff price caps at retail level. 
 One of the objectives of regulatory interventio n was however to ensure that consumers can 
avail of reasonable retail roaming offers (on a sustainable and fo rward-looking basis), and that 
any excesses in the pric ing structure be eliminated. If su fficient competition existed for the 
 
EN 4 0            EN provision of retail roaming serv ices the lower costs resulting from capped wholesale roaming 
charges would be passed thr ough to the retail consumer - retail regulation would become 
unnecessary. The Regulation is based on the assump tion that such pass-through to retail level 
would not occur. The ERG has agreed to th is view, and conclude d that pass-through of 
wholesale roaming price reductions to the retail level - in whole or at least to a significant 
extent - cannot be taken for granted.  One potential reason for very limited pass-through could be the fact that not all wholesale 
capacity is actually traded, with approximate ly 25-30% of large EU operator's wholesale 
roaming demand being met by group-owned subsidia ries. One could argue that industry-wide 
wholesale caps – whatever their level – can only be partially effective in these cases, and will 
not necessarily result in retail prices lower than the caps.
42 Another potential reason, as 
pointed out in the Commission's impact as sessment accompanying Roaming Regulation is 
that  
'because from a demand perspective rece iving a call is a good substitute for 
making a call (rather than a compleme nt) - the price difference between 
these two kinds of calls, active and pa ssive, - is economically crucial: large 
price differences will lead to large su bstitution effects. Thus, there are good 
reasons to assume that the price le vel of active calls is determining 
indirectly the price level for passive calls  – and vice versa. If this is true, 
then even a dramatic reduction in whol esale input prices would not result in 
comparable reductions at retail level for active calls […]'
43 
 . While the effectiveness of wholesale caps can be questioned, it is al so possible that the 
current wholesale caps are too high, and work  to reduce rather than maximize the retail 
margin available to operators inclined to enga ge in intense price competition on this service.
44 
Consequently, by further reducing the current le vel of wholesale caps, operators would be 
granted a greater degree of pr icing flexibility, potentially resulting in more effective 
competition (see section on regulatory options below).  From the arguments in the preceding sections it should be obvious that given the structural 
characteristics of the voice roaming market and the evidentiary record of the regulated period, 
regulation at both retail and wholesale level will continue to be necessary. 
                                                
 
42 A Commission analysis based on confidential operator data suggests that for the period Q2:2007 – Q1:2008 
approximately 25-30% of large operators' wholesale roaming demand was produced in-house, i.e. by group-
owned subsidiaries. In other terms, 25-30% of these groups' wholesale volume was captive or nor supplied 
as an exogenous (and market-priced) input factor. Note  that these figures are co nfined to genuine intra-
group traffic and do not include alliance-based traffic,  which to some extent (particularly if priced in 
collusive fashion) might also be unaffected by wholesale caps. 
43 COM(2006) 382 final, p. 18 
44 This effect would be particularly pronounced for sm aller non-alliance operators, which have to purchase 
wholesale capacity as genuinel y external production inputs. 
 
EN 4 1            EN 1.6. Summary evaluation and assessment of impacts 
Returning to the evaluation criteria set out in Chapter 5 the choice betw een regulatory options 
can be summarised as follows: 
Effectiveness 
It is considered that a combination of transp arency measures as well as retail and wholesale 
regulation is the only way to ensure an effective  outcome. Retail regulation only could be 
damaging to competition  as there is a strong possibility it  will lead to margin squeeze for 
smaller players. Equally, if regul ation is applied at wholesale level only, it is likely that the 
consumer will not see the benefits in the form of lower retail prices. That leads to the conclusion that regulation should be imposed at both retail and wholesale levels to protect the 
interests of roaming customers.   
It is sometimes claimed that the benefits flow ing to consumers from regulated roaming prices 
could be invalidated by compen satory price changes of mobile  operators elsewhere in the 
retail price structure – for example by price ch anges for domestic services. However, the 
Commission has argued in the past that such spillover effects (or waterbed effects) were unlikely to occur in a domestic setting wher e competitive forces (for instance MVNOs, who 
have only very few roaming customers) would always constrain operators' ability to price ad 
libitum . The data recently collected by ERG confir m that in fact there is no evidence of 
significant spillover effects due to the current regulation. 
Competition 
There is a competition problem in the voice roaming market which will not be addressed by 
transparency measures only or by allowing the Re gulation to expire. While  in the longer term, 
market developments may increase the possibility  of achieving sustainable competition, in the 
medium term, a combination of retail, wholes ale and transparency measures that provide 
flexibility to operators, could at least help to stimulate a degree of competition within the 
parameters of the regulation.  
Efficiency  
The administrative burden associated with the ex tension of the Regulati on is likely to be 
relatively lower than was the case for the implem entation of the current Regulation, given that 
many of the required measures are already in pl ace e.g. data collection. In any case, even if 
regulatory measures had not been  taken, data collection by natio nal regulatory authorities to 
facilitate monitoring of market developments w ould still have been necessary. In the case of 
voice regulation, the measures are generally an extension of existing obligations where costs 
of implementation have already been in curred. The ERG believes that the ongoing 
administrative burden arising from the Regulati on is relatively light, as the Regulation is 
largely self-enforcing, as a consequence of its design.  
 As for compliance costs, the GSMA estimates that the industry as a whole spent approximately €150 million to implement the Regulation (mainly overhead and staff). 
However, prior to the Regulation the industr y had acknowledged that there was a problem 
with roaming charges but claimed that this coul d be addressed without the need for regulation. 
Therefore, even in the absence of regulatio n, operators would have incurred costs in 
implementing alternative transparency measures as  well as other roaming offers. Therefore it 
 
EN 4 2            EN seems likely that part of the estimated cost s uggested by the GSMA wo uld have been incurred 
in any case. Finally the GSMA estimate obviously needs to be r ead in the context of the €2.3 - 
€2.7 billion gains in consumer welf are as a result of the Regulati on in the first year alone.   
 
Consistency 
One of the key benefits of the current Regulation is consistency of approach at wholesale and 
retail levels and in terms of uniform basic transparency requirements.  A major part of the 
problem with roaming was that no one NRA on its own could tackle  the problem since it 
could not control the wholesal e charges imposed on its own operators by operators from 
another Member State. Equally, if an NRA had been able to intervene to control wholesale 
charges within its own Member State, this c ould only have benefited consumers in another 
Member State and then only if pass-through ha d occurred. At retail level, the Eurotariff 
provides EU citizens with a guaranteed maximu m roaming charge anywhere in the EU.  
Coherence 
As stated earlier, the problem of persistently  high and unjustified roaming charges could not 
be addressed under the Telecoms Regulat ory Framework. Nevertheless the proposed 
extension of voice regulation is consistent with the general principles of that Framework. For 
example, the proposed extension of voice roami ng regulation will aim to preserve flexibility 
for competition while at the same time protecting consumers and, as noted above, providing a consistent approach. These ar e all key principles of the EU regulatory framework. This 
extension gives a similar role, for example, in terms of monitoring and dispute resolution, to 
NRAs as exists in the framework.  
 
EN 4 3            EN  
In the table below, the options are measured agai nst the pre-defined criteria set out in Chapter 
5. Each scenario is rated between "---" (ver y negative impact), "=" (no change) and "+++" 
(very positive impact). The scores are expressed in absolute terms and show to what extent 
the main regulatory options achieve the sp ecific objectives identified in Chapter 4.  
       Criteria 
 Scenario Effectiveness Competition Efficiency Consistency Coherence 
 
No policy 
change -- -- = -- -- 
Transparency 
only + + + + + 
Wholesale 
regulation only ++ ++ + + ++ 
Retail 
regulation only ++ -- + + + 
Wholesale 
and retail regulation including transparency +++ ++ + ++ ++ 
 
The following section examines options for extension of the Regulation at retail and 
wholesale levels. 
2. OPTIONS FOR WHOLESALE AND RETAIL REGULATION OF VOICE ROAMING 
SERVICES  
2.1. Glide path for price ceilings  
If, as has been argued in this impact assessmen t, regulation continues to be justified at both 
wholesale and retail level, it is necessary to ask whether going forward the existing price caps 
should be maintained or adjusted annually in  accordance with a predet ermined glide path.  
 
EN 4 4            EN Prices for domestic mobile services have genera lly declined over recent years as a result of 
competition. For example, the Commission's 13th Implementation Report shows that mobile 
prices in the low usage bask et (as calculated by the OE CD) have fallen by around 10%, and 
the prices for mobile services in the medium  usage basket and the high usage basket have 
decreased by nearly 14%.45 Arguably, prices for voice roaming services should similarly 
decline over time to reflect such developments.   
Furthermore, the Regulation's price caps for voice  roaming services should reflect lower input 
costs in future years. Current wholesale caps take account of the different elements involved 
in the production of roaming calls, in particular  the cost of originating and terminating calls 
including overheads, signalling and transit.  The most appropriate benchmark for call 
origination and call termination in the EU is th e (typically regulated) mobile termination rate 
(MTR), which has seen significan t annual decreases in the past . Accordingly, the Regulation's 
wholesale caps (and to some extent its retail caps) should refl ect those decreases.46 Details on 
the cost structure are provided in Annex I. W ith the exception of some small roaming specific 
costs, the cost structure does not differ significantly from that which applies to domestic calls.  
2.2. Maintain current price ceilings 
Under this option, the caps in pl ace at the current expiry date  of the Regulation (30 June 
2010) would remain in place at the same levels for the duration of the extended regulation i.e. 
up to 30 June 2013. Compared to a glide path opti on, such an approach would have relatively 
less impact on the industry and at the same  time would provide a degree of consumer 
protection. On the other hand, if roaming was a competitive market, one would expect that 
prices would fall to reflect increasing competition and lower costs. This approach would not 
be in line with the general price deve lopments in the overall mobile sector. 
In fact, in its response to the public consultation ERG suggest th at if the caps had been set on 
the basis of earlier work carried out by C openhagen Economics, the starting point would 
therefore be around 8€c/min lower, at both wholes ale and retail levels, th an the limits set out 
in the Regulation. There are two reasons for th is difference. First, according to ERG, the 
charge caps set by Council and the European Parl iament in the Regulation were higher than 
the levels implied by the independent cost analys is. Second, termination rates fell further than 
had been expected at the time the independent analysis was carried out. The current retail caps 
were deliberately set at generous levels to allow operators the flexibility to compete below 
these levels. If the caps are main tained at current levels actual prices could well continue to 
cluster close to the maximum ceilings. It is reason able to expect that pr ices should decline to 
reflect anticipated further reductions in thos e costs over time. While a healthy margin should 
be maintained to allow for the possibility of competition, consumers should be entitled to 
expect some benefits in terms of lower retail pr ices as a result of declining costs. Therefore, 
there is no justification for departing from the approach taken in the current Regulation which 
also includes a glide path to reflect declining costs. For these reasons this option should be 
discarded.  
                                                 
45 COM (2008) 153 March 2008  
46 Though perhaps not entirely, as the Regulation does not pursue a fully cost-orientated approach: the caps have 
been set with the twin aim of eliminating the excesse s in the pricing structure while allowing operators a 
sufficient degree of freedom to innovate and profit. 
 
EN 4 5            EN  
 
 
 2010 2011 2012 2013 
Retail outgoing 43 43 43 43 
Retail incoming 19 19 19 19 
Wholesale  26 26 26 26 
 
2.3. Glide path option 1  
This option is based on the proposal  of ERG. The ERG posits that falling input costs – such as 
lower termination rates and othe r efficiencies - give scope for lower wholesale and retail 
roaming price caps. The ERG glide path in its reliance on projected further decreases in EU 
termination rates is premised on forecasts su ggesting that MTRs are likely to fall by an 
average of 1 cent per year from 2008 onwards. ERG states that this  fall in input costs is likely 
to justify a 2 cents reduction each year in the le vel of the wholesale cap. It is considered by 
ERG that these reductions at wholesale level justify reductions of 2 to 3 cents at retail level 
for outgoing calls. In order to be consistent with the linear glide path contained in the current 
Regulation, option 1 therefore proposes a glid e path of 3 cents for outgoing calls. For 
incoming calls a similar approach is proposed.  
The above approach would lead to the following glide path for voice services: 
 2010 2011 2012 2013 
Retail outgoing 43 40 37 34 
Retail incoming 19 16 13 10 
Wholesale  26 24 22 20 
 
2.4. Glide path option 2 - with wider gap between wholesale and retail 
ceilings 
An alternative option would consist in accepting  the logic of decreasing production costs over 
time, yet to differentiate carefully between the ex tent of these decreases at wholesale level on 
the one hand and at retail level on the other. 
Based on recent notificati ons and current experience with the EU mobile call termination 
markets in the context of the Article 7 procedur e, the average EU mobile termination rate may 
 
EN 4 6            EN be projected to decline from €0.1051 (J anuary 2007) to just below €0.05 by 2012.47 This 
corresponds to a compound annual reduction of 13.1% over the period from 2007 – 2012. 
Accordingly, the implied reduction in future wholesale price caps (sta rting at €0.26 in 2010) 
should be in line with this rate. 
Turning to retail caps, it is safe to assume that any future efficiencies in production accruing 
from learning effects in marketing and retaili ng roaming services are likely to be less 
pronounced. Consequently, future retail caps shou ld follow the glide path proposed in option 
1 (which is a continuum  of the path in the cu rrent Regulation) but s hould be set in slight 
divergence from the wholesale caps. 
This approach would yield the following glide path:   
 2010 2011 2012 2013 
Retail outgoing 43 40 37 34 
Retail incoming 19 16 13 10 
Wholesale  26 23 20 17 
 
The prime virtue of this option is that it serves to increase the margin available to operators 
between the wholesale and retail price caps, th ereby potentially allowi ng additional room for 
price competition to emerge be low the regulated Eurotariff caps.48 Until 2013, the retail 
margin available to mobile operators would in crease to 100% (from a current level of 65.3%). 
Furthermore, in terms of relative competitive positioning of operators, while from an 
aggregate industry perspectiv e the level wholesal e rates is immaterial (IOTs cancel 
themselves out at overall EU industry level), smaller operators – in particular those unaffiliated with an alliance - could reap signifi cant benefits from lower wholesale rates and 
spur future price competition.  
3. 
VOICE REGULATION IMPACT ANALYSIS  
The general impact of extending voice regulati on at wholesale and retail level was examined 
in the previous section. This se ction looks at specific impacts re levant to the choice between 
the two glide path options presen ted in the preceding section.  
                                                 
47 For purposes of accuracy, an average EU MTR of €0.048 ha s been projected for 2012.  
48 It is argued in Chapter 2 that as yet there is not significant evidence for innovation and competition to have 
developed underneath the regulated caps. The present option seeks to address this issue.  
 
EN 4 7            EN 3.1. Consumer and industry welfare - economic impact 
The Commission's economic model presents an a ssessment of the overall economic impact of  
option 1 for a glide path and the alternative approach which envisages a greater decline in the level of the wholesale caps over the extende d period of the Regulat ion. The details are 
contained in Annex I. 
For glide path option 1, the Comm ission’s economic model suggests th at, as a direct result of 
extended regulation, for the firs t year of the extension (to e nd June 2011) consumer welfare 
could be increased by approximately €3.4 and €4.7 billion (depending on the elasticity scenario) over the 2007 pre-regulation base cas e. Again depending on elasticity assumptions, 
the change in industry profits could range from an  increase of €274 million to a decline of just 
over €1.1 billion for the same period. The effects on industry profitability are in fact more 
moderate than could have been expected, bearing in mind that th e fall of wholesale costs that 
has been observed since the regulation came into force has opened up an increasing gap 
between the caps foreseen in the regulation and the actual costs. Finally, overall social welfare (the net effect of increased consumer welfar e and changes in industry profits) would increase 
by between €2.3 and €5.0 billion.  
For glide path option 2, the Comm ission’s economic model suggests th at, as a direct result of 
extended regulation, for the firs t year of the extension (to e nd June 2011) consumer welfare 
could be increased by approximately €3.5 and €5.0 billion (depending on the elasticity scenario) over the 2007 pre-regulation base cas e. Again depending on elasticity assumptions, 
the change in industry profits could range from  an increase of €232 million to a decline of 
€1.2 billion for the same period. Finally, overall soci al welfare (the net effect of increased 
consumer welfare and changes in industry pr ofits) would increase by between €2.3 and 5.2 
billion. It should be recalled, as shown in Chapter 2 that, based on an estimate of 2007 pre-
regulation revenues, voice roam ing was valued at €5.17 billion which represents 3.8% of the 
total EU mobile market. 
Glide path option 2 therefore prod uces a slightly greater overall  social welfare result than 
glide path option 1.  
3.2. Competition - impact on smaller operators 
One of the aims of the current Regulation at wholesale level was to ensure that smaller 
operators did not suffer margin squeeze as a consequence of having to comply with maximum 
retail price ceilings while at the same time fa cing the possibility of relatively high charges 
imposed by larger operators at the wholesale level. Both opti ons above continue to provide 
this protection. However, the second glide path allows for a steeper decline in wholesale caps 
compared to option 1. While this produces only  a marginal difference in industry profits 
(largely because wholesale revenues and costs cancel each other out at the level of the 
industry) it nevertheless provide s the possibility for enhanced competition at retail level by 
widening the margin in relative terms between wholesale and retail caps.  
In terms of efficiency (including admini strative burden), coherence  with the general telecoms 
regulatory framework and consistency of approach  both of these glide path options would 
score equally. However, it is considered that glide path option 2 would be more effective as it 
provides a greater opportunity for competition to  work below the levels of the caps.  
 
EN 4 8            EN The following table summarises the comparison between these two glide path options in the 
context of the criteria specified in Chapter 5: 
 
       Criteria 
 Scenario Effectiveness Competition Efficiency 
 Consistency Coherence 
 
Glide path 
option 1  + + + + + 
Glide path 
option 2  ++ ++ ++ + + 
 
 
 
 
EN 4 9            EN  
CHAPTER 7.  BILLING UNITISATION POLICY OPTIONS 
There are various options to amend the Regulati on in order to address billing unitisation for 
roaming voice calls. 
1. UNITISATION AT RETAIL LEVEL  
The legal requirements applicable at national level to the retail  billing practices of mobile 
operators differ across the Community. While in most Member States the billing unitisation 
practices of mobile operators are not regulated, in four Member States49 per second billing 
obligations have been imposed.   
The divergent legal requirements and practices applicable to the billing of roaming calls 
across the Community therefore can be seen to create different conditions in different 
Member States, thereby distorting competitive co nditions in the single market. In addition, for 
consumers from the four Member States with  per second billing oblig ations for domestic 
mobile phone calls, the us er experience can change substant ially simply by crossing a border 
in the case of operators who practice per minute charging for roaming calls.  
Given the Community-wide, cross-border nature of intra-Community roaming services, it is 
therefore appropriate for the Regulation to harm onise the obligations on mobile operators in 
this regard, in the interests of strengthening the single market.  
There is a range of optio ns available for dealing with the unitisation issue at the retail level. 
1.1. Do nothing  
As experience with implementation of the Regu lation has shown there a ppears to be little 
incentive for operators to cha nge billing practices for voice roaming services. It has been 
noted that these roaming billing practices ar e not in line with general domestic billing 
practices where competition is more effective. As mentioned in Chapter 2 operators adopt divergent approaches in differe nt Member States which is not  conducive to the completion of 
a single market for electronic communications. Th erefore it is considered that this problem 
will not be resolved in the absence of regulation.  
1.2. Retail Billing Option 1 – Additional transparency obligations 
For example, additional transparency obligatio ns could be imposed, requiring operators to 
publish information on the actual price charged fo r calls of specific dura tions (e.g. how much 
a 30 second call will cost; how much a 61 second ca ll will cost). This would make it easier for 
customers to be aware of the real costs of a roaming call and to compare the prices charged by 
different operators. However the underlying pr oblem is primarily related to the charging 
mechanism as opposed to any l ack of awareness on the part of the consumer This option 
                                                
 
49France, Spain, Lithuania and Portugal. 
 
EN 5 0            EN would therefore be ineffective  as it would not tackle the problem (that customers are being 
charged for services they do not receive) while  adding considerably to the amount of pricing 
information that roaming customers will receive . . This option can therefore be discarded. 
1.3. Retail Billing Option 2 – Strict per second billing obligation (1+1) 
At retail level, it would also be possible to  require strict per second billing, whereby home 
providers are required to bill their roaming customers on a per second basis from the first second of the call, i.e. both during the first minute of the call and during all subsequent 
minutes. This is referred to as the "1+1" approach. This approach would be the simplest and most efficient  approach and have the most immediate and transparent effect on the roaming 
customer's bill. However, it would also preclud e home providers from charging any form of 
set up or connection charge at the retail le vel, which was a common practice across the 
Community even before the entry into force of  the Regulation. It would therefore have the 
biggest financial effect on the mobile operato rs. Moreover, this approach would also run 
contrary to the practice which now exists in the Member States which have a per second 
billing requirement under national law. In su ch cases a set up or connection charge is 
permitted, despite the obligation on operators to charge their customers on a per-second basis. 
For incoming roaming calls, to align the underlyi ng wholesale cost (the termination rate) to 
the retail cap, a strict per second basis is ju stified i.e. no minimum initial billing period. 
 
1.4. Retail Billing Option 3 – Modified per second billing obligation (30+1) 
In order to permit home providers  to continue to include a r easonable set up charge in their 
retail bills, a modified per s econd billing obligation could be included in the Regulation, for 
example to allow a minimum initial charging interv al (e.g. up to the first 60 seconds of a call, 
followed by per second billing for all subse quent periods (the " 60+1" approach).  
ERG notes that, in general, such a two-part ta riff is not an unreasonable structure if cost 
causality is taken into account, given that fixed costs are incurred in set ting up a call. A call of 
even one second will require VLR / HLR, In telligent Network lookup (related to number 
portability) as well as single billing. These cost are minimal, however they should be 
considered. The ERG has also noted that 60 se conds (currently this would be 46 cents) is 
likely to far exceed the actual  costs of setting up a call. 
Setting a minimum billing period at a level of 30  seconds would serve two purposes. First, it 
would allow operators to recover comforta bly the fixed set up. Secondly, because this 
approach is comfortably above costs it confor ms with the principle set out in the current 
Regulation to allow operators the freedom to compete by differentiating their offerings and 
adapting their tariff structures thus allowing operators to offer shorter minimum charging 
periods or even full per second billing.  
It may therefore be appropriate to allow a lesse r initial charging period at a maximum level of 
30 seconds (30+1), to cover the set up costs. Therefore this is the maximum
 that any operator 
could impose as a fixed set up ch arge. Operators are free to impose lower set up charges or 
indeed to opt for strict per second billing.   
 
EN 5 1            EN No minimum initial charging period is justified in the case of Eurotariff calls received, as the 
underlying wholesale cost is ch arged on a per second basis and any specific set up costs are 
already covered by mobile termination rates. 
1.5. Retail Billing Option 4 – Furth er reduction of the price caps 
Finally, the maximum price limits for roami ng voice calls set by th e Regulation could be 
reduced further, by an amount calculated to compensate consumers financially for the billing unitisation practices currently bei ng applied. This option would be ineffective  and 
disproportionate as it would pena lise those operators which curre ntly apply per second billing 
on a voluntary basis and cr eate an overwhelming incentive for all operators to move to billing 
on a per minute basis for both th e first and subsequent minut es. It should therefore be 
discarded. 
2. 
UNITISATION AT WHOLESALE LEVEL  
Since the move by some operators to per minute bi lling at retail level has been explained by 
the need to recover wholesale costs charged on a pe r-minute basis, it will be necessary to also 
look at wholesale charges and whether thes e should be billed on a per-second basis. 
2.1. Wholesale Billing Option – Do nothing  
Currently, wholesale interconnection charges be tween operators are billed on a per second 
basis across the Community. Howeve r, given the fact that the cu rrent practice is for wholesale 
charges for roaming to be charged on a pe r minute basis, in particular for the 1st minute, 
intervention at the retail level to protect consumers and harmonise the practice in the EU would require intervention at the wholesale le vel since per-minute wholesale charges could 
give rise to margin squeeze for particularly s hort calls. Therefore the 'do nothing' option is not 
a viable proposition.  
2.2. Wholesale Billing Option  – Per-second billing 
At the moment, there are inconsistent approach es to charging at the wholesale level. While 
there are some operators that already charge  IOTs on a per-second basis, there are others 
which have a set-up charge include d in their agreements. This may vary but in most cases is 
billed at 60 seconds.   The fixed costs of setting up a call at the w holesale level are alrea dy taken account of in 
regulated termination charges. In addition a pe r second basis is in ge neral applied for other 
wholesale interconne ction charges at domestic level. 
Since wholesale interconnection charges at dome stic level (termination rates) are in general 
charged on a per-second basis, it would be a ppropriate to introduce such a charging 
mechanism as this would be the most effective outcome in dealing with the problem. For this 
reason, the Commission services agree with the ERG that there is no justification for billing 
other than the actual volume. In  particular, a per-second approach  at the wholesale level might 
also enable some operators to charge on a strict per-second basis at the retail level. 
 
 
EN 5 2            EN 3. ASSESSMENT OF IMPACTS  
3.1. Consumer and industry welfare - economic impact 
The distribution of call length is  not available to enable the Commission services to estimate 
the duration of calls and this is not expected to become available even in the medium term. 
Nevertheless, if one where to assume a move to a complete per second billing system, (since 
2007), then consumers would have made savings of  nearly €1 billion for both calls made and 
received (broken down into €696 million for calls made and €242 million for calls made)50. 
However, the impact on the industry is mitigat ed by that fact that a maximum 30 second set-
up charge will be permitted.  
3.2. Competition - impact on smaller operators 
The move to per-second billing at wholesale leve l will give smaller operators more flexibility 
particularly to compete at the retail level. Currently, it would not be feasible for such 
operators to move to per-second billing at the retail level even if they wanted to for 
competitive reasons since they often have to pay on a per-minute basis at wholesale level.  Therefore at the wholesale level, a move to pe r-second billing allows for more competition.  
 
4. 
SUMMARY EVALUATION  
Effectiveness 
 
Option 3 (modified per second 30+1) will deliver  the most effective outcome as it will 
remove the 'hidden charge' of billing per minute while at the same time allowing a reasonable 
set-up charge for operators. Moreover, the d ecision to move to per-s econd billing at the 
wholesale level may also encourage more competit ion at the retail level by allowing operators 
to charge a set-up fee lower than 30 cents. 
 
Efficiency 
 
Once a decision has been taken to intervene, an y option would require some minor changes to 
the billing systems but these may be considered as minimal and therefore should not have any 
material impact on operators. 
 
Competition 
 
The suggested option of 30+1 is preferable to transparency or strict per second billing in 
terms of competition. It is envisaged that this  would apply to the Eurotariff only and as such 
operators would be free to provide other offers  with different structures. The move to per 
second billing at wholesale level could he lp to stimulate further competition.  
 
Coherence 
 
                                                 
50 Based on ERG estimates of impact of per minute billing combined with Commission market data 
 
EN 5 3            EN While modified per second billing is not mand ated as part of the Telecoms Regulatory 
Framework, it is considered that  the case of roaming is exceptiona l in that it does not exhibit 
the competitive tendencies of other mobile serv ices. Set-up charges followed by per second 
billing are common practice for domestic mobile services.   
Consistency 
 
A move to a 30+1 billing regime for roaming would encourage consistency of approach as it 
is possible that if Member States were to act to address this problem it would give rise to 
diverse approaches across the EU . This approach is also consistent with commercial practice 
for domestic charges and with chargi ng at wholesale level domestically.  
 The following table summarises the impacts of the various options for voice billing unitisation:    
       Criteria 
 Scenario Effectiveness Competition Efficiency Consistency Coherence 
 
Do nothing - - - - - 
Strict per 
second (1+1) + - + - - 
Modified per 
second ++ + ++ + + 
 
 
EN 5 4            EN CHAPTER 8.  SMS POLICY OPTIONS 
1. REGULATION OF SMS  ROAMING SERVICES  
Before taking action, regulatory or  otherwise, to resolve a partic ular problem the possibility of 
‘doing nothing’ should be considered.  
1.1. No policy change  
The option of 'no policy change' would mean not intervening on SMS roaming prices, i.e. 
allowing market forces to drive prices down. As noted above, there is strong evidence that SMS prices are unjustifiably high, at several times the cost of provision, and that they have 
been relatively stable for some time.  
The discrepancy between domes tic SMS prices and SMS roami ng prices remains unjustifiably 
high. Despite recent strong calls  from the European Commissi on and national regulators for 
significant price reductions, there has been relatively little moveme nt in the market. In fact, as 
previously mentioned, the average EU SMS retail price for Q1 2008 is around 28.5
51 cent 
which is (if at all and not only due to statistics)  only a very slight dec line on the figure of 29 
cent published by ERG for Q2 2007. Thus, in order to ensure that such prices decline over 
time in a manner consistent with trends which should be expected from a competitive market 
with declining costs, this op tion will not be effective. 
It seems unlikely that there will be any majo r market or technological developments which 
would suggest that SMS roaming prices are likely to fall in the medium term in the absence of regulation. Thus, competition is  not likely to be reinforced  as a result of technological 
developments in the following years.  
The 'No policy change' option may also result in an inconsistency problem. In fact, according 
to the available information the retail price of an SMS sent while abroad can range from 6 cents in Estonia and 80 cents in Belgium.   
In terms of efficiency, this option could lead to contradictory results. On the one hand, NRAs 
or market players would not face the administra tive burden resulting from the implementation 
of a new regulation. However, the Europe an Commission, ERG a nd NRAs would most 
probably be required to continue the monitoring of market developments. The need for a new 
review of the roaming regulation in the near future could then be possible. 
Therefore it is considered that the 'do not hing' option is not viable in this case. 
1.2. Tariff Transparency for roaming SMS 
It may be appropriate to adjust the provisions of Article 6 of the Regul ation which provide for 
transparency of voice roaming prices and the provision of price information to roaming 
customers to also include price information on roaming SMS messages. As in the case of 
                                                
 
51 GSM Association have indicated that the aver age SMS roaming price in Q1 08 was 28 cent 
 
EN 5 5            EN voice, the transparency measures for SMS roami ng services are an indispensable element of 
the current regulation. Also, given the fact th at the underlying structural problems for SMS 
roaming are similar to those for voice roaming, it is considered  that transparency measures 
alone will not be effective to address these problems.  
1.3. Wholesale regulation only 
If a price ceiling for wholesale SMS roaming charges (IOTs) only were imposed, this would 
be an efficient option in order to enable mobile operators to reduce their retail SMS roaming charges without the risk that their retail reve nues would not cover the wholesale costs of 
providing the SMS roaming serv ice to their customers.  
However, to regulate only at wh olesale level would assume that market forces would be 
sufficient to guarantee a substantial pass-throug h of wholesale reductions to the retail level 
within a relatively short period. The same economic arguments as  apply to the voice roaming 
area would suggest that such an assumptio n would be ill-founded: given the lack of 
competitive pressures in the retail roaming markets, there is a significant risk that operators would not pass through the benefits of lower w holesale rates to their retail customers.   
Thus, this option is unlikely to be effective as far as ensuring that customers will pay 
reasonable retail prices.  
1.4. Retail regulation only 
The imposition of price ceilings for SMS roami ng services at the retail level would be 
effective in so far as it would achieve reductions in pri ces for consumers. However, without 
wholesale regulation, there is a risk that sm aller operators could suffer margin squeeze 
because they may face relatively high wholesale charges while th eir retail prices are capped. 
This ultimately would not allow them to provide competitive SMS roaming offers.   
Thus, this solution could also prevent efficien t smaller operators from  continuing to profit 
from the provision of voice, SMS or data ro aming services. As was the case for voice 
roaming, the significance of this risk would s uggest that retail regulation alone would not 
achieve the desired objectives of regulation. 
This option could result in inc onsistency as significant wholesal e price differences might be 
incurred, which could result on unintended market distortions. 
1.5. Wholesale and retail regulation 
Assuming that regulation at wholesale level only or retail level only are not sufficient to 
achieve the objectives set, it is then necessary to consider regulation at  both levels. From the 
problem definition section it is clear that th e wholesale charges ar e not justified by the 
underlying costs to the host operator. Equally the retail margin is currently  rather high without 
sufficient justification.  Therefore, it is considered that  wholesale and retail regulation are 
both necessary to ensure the removal of excessi ve retail and wholesale SMS roaming prices.  
 
EN 5 6            EN 2. SUMMARY EVALUATION AND ASSESSMENT OF IMPACTS  
Returning to the evaluation criteria set out in Chapter 5 the choice betw een regulatory options 
can be summarised as follows: 
 
Effectiveness 
As for voice, it is considered that a combination of transparency measures as well as retail and 
wholesale regulation would ensure an effective  outcome. Equally, if re gulation is applied at 
wholesale level only, it is likely that the consum er will not see the benefits in the form of 
lower retail prices. Retail only regulation co uld cause margin squeeze for small operators.  
Competition 
Retail regulation only could be damaging to competition  as there is a strong possibility it will 
lead to margin squeeze for smaller players.  
Wholesale and retail regulation would promot e competition, as wholesale price regulation 
would be proposed at levels that  would allow operators to obtai n a reasonable return even in 
the case where an operator would set SMS reta il prices below the caps. Under this option, 
smaller mobile operators would be protected from a price squeeze, which ultimately would result in less competition in the market.  
Efficiency  
The extension of wholesale and retail re gulation to SMS would not cause any major 
administrative burden. For example, the ERG Benchmark Data Reports on international 
roaming already provides data for SMS.    It is important to refer again that National Re gulators believe that the ongoing administrative 
burden arising from the Regulat ion is relatively light, as th e Regulation is largely self-
enforcing, as a consequence of its design.  
 
Consistency 
As for consistency, wholesale regulation only could have a positive effect at wholesale level, 
but as previously mentioned this may not ha ve a significant impact at the retail level. 
Wholesale and retail regulation would ensure co nsistency of approach across MS in relation 
to pricing at wholesale and reta il levels for roaming services.  
Coherence 
As a result, this option is considered the most coherent with the general principles of the 
Regulatory Framework. In fact , it would contribute to the promotion of competition, and 
effective consumer protection a nd would have a decisive role as far as the harmonisation is 
concerned. 
 
EN 5 7            EN The extension would promote fu rther development of the si ngle market for electronic 
communications services for users of public mo bile telephone networks for EU-wide roaming 
services when travelling within the Community.   
 
In the table below, the options are measured ag ainst pre-defined criteria. Each scenario is 
rated between "---" (very negative impact), "= " (no change) and "+++" (very positive impact). 
      Criteria 
 
Scenario Effectiveness Competition Efficiency Consistency Coherence 
 
No policy 
change -- -- = -- -- 
Tariff 
Transparency only + +  + + + 
Wholesale 
regulation only + + + + + 
Retail 
regulation only + - + + = 
Wholesale 
and retail regulation plus transparency ++ ++ + +++ ++ 
 
Assuming the current Regulation is to be extended to include re gulation of SMS at retail and 
wholesale levels as well as transparency measures , the next issues to consider are the duration 
of such regulation and the levels of the pric e ceilings together with whether these should 
decline each year in accordance with a predetermined glide path.  
3. DURATION  
As shown earlier, SMS exhibits many of the same structural problems as in the case of voice. 
Market and technological developments wh ich might render the need for regulation 
unnecessary are unlikely to occur in the short to medium term. There is a strong case for 
aligning the period of regulation with that of  voice. This would ensu re certainty for both 
 
EN 5 8            EN consumers and market players while allowing sufficient time for real competition to develop 
over that period. Therefore the Regulation sh ould be amended to include SMS roaming 
services with effect from 1 July 2009 fo r a period of four years to 30 June 2013.  
4. OPTIONS FOR WHOLESALE AND RETAIL REGULATION  
When a roaming customer sends an SMS, th e visited network bills the home network a 
wholesale fee for the SMS origination service. The home network bills the roaming customer 
a retail fee for the complete service (which  includes the origination leg and also the 
termination of the SMS on the recipient's terminal).  
When setting the price ceilings for retail roami ng SMS, it should be borne in mind that the 
termination rate at domestic level is generally  not regulated. The termination payment faced 
by the retail operator is on average 4.36€c per SMS according to the latest ERG benchmarking (as mentioned in the ERG su bmission to the Public Consultation).  
On the other hand, there are no wholesale or retail charges for receiving an SMS. 
Nevertheless, the cost for terminating the SMS at  the visited network must  also be taken into 
account when setting the price ceilings for roaming SMS.   According to some submissions to the Public Consultation, the cost s incurred at the wholesale leve l are minimal since an SMS is 
treated by the visited ne twork as pure signalling. 
The following section examines three options for regulation of wholesale and retail SMS 
roaming charges. The first is proposed by the Danish national regulatory authority (NITA) 
while the other options were proposed by ERG.  
4.1. Option 1 – NITA cost model  
The Ministry of Science Technology and Innovati on of Denmark submitted as an Annex to its 
answer to the Public Consulta tion, a recent study carried out by the Nati onal IT and Telecom 
Agency, the Danish Regulatory Authority
52. The study presents a comprehensive and detailed 
analysis of the prices and costs for SMS and da ta roaming services with a view to assessing 
whether regulatory intervention is needed.  
According to NITA, the  costs to the visited network (wholesale cost) of an SMS being sent 
can be categorised as follows: 
– origination; 
– international transit. 
 Also, according to NITA, the unit cost of sending an international roaming SMS is slightly less than the costs of sending a national SMS, since the SMS centre (SMSC) will not be used in originating an international roaming SMS.  In  relation to the international transit it is 
assumed that the costs for an SMS are very clos e to zero. NITA also suggests that operators 
should be compensated for the lack of wholes ale cost coverage for receiving SMS. This 
                                                
 
52 http://en.itst.dk/interconnection-and-cons umer-protection/filarkiv-international-
roaming/English%20abstract.pdf 
 
EN 5 9            EN compensation would be equal to 0.40€c. Theref ore the overall wholesale cost would result 
from the following formula:   
Origination costs + internati onal transit + Receiving SMS = 0.4 cents + 0 + 0.4 cents = 0.8 
cents 
At the retail level, according to NITA, the costs to the home operator related to a SMS sent 
from abroad can be divided into the following categories: 
 
– handling/receiving SMS; 
– termination of SMS; 
– retail costs. 
 
 
In its submission NITA states that the ne twork elements used are the Mobile Service 
Switching Centre (MSC) and SMSC wh ich together amount to 0.13€c /SMS. 
 As for the termination of SMS, a distinction is made between the following three scenarios: 
• SMS terminating on the sender's home network 
• SMS terminating on another network in the home country 
• SMS terminating on another network where the recipient is roaming 
 The first scenario
 covers the situation in which the recipient is an end-user on the sender's 
home network. This results in an internal network cost of 0.40€c / SMS. The second scenario  
relates to the situation in which the recipient network is another national network in the home 
country. In this situation there is a terminati on payment from the sender's home network to the 
recipient's network of 2.68€c / SMS in Denm ark. However, as previously mentioned the 
average termination rate in EU27 is around €4.36c. The third scenario  considers the situation 
in which the recipient is roaming  on a network other than the se nder's home network. In this 
scenario, there are no  termination  charges to be paid. 
 
NITA assumed that 20 per cent of the traffic is destined for end-users abroad i.e. roaming, 
while 80 per cent of the traffic is destined fo r end-users in the home country. It is also 
assumed that the home provider has a 25% market  share, which will result in around 25% of 
the traffic to the home country terminating on the operator's own networ k, with 75 per cent of 
the traffic to the home country terminating on co mpeting networks. On th at basis, a weighted 
average price for termination costs can be  calculated at 1.74€c per SMS based on the 
following formula:  
0.2x 0 + 0.8x(0.25x 0.40€c + 0.75x 2.68)= 1.74€c / SMS 
 
NITA estimates that the averag e absolute retail mark-up for a national SMS is 0.81€c /  SMS. 
When the roaming customer receives an SMS while roaming, no termination charge is levied by the host network on the home (originating) network.  Therefore, on the basis of the analysis above, the overall costs to the hom e network, excluding the visited network 
wholesale charge (IOT), are as follows:   
 
EN 6 0            EN  
Incurred costs  €c / SMS 
Handling / receiving 
(SMSC) 0.13 
Termination costs in 
2009  1.74 
Retail markup 0.81 
Receiving SMS 0 
Total 2.68 
 
Therefore the total estimated cost to the home network (and consequently the retail price 
ceiling implied by the NITA analysis) is 3.48€ c excluding VAT (0.8€ (wholesale level) + 
2.68€c (retail level)). 
 
4.2. Option 2 - Retail price ceiling at 15 cents 
According to ERG, the costs faced  by retail operators (in both this option and option 3 below) 
consist of: 
– Wholesale charge (IOT) – which includes inter alia  origination and international transit; 
Plus home operator costs which include: 
– Termination payment (payable by the home operator); 
– Retail cost; 
– Reasonable return. 
As for regulation of wholesale charges, this method proposes that the wholesale price cap is 
set on the basis of national SMS termination rates.  ERG uses the 75th pe rcentile of European 
domestic non-regulated SMS termination rate s as a starting point for its calculations. 
According to the latest ERG Benchmark Report on SMS termination rates, the average charge 
is 4.40€c, and the 75th percentile is 4.99€c.  ER G state that the average rate would be 
expected to decline as charges are brought more into line with costs (N RAs estimate that this 
average would not exceed 4€c at  1 January 2010).  On this ba sis, they estimate that the 
average cost for terminating an SMS is 4€c.   
The cost of originating an SM S also needs to be covered, t ogether with the other roaming-
specific costs (e.g international transit). ERG believes that the roaming specific costs do not 
exceed 0.5€c per SMS. As for origination costs, the average cost of originating an SMS could 
also be estimated at 4€c. On this basis, ER G indicates that the total wholesale costs of 
provision of a roaming SMS (including reasonable  return) could be assessed at 8€c (4€c for 
origination and 4€c for the unrecovered cost  of terminating incoming SMS) per SMS
53.   
                                                 
53 This assumes that no wholesale charge is levied for termination of a roaming SMS and that the 
wholesale charge for originating a roaming SMS addi tionally covers the cost of terminating incoming 
SMS.  
 
EN 6 1            EN  
As mentioned above, in setting the retail cap, it is necessary to consider the termination 
payment on the home network, the retail  cost and a reasonable return. 
For the termination payment (as also in the NITA methodology – option 1) it is assumed an 
average operator's market share of 25%. Thus, 25% of the SMS traffic will terminate on its own network.
 In this case, the operator faces an in ternal network cost of around 0.5€c per 
SMS.   On this basis the average termination payment can be calculated at 3,4€c 
(4,4€c*75%+0,5€c*25%). As far as the retail cost  is concerned, ERG consider that the 
available data indicates that the mark-up coul d be lower than 1€c/SMS and as high as 3€c. 
This estimation is also confirmed by other subm issions to the Public Consultation, and also in 
one of the meetings that the European Commi ssion had with operators in the context of the 
review of the Roaming Regulation.  
Overall, ERG indicate that it is not necessary to allow more than 7€c (which includes the 
termination payment, retail costs and a reasonable return) at the retail level for the recovery of 
costs plus a reasonable return.  
This produces the following price ceil ings over the period of regulation: 
  2009 2010 2011 2012 
Sending - 
Retail 15 15  
15  15 
Sending - Wholesale 8 8 8 8
Receiving – 
both retail and wholesale 0 0 0 0
 
ERG did not suggest a glide path for the future trend of these price ceil ings. In fact, as the 
wholesale cap takes into consideration termina tion rates which are not regulated, it could be 
difficult to estimate an evolution for these termination rates. 
ERG has indicated that this model has some drawbacks. Firstly, SMS termination rates are 
unregulated and set at a high leve l compared to real cost. Secondly, there is at the moment no 
complete SMS termination benchmark which can be used for this purpose, as the ERG benchmark exercise does not  include all countries.
 This Report on SMS termination rates does 
however contain data from most Member States.  
 
4.3. Option 3 - Retail price ceiling at 11 cents 
The second method proposed by ERG for regul ating wholesale and retail SMS roaming 
charges uses NITA's SMS price a nd cost analysis (opt ion 1) as a basis but is more generous 
that the pure NITA approach in terms of the ceilings proposed.  
Under this option, wholesale cost s (including origination, intern ational transit, interconnect 
costs and billing costs plus a reasonable return) would not exceed 2€c per SMS for any 
 
EN 6 2            EN European operator. As in option 2, ERG also a dded an allowance for the unrecovered cost of 
termination. Using this method, it is concluded th at the total wholesale cost should not exceed 
4€c per SMS. It should be noted that the equiva lent figure under the pure NITA approach is 
0.8€c.  
At retail level, the price cap is calculated on th e basis that termination is payable by the retail 
operator at an average rate of 4.4€c (i.e. us ing a similar method to option 2). ERG indicate 
that it is not necessary to allow more than 7€c to cover the home operator's costs plus a reasonable return (includes a termination charge of 3.4€c
54  plus retail costs and a reasonable 
return).  
 
This formula would lead to th e following SMS price ceilings:  
  2009 2010 2011 2012 
Sending - 
Retail 11 11 11 11
Sending - 
Wholesale 4 4 4 4
Receiving – 
both retail and wholesale 0 0 0 0
 
The advantage of this approach is that it gives a realistic estimate of the actual costs faced by 
operators at wholesale and retail levels for ex ample by reflecting the real average termination 
rate in the EU27 (4,4€c) instead of the average termination of 2,68€c in Denmark only (used in option 1). ERG did not prescribe any gl ide path. Unlike the case of voice, where 
termination rates are regulated, it is difficu lt to predict a significant downward trend for 
underlying SMS roaming costs. It is therefore reasonable not to include a glide path for SMS 
price ceilings.  
5. 
SMS  IMPACT ANALYSIS  
It is important to bear in mind issues that differentiate the voice a nd SMS roaming market.  
SMS termination rates are only regulated in France, while for voice, termination rates are 
regulated in all Member States . Therefore, when evaluating options for voice regulation, the 
use of the average regulated termination rate as a benchmark for whol esale prices provided 
transparency, simplicity and certai nty. However, as this is not the case for SMS, the use of 
unregulated termination rates when setting IOT charges would not provide the same benefits. 
Furthermore, at the moment there is no comp lete SMS termination benchmark that can be 
used for this purpose. The ERG Benchmark Report on SMS termination rates does however 
contain data from most Member States.   Option 3 is considered an effective  method given that it reflect s a meaningful relationship 
between the wholesale SMS cap and the unde rlying costs of providing these services. 
However, as stated above, it s hould be noted that the retail price ceiling has to cover the real 
                                                
 
54  Assuming that a mobile operator will terminate in av erage 25% of the SMS traffic on-net. On this basis 
the average termination payment can be calculated to 3,4€c (4,4€c*75% + 0,5€c*25%).  
 
EN 6 3            EN average cost of termination as this is in fact a cost incurred by the home operator whenever a 
roaming customer sends an SMS.   On the other hand, it should be borne in mind that option 1 is based on the relativ ely low SMS 
termination rate in Denmark, and therefore it  is considered that  it would produce price 
ceilings which are too aggressive for practical  application in almost all Member States. 
Furthermore, termination rates for SMS (which are to be borne by the home operator) are not 
regulated and presently stand at 4.4 cent on averag e with considerably hi gher rates applying in 
some countries.  
 The main objective of regulation is to eliminate excessive prices while retaining flexibility for 
operators to compete below th e levels of the caps. Option 1 above would result in SMS 
roaming caps that would be significantly below e quivalent average domestic price levels in all 
Member States. For this reason, opt ion 2 and 3 allow more space for competition as the 
difference between the retail price ceiling and th e wholesale cap is higher in both of these 
options.  At wholesale level, option 3 is preferred ove r option 2 because it provides a better reflection 
of the wholesale costs actually incurred while at the same time proving greater flexibility than 
the approach advocated under optio n 1. At retail level, option 3 is clearly preferable from a 
consumer perspective. Like option 2, it still al lows a generous margin above the wholesale 
cost and, unlike option 1, it refl ects the real costs of terminati on payable by home operators.  
 In terms of coherence  with the EU telecoms regulatory framework and consistency of 
approach  options 2 and 3 would scor e equally. However, as noted  above it is considered 
option 3 would be more effective and more  efficient in terms of cons umer benefits but would 
be equal in terms of administrative burden .  
 
5.1. Social welfare 
The Commission has modelled the options prop osed by ERG (see Annex II for details).  
 
For option 2 (15 cents), the Commission’s economi c model suggests that as  a direct result of 
regulation consumer welfare could be in creased by approximately €0.707 billion to €0.995 
billion for every year of the regulation. The precise change would depend on the elasticity 
scenario regarded as the most realistic one. In  this option, total econom ic welfare gains could 
be estimated to range from €0.639 to €1.301 bill ion, depending on the elasticity scenario. 
 In the case of option 3 (11 cen ts), the economic model suggest s even a higher level of 
consumer welfare increase. In fa ct, in this case in every year of regulation the model yields a 
consumer welfare between €0.884 billion and €1.243 billion, according to the elasticity 
scenario. As for the social welfare, this option would result in an estimated gain ranging from €0.716 billion and €1.514 billion.  
 
EN 6 4            EN 6. COMPARISON OF OPTIONS  
In the table below, the options are measured against the pre-defined criteria described in 
Chapter 5. Each scenario is rated between "--- " (very negative impact), "=" (no change) and 
"+++" (very positive impact). 
       Criteria 
 Scenario Effectiveness Competition Efficiency Consistency Coherence 
Option 1 – 
NITA + - + + = 
Option 2 –  
(price ceiling of 15) + + + + = 
Option 3 –  
(price ceiling of 11) ++ + ++ + = 
 
.  
 
EN 6 5            EN CHAPTER 9.  DATA ROAMING POLICY OPTIONS 
1. REGULATION OF DATA ROAMING SERVICES  
In contrast to SMS roaming, prices for data  roaming have shown significant movement over 
the last year. There is evidence to  suggest that such movement is not just the result of political 
pressure but that there is also a genuine recognition on the part of operators that prices need to 
be reduced as a response to co nsumer concerns over ‘bill shock' and to exploit the untapped 
potential for growth in the market. While prices  at wholesale and reta il levels remain high, 
there is a downward trend and, gi ven that this is a developing market, the movement in prices 
that has occurred suggests that re gulatory intervention to control prices needs to be considered 
very cautiously.  
Before taking action, regulatory or  otherwise, to resolve a partic ular problem the possibility of 
‘doing nothing’ should be considered.  
1.1. No policy change  
In this case the option of ‘no policy change ’ would mean no regulat ory intervention i.e. 
allowing market forces to work. As noted above, the retail prices for data roaming services 
have declined from €5.81 per MB in Q2 2007 to €3.50 per MB in Q1 2008.  
This price trend may therefore s uggest that the market should be allowed to develop without 
regulatory intervention particularly as growth of these services in terms of volumes and 
revenues is also very much in evidence. Comp etition from WiFi services may put further 
pressure on prices for mobile data usage wh ile roaming. Moreover, as more users take-up 
such services at home, in many cases by subscribi ng to monthly flat rate fees, the pressure on 
data roaming  prices co uld continue to grow.  
On the other hand, the continuing discrepancy be tween domestic data prices and roaming data 
prices remains high with a diverse pattern across Member States, leading to the ongoing 
possibility of ‘bill shock’ for consumers. As not ed in Chapter 2, prices have increased in some 
Member States. While average wholesale prices may be falling, operators have reported that 
extremely high charges still exist leading to problems developing competitive retail offerings. Lack of transparency remains a key problem a nd it is far from certai n that recent efforts by 
some operators to enhance transparency for this  service will ensure that the problem of ‘bill 
shock’ is eliminated in all Member States pa rticularly while retail and wholesale prices 
remain at current exorbitant levels. Therefore,  while regulatory intervention should be treated 
cautiously, it is considered that measures of so me form will still be necessary to tackle this 
problem. 
1.2. Transparency regulation only 
Lack of transparency is a key element of th e problem and for data roaming services and 
consequently measures to improve transparen cy must be part of the solution. There are 
various approaches that could be considered for improving transparency  starting from basic 
information provision requirements to more pr escriptive measures. The main aim of such 
 
EN 6 6            EN measures should be to improve price transpar ency for data roaming consumers by giving 
consumers the tools to control their expenditure for these services and also to inform them 
about the charges that apply when ‘roaming’ in the internal market. Targ eted regulation in the 
form of improved transparency is therefore desirable. The options for achieving this are considered further below.  
As noted in the problem definition section, 'bill shock' for data roaming services is a 
significant problem particularly for high volume us ers. It is also becoming evident that high 
volume users are not necessarily  business customers but also residential customers who are 
increasingly accustomed to using mobile broa dband services at home. While many operators 
have recognised this problem, concrete transp arency measures are necessary to address this 
problem. The question is whether such measures  on their own would be sufficient to address 
the key underlying problems in this market or whether these measures need to be 
supplemented with either wholesale or retail regulation.  
Transparency measures will help to addr ess the problem of 'bill shock' by increasing 
consumer awareness of the retail charges an d by giving consumers the tools to control 
expenditure. However, while helping to increa se consumer awareness, such measures are 
unlikely to address the extreme levels
 of the prices at either the retail or wholesale levels. The 
merits of wholesale and/or regulation are considered below. Options for transparency 
regulatory measures are considered in more de tail later in section 4 of this Chapter.  
1.3. Wholesale regulation 
High wholesale charges (particu larly on non-preferred networks ), combined with traffic 
steering difficulties for data roaming, are causing a lack of predictability for operators in 
relation to their wholesale costs, which transl ate into difficulties w ith providing transparent 
retail offers and clear informati on to consumers. If operators can have greater certainty and 
control over wholesale costs this is likely to en hance transparency at retail level particularly, 
for example, by allowing for more flat-rate o ffers or for lower per MB charges. Such 
extremely high rates arise when traffic cannot  be steered onto preferred networks which 
would normally offer reasonable rates. Some operators have indicated that these high 
wholesale prices limit their capacity to offer lo wer retail tariffs and note that, even in cases 
where just one operator in a given Member St ate retains a high wholes ale rate, this has a 
negative impact on end-user prices.   The problem is caused by the relative ineffectiv eness of traffic steering which results in 
operators having to pay exorbitant  rates for the remaining traffic. In the first place, not all 
networks are homogenous and the different speed of roll-out of  3G networks and HSPA in 
particular means that there ar e quality issues that are not prevalent for voice or SMS. 
Moreover, these technological constraints mean that it is more likely that  traffic is diverted 
onto non-preferred networks than for voice, t hus incurring higher wholesale charges than 
would otherwise apply. Voice stil l remains the most important el ement in the negotiations for 
wholesale roaming and hence an op erator is likely to steer all traffic to his preferred voice 
partner, irrespective of the whol esale price for data services.  
 A wholesale cap would eliminate these excessive charges.  It is therefore considered that 
some form of wholesale regulation (in combina tion with transparency measures as per the 
previous section) is necessary.  
 
EN 6 7            EN 1.4. Retail regulation only 
The imposition of price ceilings for data roaming services at the retail level would be effective 
in ensuring reductions in pri ces for consumers. However, as explained in the problem 
definition section, the imposition of such a cap at retail level would require a corresponding 
reduction at wholesale level if all operators are to  be in a position to offer the service without 
a suffering a loss. 
Therefore, this solution could prevent even efficient smaller operators from being able to 
provide these services a nd this alone suggests that retail regulation only would not achieve the 
desired objectives.  
1.5. Wholesale and retail regulation 
Wholesale and retail regulation may be necessary if there is lack of competition at both levels. 
However, action to reduce the level of the wholesale charges is likely to have a positive effect on retail prices.  Current levels  of wholesale prices (as desc ribed above) constrain market 
players (particularly smaller players) from comp eting at retail level e.g. particularly their 
ability to offer flat-rate packages at retail level.  
Unlike voice and SMS roaming, data roaming face potential competition from other forms of 
access, such as wireless access (WiFi) and broadband access from fixed locations (e.g. in 
hotels). Indeed, it appears that this kind of access is generally developing and spreading. Another option is for the roaming customer to  use a local domestic mobile broadband SIM 
card which is a more attractive option than for voice or SMS because there is no numbering constraint associated with the usage of data se rvices i.e. the customer  is not worried about 
losing their number. The fact that data serv ices are not linked to a mobile number also 
increases the possibility that customers w ill shop around for more at tractive data roaming 
packages without severing service with  their current domestic provider.  
 This option therefore should not be  considered at this stage of  the development of the data 
roaming market. 
2. 
SUMMARY CONCLUSION ON REGULATORY APPROACH  
Returning to the evaluation criteria set out in Chapter 5 the choice betw een regulatory options 
can be summarised as follows: 
Effectiveness 
A combination of transparency measures as well as some form of wholesale regulation is the 
optimal way to ensure an effective outcome. Reta il regulation, either al one, or together with 
wholesale regulation for data servic es is extremely difficult in view  of the fact that there is a 
very wide range of services which would n eed to be addressed. Moreover, different 
consumers have different needs suggesting th at a one-size fits all approach would be 
extremely restrictive and highly ineffective, at  least at this stage of development of the 
market. Moreover, retail regulation alone could lead to margin squeeze for smaller operators. 
 
EN 6 8            EN This leads to the conclusion that regulation should be impos ed at wholesale levels to 
encourage competition in the market while also ensuring that transparency measures are in 
place to protect consumers. 
 
Competition 
Data roaming services are negotiated between operators together with voice and SMS. For 
many years, there was little emphasis on prices for data roaming in these negotiations at the wholesale level since the main emphasis was on voice. By tackling the high prices which exist 
on non-preferred networks, intervention at the w holesale level will help stimulate competition 
at the retail level. 
Efficiency 
 
A combination of transparency measures as we l l  a s  s o m e  f o r m  o f  wholesale regulation for 
data services would not cause any major ad ministrative burden. For example, the ERG 
Benchmark Data Reports on international ro aming already covers data services.   
 It is important to reiterate that national regulators believe that the ongoing administrative 
burden arising from the Regulat ion is relatively light, as th e Regulation is largely self-
enforcing, as a consequence of its design.   The Commission is aware that op erators will incur costs resu lting from the introduction of 
tariff transparency measures. However, as recognised by all responde nts including operators 
in their submissions to the public consultatio ns, the implementation of such transparency 
measures is needed.     
Consistency 
One of the key benefits of the current Regulation is consistency of approach at wholesale and 
retail levels and in terms of unifo rm basic transparency requirements.  Regulatory intervention 
was required because no NRA on its own could t ackle the problem since it could not control 
the wholesale charges imposed on its own operators by operators from another Member State. 
Equally, if an NRA had been able to interven e to control wholesale charges within its own 
Member State, this could only have benefited consumers in another Member State and then 
only if pass-through had occurred. These issues ar e equally valid for data roaming. In the case 
of data roaming, a consistent approach to tran sparency would do much to eliminate bill shock 
for consumers.  
Coherence 
A combination of transparency measures coupled  with a form of whol esale regulation will 
preserve flexibility for competition while at th e same time protecting consumers and, as noted 
above, providing a consistent a pproach. These are all key princi ples of the general regulatory 
framework. This extension gives a similar role , for example, in terms of monitoring and 
dispute resolution, to NRAs as ex ists in the general framework.  
 
EN 6 9            EN 3. COMPARISON OF OPTIONS  
In the table below, the options are measured ag ainst pre-defined criteria. Each scenario is 
rated between "---" (very negative impact), "= " (no change) and "+++" (very positive impact). 
       Criteria 
 Scenario Effectiveness Competition Efficiency Consistency Coherence 
 
No policy 
change - - = - - 
Transparency 
only + + + + + 
Wholesale 
regulation plus transparency ++ + + ++ ++ 
Retail 
regulation only + -- = + - 
Wholesale 
and retail regulation + = = ++ = 
 
4. DETAILED OPTIONS FOR TRANSPARENCY REGULATION  
The options for transparency regulation are as follows: 
4.1. Provision of basic pricing information 
The first time that a roaming customer initia tes a data roaming service, his home provider 
should provide him automatically with pers onalised tariff information on the charges 
applicable to that roaming cu stomer. The customer should ha ve the right to opt out of 
receiving such information. This  service should be provided free of charge to consumers. 
While for those with a mobile device such an ob ligation could take the form of an SMS, for 
laptop users initiating a data roaming session, this could either take the form of an SMS, email 
or a welcome page which informs the customer of the costs that apply.  
 
EN 7 0            EN 4.2. Cut-off and warning limits  
Mobile operators should offer all their roaming customers, fr ee of charge, an opportunity to 
specify in advance a maximum financial limit for their outstanding charges for data roaming 
services (the "Cut-Off Limit").  
Mobile operators should also ensure that an appropriate warning messa ge is sent to the 
roaming customer's mobile telephone or other de vice when one or more intermediate charge 
limits, agreed between the customer and the home provider in advance, are reached. This warning message could inform the roaming custom er of the approach of the "Cut-Off Limit" 
and of the procedure to be followed by the cust omer if he or she wishes to request the 
continued or renewed provision of those services.  
Such an approach would enable consumers to  determine in advance, how much they are 
willing to spend, before the mobile operator cut- offs the service temporarily unless they opt-in 
again. This approach would also directly tackle  the problem of ‘bill shock’ since a customer 
would have to decide in advance of his spendi ng limit and then is again informed when this 
limit is reached. 
4.3. Real time expenditure information 
Some operators are already developing real-tim e expenditure information systems or near 
real-time systems particularly for laptop users. Other operators are also in the process of 
developing such systems which enable custom ers to determine the exact amount of volume 
and price that is being charge d for their data roaming sessi ons. Such a measure may take 
longer to implement, particularly for smaller operators who do not have the economies of 
scale required to develop such systems. It still has to be seen whether such an approach would 
be feasible for handsets since software deve lopments may be required on existing devices. 
4.4. Flat rate offer  
A further safety measure could be that of impos ing an obligation on operators to offer a flat-
rate tariff in view of the fact that many cust omers are becoming used to flat-rate tariffs for 
domestic use of data services. mobile opera tors should make available to their roaming 
customers a flat-rate tariff for the provision of data roaming services up to a specified ‘fair 
use’ volume limit. Such an offer should be provided on an ‘opt-in’ basis since such offers may not be attractive to some consumers. 
While all of the options above have merit, it w ould be disproportionate to  require all operators 
to introduce all of these measures by means of re gulatory intervention. It  is considered that 
the provision of basic price information is e ssential for consumers and should be considered 
further as a possible regulatory measure. Equa lly, allowing the consumer to choose cut-off 
limits would provide a very effective tool for dealing with the problem of 'bill shock'. While flat rate offers are an important market deve lopment which lead to improved transparency, it 
is unnecessary to require operators to provide su ch an offer by means of regulation. Real time 
expenditure information is clearl y beneficial but, in light of th e potential costs of developing 
such systems, particularly for smaller operators , this option should be di scarded in terms of a 
possible regulatory measure.  
 
EN 7 1            EN 5. DETAILED OPTIONS FOR WHOLESALE REGULATION  
5.1. Option 1 – Aggressive Wholesale ca p linked to best market offers 
To date, there has been little work done by NRAs on costing a pproaches for data services. 
However, the Danish NRA, NITA, has noted th at unit costs for downl oading or sending 1MB 
of data on a visited network are approximately  the same as those at national level. The 
average of Danish company’s costs of downloadi ng or sending 1 MB of data is 61 cents for 
GPRS and 37 cents for UMTS technology. The wei ghted average cost is  39 cents per MB 
while international transit is €0.0671. Therefore, according to the NITA figures, the total cost 
per MB for the visited network is estimated at 45 cents. Howeve r, many operators are already 
offering wholesale services at even lower levels.  
 At present according to information received from  operators, there are offers in the market of 
25 cents and 50 cents on a reciprocal basis. According to the ERG the average wholesale 
charge per MB for 'group' comp anies is around 50 cents per MB. Th is raises the possibility of 
establishing a benchmark cap at a much lower ra te (for example, 25 cents per MB is already 
being offered on a reciprocal basis). 
  A wholesale cap, set at say 25 cents, could act as  a strong catalyst for further competition at 
the retail level in the short-term. However it mi ght also be too close to costs and therefore 
hinder operators' flexibility to compete at the wholesale level.   
5.2. Option 2 –Wholesale cap set at safeguard level 
An alternative approach to wholesale regulati on could be to set a w holesale cap which would 
eliminate extreme prices which in many cases can exceed €10 per MB. Such a cap should be set well above the more recent market offers  (e.g. 50 cents and 25 cents) and also above the 
average group rate per MB which is currently  at around 50 cent per MB. The latest figures 
from ERG indicate that the average EU pr ice per MB for non-group operators has dropped 
from €2.56 in Q4 2007 to €2.00 for Q1 2008. The relatively high non -group average is a 
direct result of the traffic steering problem noted above.  
 While it is likely that this pri ce per MB will fall by the time th e regulation enters into force, 
many operators will continue to face the probl em of relatively high charges on non-preferred 
networks. An average ceiling of €1 per MB is  not a direct intervention on charges and is 
sufficiently above some current market offers (the effects of which will not yet have been 
seen in the ERG data) to avoid disruption of competitive forces and therefore minimises the 
risks that prices should cluste r around the cap. It is also lo w enough to have a meaningful 
impact on the 'bill shock' problem at retail level. It  is anticipated that at current rates of growth 
the impact of such offers will drive down the average per MB charge to well below the €1 per MB mark.  Equally it would eliminate the extr eme wholesale charges which currently hinder 
the development of competition at retail level. 
 
5.3. Option 3 – A new wholesale model 
A more radical change to the wholesale model could also be considered. For example, the 
charging system could be changed from the current per MB structure to a time-based 
 
EN 7 2            EN approach. While this may lead to greater tran sparency, further study would be required to 
assess whether such an approach is feasible. Fo r example, it is uncertain how such a charging 
practice would affect some devices which ar e permanently online but which do not consume 
high volumes.   Another approach could be to move to a pure wholesale model based on a yearly volume 
commitment by the home network which would enable retail flexibility while allowing the visited network to receive guaranteed revenu e to cover its investments in capacity and 
coverage.  
 While these approaches have merit, it would be overly prescriptive to specify detailed 
charging structures given the developing nature of roaming data services' charging models.  
 The ERG has suggested that a possible altern ative approach which could induce more 
competition in data roaming services might be for the roaming user to use a domestic mobile 
data service in the visited country. Because of potential technical difficulties, it is considered 
that this is not an option in the short or even medium term but is worthy of further 
consideration as a possible long term development.  
6. 
ANALYSIS OF THE IMPACTS  
Having looked at the options for data roamin g services and concluded above that retail 
regulation is not necessary at this stage, the following section examines the impacts of the 
remaining options for transparen cy and wholesale regulation.  
6.1. Transparency 
As noted in section 4 above it is considered th at two measures could be imposed, namely, the 
provision of basic price informa tion and the requirement to offe r consumers the possibility of 
choosing a cut-off limit.   
6.1.1 Industry impact 
The obligation to provide basic price informati on  to customers and the obligation to enable 
them to specify cut-off limits with warning mechanisms should be sufficient to inform customers of the differences that apply when roam ing and also ensure that  the problem of ‘bill 
shock’ is addressed. Given that th e relatively more onerous obliga tions of including a flat rate 
offer and real time updating have been discarded, it is consid ered that the impact on the 
industry of the remaining two options is very  limited, particularly in  the context of the 
consumer benefits. The provision of basic pric e information when roaming is a basic pre-
requisite for the consumer to be informed. For the cut-off limits, a one year time lag would be 
allowed to enable market players to  develop the nece ssary systems.  
 
6.1.2 Consumer impact 
Consumers should be able to opt-out of transpar ency systems and opt-in again within 
reasonable timeframes. The transparency measur es proposed will consumers that are informed 
about prices and that have a choice to decide on how much they woul d like to spend before 
 
EN 7 3            EN having the service cut-off, are more likely to use se rvices particularly if they are not likely to 
be aware of the price and hence re frain from using such services. 
 
6.1.3 Administrative burdens 
The first chosen transparency measure to provide basic pricing information can be 
implemented in a relatively short-time frame. The second chosen transparency measure, to 
provide for a cut-off may require more administ rative work for operators but in the medium-
term should enable them to save time dealing with complaints from customers that have 
accumulated ‘bill shock’. Moreover, such measures, particularly for laptop users, could be 
applied at the point when a first data roami ng session is started an d therefore would not 
require prior contacting of the customer for example. The implementation of this measure is 
not likely to involve significant additional cost s given the stated intention of many market 
players to implement measures to address the problem of 'bill shock'. 
6.2. Wholesale regulation 
Having discarded option 3 (new wholesale model)  in the previous section, it is therefore 
necessary to look at what impacts the rema ining two approaches would have both on 
consumers and on operators.   Data services, in particular data roaming serv ices, are still in the early stages of market 
development. Given that this market is char acterised mainly by early  adopters, it would be 
very difficult to assess elasticity  of demand particularly since it is not clear at this stage what 
impact a decrease in price would have on upt ake in the market. While voice and SMS are 
relatively mature markets, the same cannot be  said for data roaming services. Not every 
mobile user has a handset that is  capable of making use of data services. For these reasons, the 
Commission services believe that the inclusi on of roaming data services in the economic 
model in the Annex to this documen t would produce uncertain results.  
 
6.2.1 Industry and consumer impact 
Option 1 
Under option 1 a price cap at 25 cents per MB would bring the wholesale prices down by 
more than 85% of what is currently being paid  on average for non-group traffic. While not all 
operators have access to such wholesale rate s, setting such a low cap could encourage 
operators to price these services at the cap, th ereby potentially not leav ing sufficient scope for 
competition. 
As stated above, it is still earl y to determine the elasticities of  demand that price decreases can 
bring. It would therefore be unrea listic to try to forecast what the increase in volume would be 
if the price was to decrease to cost levels. However, the impact on the industry of option 1 
could be such as to limit long-term competition since for mobile broadband to develop in the 
internal market, the current w holesale model may need to be changed. Therefore a wholesale 
price cap based on initia l cost-based work may prove to be detrimental in the long run. 
 From a consumer point of view, it may be ar gued that large operators already offer their 
customers packages that are based on the equiva lent wholesale rates, particularly where the 
traffic is within the group ne twork. However, while volumes are increasing, there is little 
 
EN 7 4            EN evidence to indicate that prices at the retail le vel have yet reached a leve l that is close to what 
is being paid for the same service at home.    
Option 2 
 
While it is equally difficult to model the financia l impact of option 2 it can be concluded that 
the impact on the industry may be deemed to  be minimal, as the overall industry average 
wholesale charge per MB will decline to levels below the safeguard cap. Nevertheless for that 
proportion of traffic which cannot be steered e ffectively, it is unlikely that operators would 
reduce their wholesale rates unilaterally. For such traffic operators have no incentive to reduce prices since they would receive this tr affic irrespective of the price that is being 
charged.   Such a safeguard approach will give operators more control of their wholesale costs and should therefore enable them to  focus on retail prices that are of benefit to consumers. 
Together with transparency therefore, consumer s are expected to benefit from lower retail 
prices for data roaming services and hence use the service more. Moreover, spillover effects for specific data services are deemed to be negligible since operators are at the moment 
offering data services at attractive pri ces domestically to encourage take-up.  
 
6.2.2 Competition and impact on smaller operators 
Under option 1 smaller operators wi ll have access to lower wholesale prices but if such prices 
are set at levels which could be close to cost this will limit competition at  the wholesale level. 
The aim of regulation should be to maximise flexibility for competition to occur while at the 
same time eliminating the extreme charges.   Option 2 preserves the possibility for competition at wholesale level while at the same time 
ensuring that operators will no longer have  to face extreme charges on non-preferred 
networks. This will facilitate greater certai nty and consequently enhanced competition at 
retail level.   
6.2.3 Administrative burden 
 
In terms of the administrative  burden, the two options above do not vary considerably since 
both will require changes to wholesale agreements between operators. The first option may result in fewer wholesale agr eements needing to be amended than under the second option. 
However, in this regard, as the ERG said in its submission to the public consultation, 
wholesale regulation of such services would be  largely self-enforcing. In terms of impact on 
national regulatory authorities, the burden is li kely to be limited since data collection of 
wholesale prices is already one of the regul atory activities arising from the regular ERG 
Benchmark Data Reports.  
7. 
DURATION  
As shown earlier, data exhibits many of the same  structural problems as in the case of voice 
and SMS although with significant  differences also apparent . Market and technological 
 
EN 7 5            EN developments which might render the need for regulation unnecessary are unlikely to occur in 
the short to medium term. There is  a strong case for aligning the period of regulat ion with that 
of voice and SMS. This would ensure certaint y for both consumers and market players while 
allowing sufficient time for real competition to develop over that period. Therefore the 
Regulation should be amended to include wholesal e regulation and transparency measures for 
data roaming services with effect from 1 July  2009 for a period of four years to 30 June 2013.  
8. COMPARISON OF OPTIONS  
In summary therefore it is considered that the transparency measures (basic information plus 
cut-off limits) together with option 2 (safegua rd approach) for wholesale regulation is the 
preferred approach. This is summar ised in the table below:    
 
 
       Criteria 
 Scenario Effectiveness Competition Efficiency Consistency Coherence 
Option 1 
Wholesale 
cap + + + + + 
Option 2 
Safeguard 
approach + ++ + + + 
 
  
 
 
EN 7 6            EN CHAPTER 10.  EVALUATION AND MONITORING 
 
Extension of the mobile roaming regulation will  continue to be monitored very closely both 
by the NRAs and the Commission. Already under th e current roaming regulation, NRAs were 
required to collect data not onl y on retail and wholesale voice tariffs but also on SMS charges 
and data roaming charges. The data collection exercise went smoothly and did not create any 
significant additional administrative burden compared to the situation before the regulatory intervention. This was due to the fact that NRAs  had already in place the necessary basic tools 
to gather and analyse information since mark et data on roaming was already assembled under 
Article 5 of the Framework Directive. Data collected by the NRAs and the Commission and 
presented collectively by the ERG provided a ve ry useful and timely input for evaluation of 
the effectiveness of the current regulation and for assessment of the policy options for its possible extension.   The Commission services therefore consider th at data collection of similar scope and 
frequency should continue to be carried out  also during the time span of the proposed 
extension. NRAs will be asked to  collect data on retail and wholesale voice, SMS and data 
roaming services every six months. They will  also regularly report to the Commission on the 
progress of implementation of the extended roam ing regulation in indi vidual Member States. 
The Commission can supplement the national regul ators’ data collection by its own ad hoc 
studies or surveys on main market and techni cal developments, charging systems, contract 
conditions, business vs. residential customers tari ffs, etc. in order to get a more complete 
picture of the actual impact of the extended regulation once it is implemented. At the same 
time, the Commission will continue to monitor the en tire mobile market as such, as part of its 
regular monitoring of the implementation of the regulatory framework for electronic 
communications. This monitoring exercise as we ll as various studies on specific issues in 
electronic communications markets commissi oned regularly by DG INFSO will provide a 
sufficiently broad overview of the context in which the roam ing regulation operates and will 
also inform other Commission services  in the next review exercise.  
 
In relation to enforcement and compliance it is envisaged that, as in the case of the current 
Regulation, NRAs will continue to be charged with the tasks of monitoring and supervising 
compliance and may intervene on their own initi ative to ensure compliance in accordance 
with the terms of the amended Regulation.  With respect to evaluation of th e extended roaming regulation, it is considered that a similar 
approach to the current regulation can be ad opted, i.e. evaluation of the effectiveness, 
efficiency and relevance of the roaming regula tion will be carried out towards the end of its 
three-year duration as part of  the review exercise. An in terim evaluation does not seem 
practical due to a relatively short overall dur ation of the regulation and lack of up-to-date 
information and data in the middle of its implementation. 
 
 
EN 7 7            EN CHAPTER 11.  CONCLUSIONS – OVERALL IMPACTS OF 
THE PREFERRED OPTIONS 
 
This impact assessment has identified and asse ssed different policy options for strengthening 
the single market for mobile roaming services. In particular, it examined the question of 
whether the current roaming regulation should be extended in time and in scope. Based on a 
careful assessment of th e available data and evidence, th e impact assessment has concluded 
that extension of the roaming regulation both in time and in sc ope is necessary because the 
underlying causes of the problem of insufficient competitive pressure in the mobile roaming market still remain valid.   The impact assessment focuses on four key problem areas: voice roaming, voice billing unitisation, SMS roaming and data  roaming services. In each case, a variety of different 
regulatory and non-regulatory a pproaches have been considered and the most important, 
mainly economic impacts have been assessed. Qu alitative argumentation and assessment has 
been supported and enhanced by quantitative ec onomic modelling for the detailed regulatory 
options related to voice roaming and SMS ro aming services, focussing in particular on 
consumer impact, industry impact and the overa ll social welfare. Finally, options in each 
problem area have been assessed against evalua tion criteria such as effectiveness, efficiency 
or coherence in order to provide a straightforward link to the main objectives of this initiative.  
 Based on the detailed qualitative and quantitative assessment of the alternative approaches to 
regulation, this impact assessmen t has identified an overall prefe rred option which consists of:  
wholesale and retail re gulation for voice with wider ga p between wholesale and retail 
ceilings, wholesale and retail regulation for SMS with retail price ceiling at 11 cents, modified 
per second billing unitisation and a wholesale safeguard cap plus transparency measures for 
data roaming services. While the impact analys is focused on each individual problem area and 
the corresponding set of options separately, it can be demonstrated that the policy mix will 
provide for a balanced overall outcome.   The individual options for voice, SMS and data  are complementary and mutually supportive, 
as they all contribute to the general objective of lower roaming prices  and stronger single 
market in mobile communications. The estimated  overall social welfare of this policy mix 
would be the highest, compared to the othe r alternatives, with relatively low impact on 
industry profits. As for data roaming regulation, a cautious approach of setting a safeguard wholesale cap coupled with transparency measur es would allow market forces to play while 
providing sufficient information and guarantees for the consumer.   With respect to the specific objectives outlined in Chapter 4 of this impact assessment, the 
preferred policy mix has emerged from the analys is as the most effective one. The extension 
of the voice roaming regulation will ensure that  there is no return to excessive retail and 
wholesale voice roaming prices. The specific re gulatory solutions ensure furthermore that 
prices for roaming services (voice, SMS or da ta) are not significantly higher than domestic 
prices and that transparency of those prices wi ll improve. On the operator’s side, regulation at 
the wholesale level should provide sufficient safeguards for operators to compete at retail level and avoid margin squeeze for small operators in particular.  
 
EN 7 8            EN  
The billing unitisation regulation will ensure that customers do not pay for more than they 
consume while allowing operators to cover th e cost of setting up the call. The impact on 
industry profits (the extent of which very much depends on the demand elasticity for the 
roaming services) can have some negative eff ect on investment but taking into account the 
size of the mobile market as a whole, the ef fect is expected to be limited. In terms of 
administrative burdens, the pref erred option does not add signi ficantly higher administrative 
costs on public authorities and operators, as it does not create additional information 
obligations. Finally, the pref erred policy mix provides for a consistent and harmonised 
approach across Member States and is fully in  line with internal market principles.  
 
 
EN 7 9            EN ANNEX I 
 
1. INTRODUCTION  
 
This annex provides some deta ils of the Commission's data collection exercise, which was 
undertaken in preparation of  this impact assessment and the Commission's regulatory 
proposal. The sections below focu s on the derivation of key para meters (such as market size 
and unit prices) for the voice, SMS and data roaming segments.  Complementing the work undertaken by th e European Group of Regulators (ERG)
55, the 
European Commission on the 19th March 2008 invited national re gulatory authorities (NRA) 
to submit detailed operator-specific roaming data on a confidential basis. Following this request, data were collected from 27 NRAs, co mprising more than 120 operators (including 
MVNOs).  This impact assessment is based on comprehe nsive data sets for Q2:2007, Q3:2007, Q4:2007 
and Q1:2008. As the (Eurotariff) retail pri ce caps set by Regulation (EC) No 717/2007 came 
into force on 30 September 2007, the Commission' s data collection exercise yields 'clean' 
price and volume information (i.e. not yet dire ctly influenced by regulatory intervention) for 
Q2 and Q3:2007.  The task at hand in the context of this impact  assessment was then to estimate 'clean' values 
for Q1:2007 and Q4:2007 in order to derive hy pothetical figures for the whole of 2007 (i.e. 
figures on an as-if-basis , showing what key parameters such as market size would have been  
in the absence of regulation). The 'clean' values  for 2007 were then used as the base case or 
point of comparison for evaluative purposes in the economic model (see annex 1).      
 
2. 
VOICE – MARKET SIZE AND OTHER KEY PARAMETERS  
2.1. Estimation of volumes 
Outgoing roaming calls 
 
The starting point for estimating the corrected values for Q1:2007 and Q4:2007 (corrected for 
the impact of regulation) was the annual distributional pattern of tourist and business travel 
                                                 
55 ERG (07) 85 - International Roaming Report 
http://www.erg.eu.int/doc/publicati ons/erg_07_85_intl_roaming_rep.pdf  and ERG (08) 36, available at 
http://www.erg.eu.int/doc/publi cations/erg_08_36_intern_roam_rep_080812.pdf  
 
 
EN 8 0            EN flows in the EU, as approximated by the percen tage distribution by qu arter of total 'nights 
spent by non-residents' within  the EU27 (table below).56 
 
 Q1:2007 Q2:2007 Q3:2007 Q4:2007 
Percentage of 
Nights spent by non-residents by Quarter 19% 26% 37% 18% 
  
As can be seen, the peak of  EU-wide tourist and business- travel-related activity (and by 
extension of EU-wide roaming activity) occurs in the third quarter. By taking the available 
roaming data for Q2:2007 and Q3:2007 to represen t 26% and 37% of the annual total, the two 
missing quarters can be estimated and, for the sa ke of plausibility, co mpared to the actual 
figures (though 'contaminated' by regulation) of  Q4:2007 and Q1:2008. The resulting data for 
2007 are as follows.   Actual volumes for outgoing roaming calls in the EU for Q2:2007 and Q3:2007 were, 
respectively, 1.296 and 1.751 billion minutes (b ased on operator-specific information 
submitted by NRAs), yielding a total of 3.047 bi llion minutes for the two quarters, and 63% 
of the annual traffic. Hence, total volume for outgoing calls ma de in 2007 would have been 
around 4.836 billion minutes in the absence of re gulation (with quarterly figures for Q1:2007 
and Q4:2007 of 0.920 billion and 0.871 billion minutes respectively). 
 
Incoming roaming calls  
   
Actual volumes for incoming roaming calls  in the EU for Q2:2007 and Q3:2007 were, 
respectively, 0.908 and 1.282 billio n minutes. Accordingly, tota l volume for incoming calls 
made in 2007 would have been around 3.477 bil lion minutes in the absence of regulation. 
  
2.2. Estimation of revenues 
For the estimation of total revenues, it was a ssumed that average prices for both outgoing and 
incoming roaming calls would not have ch anged throughout 2007 in  the absence of 
regulation.  According to EC data, the average EU pr ice per minute in Q2:2007 was €0.7692 for an 
outgoing roaming call and €0.4179 for an incoming roaming call.
57 Combining this with the 
assumption of unchanged pricing practices thro ughout 2007, total revenues for outgoing calls 
                                                 
56 Source: Eurostat. Nights spent by non-residents - world geographical breakdown - monthly data 
http://epp.eurostat.ec.europa.eu/por tal/page?_pageid=1073,46870091&_dad=portal&_schema=PORTAL&p_
product_code=TOUR_OCC_NINRMW  
57 It should be noted that the EC economic model looks at actual  volumes rather than to billed  volumes, since this 
will allow a more precise calculation of price elasticities  in future reports. Thus, the average price as derived in 
this impact assessment cannot be directly compared to th e average price as estimated by ERG in its reports of 
January and August 2008, in which aver age prices were derived based on billed  volumes. 
 
 
EN 8 1            EN would have been around €3.72 billion58 if the absence of regulation. The equivalent figure for 
incoming calls would have been about €1.45 billion59.  
3. SMS  - MARKET SIZE AND OTHER KEY PARAMETERS  
 
3.1. Estimation of volumes 
As SMS roaming prices are not currently regulated, the EC data  collection exer cise yields 
'clean' figures for three quarters of 2007 (Q2: 2007 to Q4:2007). This can be complemented by 
the collected figures for Q1:2008 to derive th e whole of 2007. However, the Q1:2008 figures 
would need to be corrected for the annual growth  rate of SMS services of approximately 6%.  
 According to the EC data collection, the number of roaming SMS sent was as follows: 
 
 Q2:2007 Q3:2007 Q4:2007 Q1:2008 
SMS (million) 594.4 888.3 541.8 611.62 
 
Combining these figures (and the assumed grow th rate) with the seasonality pattern of 
roaming services in the EU (explained in section 2 above), about 577 million roaming SMS 
can assumed to have been sent in Q1: 2007 (yielding a total fo r 2007 of 2.6 billion). 
 
3.2. Estimation of revenues 
As for an estimation of SMS revenues, it was assumed that the average price of a roaming 
SMS was unchanged from Q1:2007 to Q2:2007. Total revenues for roaming SMS in the EU were thus approximately €0.8 billion in 2007.  
4. 
DATA SERVICES  
4.1. Estimation of volumes 
The EC data collection exercise also provide d actual price and volume information for EU 
data roaming for the peri od from Q2:2007 to Q1:2008.  
 Thus, analogous to the method used in sectio n 3 above, there was a need to estimate the 
values for Q1:2007. However, unlike SMS, demand for data roaming services is growing very dynamically. For this reason, Q1:2007 was estimated using a backwards forecasting method (i.e. backwards extrapolation). Extrapolation was based on four seque ntial observations at 
known points in time (Q2:2007 to Q1:2008). Inspecti on of the data shows a clear linear trend 
in the logarithms of the volume data i.e. a st able growth rate with only very small seasonal 
deviations. 
                                                
 
58 4.83624 billion minutes * €0.76.92 per minute 
59 3.47749 billion minutes * €0.41.79 per minute  
 
EN 8 2            EN  
  
 Q2:2007 Q3:2007 Q4:2007 Q1:2008 
Volume (1000 
MB) 18209.8 27141.9 33815.6 45852.1 
The regression of the natural logs of volume data  on time (t) give the results as shown in the 
following graph:      
 
 
Logarithm Volumes and linear regression
y = 0,299x + 9,2485
R2 = 0,9936
8,599,51010,511
1Q2007 2Q2007 3Q2007 4Q2007 1Q2008
Log Volumes Linear regression (volumes)
 
  
      Extrapolation gives a value of 14.010 GB for da ta roaming volumes for the first quarter 2007. 
  The table below presents the estimated volumes for 2007:  
 Q1:2007 Q2:2007 Q3:2007 Q4:2007 
Volume (1000 
MB) 14010.2 18209.8 27141.9 33815.6 
 
 
EN 8 3            EN 4.2. Estimation of revenues 
The estimation of revenues for Q1:2007 was made  using the same methodology as above; the 
resulting figures were €0.117 billion for Q1:2007 and € 0.559 billion for the year 2007. 
   
 
EN 8 4            EN  
ANNEX  II 
 
Model – Welfare Impacts of Regulatory Options 
 
1. INTRODUCTION TO THE MODEL  
 
The purpose of the model is to provide a quantitative analysis of the economic impact of the 
various regulatory options considered in this impact assessment. The model focuses on static 
welfare impacts, using the standard definition of  social welfare as the sum of consumer and 
producer surplus. It builds on one of the main findings of we lfare theory, namely that any 
deviation from a competitive equilibrium will reduce social welfare in the static sense. 
Various policy options considered in this impact assessment will be evaluated in accordance with this principle – in other terms, we will ask which policy option results in the greatest 
overall welfare gains for society (industry profits and consumer welfare). 
 The model enables us to understand the aggr egate effects of regulatory intervention on 
international roaming prices. This means that an analysis of the effects on individual operators 
is not the primary objective. Clearly for purposes of the imp act assessment the aggregate 
impact on the industry and on thei r customers as a whole is what  matters most. The nature of 
the problem at hand, involving as it does conf idential information on volumes and prices, 
precludes a disaggregated analysis. In the course of the preparation of this analysis EU mobile 
operators were asked by the European Comm ission and the ERG to provide detailed 
information on roaming prices, costs and volumes.
60 The data received is used by the model 
inter alia for the quantitative description of the status quo. 
 An impact assessment complying with the inte rnal best practice rules of the European 
Commission requires an analysis of severa l policy options. Various policy options are 
considered in this impact a ssessment; the quantitative welfare analysis is focussed on the 
following regulatory options: 
1. Voice roaming regulation as proposed by the ERG 
2. Voice roaming regulation as proposed by the Commission 3. SMS roaming regulation as proposed by the ERG 2. SMSroaming regulation as  proposed by the Commission 
 One major prerequisite of the welfare analysis of the international roaming regulation is the 
formulation of a demand model  for international roaming serv ices. The model developed for 
this purpose analyzes the dema nd for three different international roaming services:  active 
calls from the foreign country, received calls in the foreign country, SMS sent from the visited 
country.  
Unfortunately, there are no valid scientific resu lts on the demand elasticity of these services. 
                                                
 
60 See annex 2 of this impact assessment. 
 
EN 8 5            EN  
As a consequence, scenario techniques have to be applied to arrive at  a more reliable picture 
of the possible quantitative effects of the regul ation. Three different elasticity scenarios for 
the reaction of customer demand on price changes are developed and will be applied to the three policy options under consideration. 
 The first scenario – referred to as the “ industry scenario ” (elasticity scenario 1) – reflects 
opinions of the mobile industry and some fi nancial analysts with regard to demand 
elasticities. The sources referred to imply that th e relevant demand elasticity is rather small, 
significantly smaller than one (in absolute term s). This would mean a significant decrease of 
roaming revenues as a reaction to a drastic reduc tion of end user prices induced (or enforced) 
by the proposed regulation.  The second scenario is called the “ minus one scenario” (elasticity scenario 2). As the name 
of the scenario suggests, a valu e of minus one for the demand elasticities is assumed for all 
services. A demand elasticity of minus one implies constant reve nues as prices change. This 
scenario allows a closer look at the redistri bution of consumer and producer surplus as a 
consequence of regulation.  The third elasticity scenario - the “ optimistic scenario” (elasticity scenario 3) - reflects a 
more optimistic vision of demand elasticities. In pa rticular it reflects re cent experience drawn 
from the data on the international roaming market s collected by the ERG. Accordingly, such a 
scenario forms one part of the model. 
 The tables below display the most important pa rameters and variables as used by the model: 
 
Table 1:  
€ million, aggregate EU roaming retail market (estimate for 2007)   
Outgoing roaming calls 3719.90 
Incoming roaming calls 1453.39 
Roaming SMS 804.32 
Roaming data 559.15 
Total 6536.76 
 
 
Table 2: 
 
€, Prices per minute, aggregate EU level (estimate for Q1/Q2:2007) Average EU Retail 
Price 
Outgoing roaming calls 0.77 
Incoming roaming calls 0.42 
Outgoing roaming SMS 0.31 
      
 
EN 8 6            EN  
Table 3:  
€, Prices per minute, aggregate EU level (Eurotariff as of 
Q4:2007) Average EU Retail 
Price 
Outgoing roaming calls 0.49* 
Incoming roaming calls 0.24* 
Outgoing roaming SMS 0.31 
*to be decreased to 0.46/0.22 and 0.43/0.19 in 2009/2010 respectively  
 Table 4:  
 
Price elasticities / Scenarios 1-3 Pessimistic Minus One Optimistic 
EPS x1p1 -0.55 -1.00 -1.20 
EPS x2p2 -0.55 -1.00 -1.20 
EPS x3p3 -0.55 -1.00 -1.20 
 
 
The second building-block of the evaluation model is the cost function . For the impact 
assessment it is assumed that unit costs of the se rvices under consideratio n are constant in the 
relevant range. In other words,  constant total average costs are assumed. The most important 
cost factors considered are: 
• Origination and termination costs 
• Transit costs 
• Directly attributable costs of international roaming (concluding and maintaining 
roaming contracts, technical and software  provisions for international roaming,end 
customer and inter-carrier billing. 
 It should be stressed again that the model is an aggreg ate model, i.e. it takes a consolidated 
view of revenues and costs. All inter-carrier pa yments such as IOTs and MTRs will therefore 
drop out, and only the underlying factor-consumption and related costs will be considered.   The model itself calculates the relevant wholesal e payment flows, but they are only used for a 
plausibility check of the results.  
2. 
DEMAND MODEL  
 
The starting point for the quantitative analysis  of the demand side is a system of demand 
functions for international roaming services, whic h is appropriately disa ggregated to allow the 
following markets to be separated out: 
1. Market for 'outgoing calls' while roaming within the EU 
2. Market for 'incoming calls' (market for calls  received from callers located in an EU 
country, while roaming within the EU) 
3. Outgoing calls to countries ot her than EU member states 
 
EN 8 7            EN 4. Incoming calls from countries other than EU member states 
5. Active and received calls of roamers from outside the EU 
6. SMS sent while roaming in th e EU to another EU country 
 Of particular interest are the first two markets,  because they constitute the bulk of the roaming 
market in the EU. Markets 3, 4 and 5 are not of  significant interest here and are accordingly 
not further considered. In add ition to international voice roaming, SMS roaming is added as a 
relevant roaming market. 
 
The demand model used for the impact assessm ent attempts to model direct (“own”) price 
effects. For the purpose at ha nd cross price effects and possi ble effects on demand introduced 
by arbitrage opportunities for end users and cr eated by the regulation are disregarded. Since 
we expect mobile operators to know their market s, we can safely assume that their pricing 
policy would avoid substitution of active calls by received calls and SMS. The demand model explicitly takes into account the demand for 'outgoing calls ( x
1)', 'incoming calls ( x2)', and 
'SMS sent ( x3)'. Roaming SMS received are not considered  here, as – unlike for voice services 
– they do not constitute a direct revenue source  for operators (the price for receiving a SMS 
while roaming is zero).    Mobile operators indicate that  consumers might follow a two-st ep procedure for making their 
roaming decision. In the first step they decide whether they want to roam and which conditions they are willing to accept. In the s econd step they make and receive their roaming 
calls. The “to roam or not to roam” decision is assumed to depend on the frequency of 
travelling abroad, and on roaming prices, pred ominantly o calls home and received calls 
prices. We can safely assume that a high frequency of journeys abroad will yield a higher propensity of roaming customers to roam, and that high roaming prices will reduce it. For a high-level study, this two step procedure can be simplified and regarded as a one-step 
decision where the determinants of the basic decision are represented in the respective demand functions.  It is assumed that the demand for x
1, i.e. for outgoing roaming calls, can be described by the 
following demand function (with similar demand functions for x2 (incoming) and x3 (SMS)):  
 
(1)  ∏=
jjj
y p xφ
αα1
0 1  
 
(2)  ∏=
jjj
y p xφ
ββ1
0 2  
 
(3)  ∏=
jjj
y p xφ
γγ1
0 3  
 
where p1, p 2,p3 are the prices for outgoing roaming cal ls, incoming roaming calls and sent 
roaming SMS respectively; y represents a vector of other variables influencing customer 
behaviour such as income levels, frequency of j ourneys abroad, prices of international calls on 
the fixed network, call prices at hotels; parameters Φ express the respective elasticities. 
 
 
EN 8 8            EN The demand functions for the different componen ts of international roaming are assumed to 
be linear in logarithms, in order to simplify the process and as a fi rst approximation of the 
virtually unknown characteristic s of the functional form of the demand functions for 
international roaming. Therefore parameters α0,β0 and γ0 function as scaling parameters. The 
parameters α1,β1 and γ1 are the direct price elasticities, which are used to describe the 
reactions of consumers to change s in the relevant roaming prices. Reactions to the variables in 
y do not affect behaviour in the short run, and are themselves not affected by roaming prices, 
so they will be assumed to be constant. 
 
Without any scientifically valid results for th e roaming demand functions this choice of the 
functional form allows a direct evaluation of we lfare effects for given price elasticities. The 
available data as collected by the ERG do not yet allow an econometric (p anel) analysis of the 
roaming demand functions, which would suppor t the social welfare analysis by better 
estimates of elasticities and reasons for th e choice of the functional form for demand 
functions.61 
 
3. COST FUNCTION  
For the practical purpose of this analysis one can use the experience of the European 
Commission and many NRAs as regards mobile cal l termination analysis to gain a better 
understanding of the costs of in ternational roaming. The costs of  mobile call te rmination in 
the EU have been analysed in extensive detail over the past decade, and may be taken as a 
good proxy for modelling the costs of international roaming services. For a start, the costs for 
originating a mobile call may roughly be equate d to the costs of term inating a mobile call. 
Furthermore, regulated call termination rates in  the EU include a whole array of unit cost 
positions which are relevant in the present context,  such as labour costs or costs of capital. To 
arrive at a complete picture, roaming-specifi c costs (for instance for the marketing and 
retailing of roaming servi ces) can then be added to these proxy results.  
Costs of three categories of  calls will be analysed: 
• Incoming calls 
• Outgoing calls • SMS  All other categories will be disreg arded for the purpose at hand. 
 Outgoing calls typically involve th e use of network resources for: 
• Call origination 
• Transit to the home country (if applicable) • Call termination, which may be on 
• the network of the roaming customer 
• another mobile network 
                                                
 
61 However, the academic literature suggests elasticities fo r mobile voice services to be significantly greater than 
the elasticities for long-distance fixe d voice services, and perhaps greater than one. See for instance Rahul 
Telang, An Empirical Analysis of Cellular Voice and Data Services , NET Institute Working Paper #04-10, 
October 2004.    
 
EN 8 9            EN • a fixed network or 
• a mobile network in an EU member  state other than the home country 
 In inter-carrier relations, origination costs ar e compensated by a per-minute payment of IOTs 
to the host network. The use of network resour ces for signalling is included in the cost 
parameters described above.  In addition to these costs there are other directly  attributable costs of international roaming, 
such as costs of contracting, billing, inter-ca rrier billing, software, attributable marketing 
expenditure and others, which are integrated as additional cost parameters to the model. Since 
call origination and call termination as well as transit prices typically cover all cost factors 
such as energy, labour, deprecia tion, costs of capital (includi ng a risk premium), frequency 
use, no mark-ups onto these costs will be ma de. Using the terminology and concepts of 
economics rather than the respective concepts of accounting is required to be able to make the 
required welfare comparisons.  Incoming calls typically consume the following network resources: 
 • Domestic switching • International transit (if applicable) • Call termination on the foreign network of the roaming partner  The calling party pays principle is applied to  the calling party, which means that the caller 
pays call origination and call termination. Th erefore the majority of associated costs are 
already covered by these payments. The cost s actually incurred by the home operator will 
exceed the termination fee of the home network, due to differences in MTRs, transit costs and 
the other directly attributable cost. This in tu rn means a small net cost to the home network, 
which is far below the resale price for received  calls in international roaming. In addition to 
these costs, the other directly attributable costs mentioned above will be integrated as 
additional cost parameters to the model.  Costs of (international and roaming) SMS have  been studied recently by NITA and ARCEP. 
The very detailed cost study underataken by NI TA will be used for this social welfare 
assessment. NITA arrives at costs per roam ing SMS of approximately 3.4 eurocents. This 
value will be used throughout the study.  The following unit costs were assumed and used for the calculation of the economic effects in 
all regulatory options and all elasticity scenarios: 
 
Table 5: 
 
 
Cost type Costs per minute (€ cents) 
Termination costs 10.51* 
Origination costs 10.51* 
Transit costs 2.00 
Special roaming costs 1.00 
Roaming marketing costs 1.00 
*EU average MTR 2007; projected (compound) annual reduction factor until 2013: 19.73% 
 
EN 9 0            EN  
 The assumed values for call origination and call termination are the average termination costs per minute in the EU (as they are projected  to develop over the period 2007–2013); the other 
cost figures are estimates, emerging from seve ral discussions with mobile operators and 
results of the public consultation. These figures, which represent the monetary equivalent of the resources used up for 
international roaming calls, are to be contrasted with the IO Ts as intercarrier payments 
covering parts of the resource consumption in relation to international roaming. In a 
consolidated view of the EU mobile comm unication sectors the IOTs will cancel out. The 
model will use the resource consumption, valued  by the cost per minute figures shown above 
to calculate average costs of international roaming. 
 The model is not designed to deal with capacity  constraints of mobile  networks. Changes in 
demand in general should not be seen as creatin g difficulties when elasticities are assumed to 
be low – demand reactions will be small in rela tion to total call volumes. When elasticities are 
assumed to be higher, capacity constraints could become an issue at specific points in the network. For present purposes it may safely be  assumed, however, that in general intense 
competition between mobile networks in terms of both prices and quality has led to a situation 
where there is sufficient overall excess capacity.  To sum up, the model provides a static welfare an alysis of three differe nt regulatory options. 
The model’s focus is on aggregate industry and consumer outcomes. The model yields results 
that enable us to select th e policy option that maximizes ove rall welfare (industry profits and 
consumer welfare).   
4. 
WELFARE IMPACTS OF EC REGULATION 717/2007  (THE VOICE 
REGULATION ) 
The voice roaming regulation established whol esale caps and Eurotariff retail caps by means 
of two different glide paths for the peri od 2007–2010 as shown in the following table: 
 
Table 6: 
 
 
Price Caps, € cents     
Retail Retail Wholesale 
Voice outgoing  Voice incoming   
49 24 30 
46 22 28 
43 19 26 
 
 
 
EN 9 1            EN The impacts of this regulation may be analysed  in terms of changes in consumer welfare, 
industry profits and social welfare compared to the status quo ante regulation , i.e. to the 
performance of the EU voi ce roaming market in 2007 in the absence of regulation.62 
 
The following comparative statics results  can be derived from the model: 
 
Table 7: 
Pessimistic 
Scenario       
€ billion (Delta δ) 2007-08 2008-09 2009-10 
δ Consumer Welfare 2.265 2.570 2.953 
δ Profits -1.167 -1.074 -1.070 
δ Social Welfare 1.098 1.495 1.883 
    
Minus One 
Scenario       
€ billion (Delta δ) 2007-08 2008-09 2009-10 
δ Consumer Welfare 2.578 2.991 3.550 
δ Profits -.621 -.414 -.292 
δ Social Welfare 1.958 2.577 3.258 
    
Optimistic 
Scenario       
€ billion (Delta δ) 2007-08 2008-09 2009-10 
δ Consumer Welfare 2.741 3.215 3.879 
δ Profits -.337 -.063 .133 
δ Social Welfare 2.404 3.152 4.012 
 
Graphically, these results may be displayed as follows:  
Chart 1: 
                                                
 
62 Please refer to annex 2 for a more detailed discussion of this methodological approach and the quantitative 
derivation of the base case or reference scenario of 20 07. All welfare calculations in the sections of this 
annex are based on such comparison. 
 
EN 9 2            EN Welfare effects of roaming regulation
Pessimistic elasticity scenario
2.2652.5702.953
-1.167-1.074 -1.0701.0981.4951.883
-1.500-1.000-50005001.0001.5002.0002.5003.0003.500
07-08 08-09 09-10 δ Consumer Welfare δ Profits δ Social Welfare 
Chart 2: 
Welfare effects of roaming regulation
Optimistic elasticity scenario
2.7413.2153.879
-337-631332.4043.1524.012
-1.000-50005001.0001.5002.0002.5003.0003.5004.0004.500
07-08 08-09 09-10δ Consumer Welfare δ Profits δ Social Welfare
  
 
For the sake of completeness, one can explor e the impact of the roaming regulation upon 
industry in some more detail. In particular, first, one ma y ask how voice roaming revenues 
have developed following entry into force of th e regulation (viz. are pr ojected to develop over 
the next years):  
 
EN 9 3            EN Table 8: 
 
billion €     Current 
Regulation   
  Baseline 2007 2008 2009 
       
Optimistic 5.173 5.694 5.775 5.880 
Pessimistic 5.173 4.169 4.040 3.883 
   
 
Expressed in percentage terms relative to the baseline scenario, indu stry revenue changes 
would be as follows: 
 
Table 9: 
 
% changes   Current 
Regulation   
  Baseline 2007 2008 2009 
       
Optimistic 5.173 10.1% 11.6% 13.7% 
Pessimistic 5.173 -19.4% -21.9% -24.9% 
 
 
As can be seen from the above, the change in  roaming revenues varies according to which 
regulatory option is selected, a nd according to which elasticity  scenario holds true (although 
the choice of the preferred opti on is not based on this).  
 Depending on these parameters, and compared to the base line, industr y could either look 
forward, for the period 2009-2010, to an increase  of 13.7% in voice roaming revenues, or 
would have to deal with a decrease  of 24.9% in voice roaming revenues.  
 Second, one may also ask how these potential changes in industry voice roaming revenues 
and profits compare to broader market parameters. The 13
th implementation report estimated 
total EU mobile communications  revenues to have reached €137 billion. T hus, a decrease of 
€1.29 billion in voice roaming revenues in th e pessimistic scenario in 2009-2010 (or an 
increase of €0.71 billion in the optimistic scenario) would correspond to an overall revenue reduction of approximately 0.94% (or an overall in crease of 0.52%). Sim ilarly, if one assumes 
an average EBITDA margin for the EU telecommunications industry of roughly 35%
63, 
overall profits are approximately €50 billion. The profit impact in 2009-2010 would then lie 
somewhere between a decrease of 2.14% and an  increase of 0.27%. The impacts on industry 
are thus rather small.    
                                                 
63 This is a reasonable assumption for instance for the constituents of the Dow Jones SXKP Telecoms Index, a 
broad measure containing most listed large- and mid-cap European firms which may be taken as a proxy for the sector as a whole (both fixed and mobile). Stand-alone mobile EBITDA is likely to be even higher 
(further mitigating the impact discussed here). 
 
EN 9 4            EN 5. WELFARE IMPACTS OF REGULATORY OPTIONS  
5.1. Voice roaming regulation as proposed in Option 1 
Under option 1 the proposed price caps are as follows: 
 
Table 10: 
 
Price Caps, € cents     
Retail Retail Wholesale 
Voice outgoing  Voice incoming   
49 24 30 
46 22 28 
43 19 26 
40 16 24 
37 13 22 
34 10 20 
 
 
The model yields the following we lfare results for this option in the three different elasticity 
scenarios (results compared to 2007; results until 2009-10 driven by the existing roaming 
regulation; thereafter by the regu latory option here analysed):64 
 
 
Table 11:  
 
Pessimistic 
Scenario             
€ billion (Delta δ) 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 
δ Consumer Welfare 2.265 2.570 2.953 3.376 3.856 4.425 
δ Profits -1.167 -1.074 -1.070 -1.116 -1.213 -1.366 
δ Social Welfare 1.098 1.495 1.883 2.260 2.644 3.060 
       
Minus One 
Scenario             
€ billion (Delta δ) 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 
δ Consumer Welfare 2.578 2.991 3.550 4.223 5.075 6.241 
δ Profits -.621 -.414 -.292 -.227 -.229 -.327 
δ Social Welfare 1.958 2.577 3.258 3.997 4.846 5.914 
       
Optimistic 
Scenario             
€ billion (Delta δ) 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 
δ Consumer Welfare 2.741 3.215 3.879 4.710 5.814 7.420 
δ Profits -.337 -.063 .133 .274 .344 .300 
δ Social Welfare 2.404 3.152 4.012 4.984 6.158 7.719 
 
                                                 
64 See note 3 above. 
 
EN 9 5            EN Graphically, this may be depicted as follows  (for two different elasticity scenarios): 
 
Chart 3: 
 
 
Chart 4: 
 
 Welfare Effects – Option based on ERG work - Optimistic Elasticity 
2.7413.2153.8794.7105.814 7.420
-337-63 133274 344 3002.4043.1524.0124.9846.1587.719
-1.00001.0002.0003.0004.0005.0006.0007.0008.0009.000
07-08 08-09 09-10 10-11 11-12 12-13
? Consumer Welfare ? Profits ? Social WelfareWelfare Effects – Option based on ERG work - Pessimistic Elasticity 
2.2652.5702.9533.3763.856 4.425
-1.167-1.074 -1.070 -1.116-1.213
-1.3661.0981.4951.8832.2602.6443.060
-2.000-1.00001.0002.0003.0004.0005.000
07-08 08-09 09-10 10-11 11-12 12-13
? Consumer Welfare ? Profits ? Social Welfare
 
EN 9 6            EN 5.2. Voice roaming regulation as proposed in  this impact assessment – Option 2  
The regulatory option favoured in this impact  assessment proposes to extend the roaming 
regulation beyond 2009, and to adapt the wholesale and retail glide paths in accordance with 
changed demand and costs condit ions; in particular, the propos al is more stringent at 
wholesale level. The proposed  price caps are as follows: 
 
Table 12: 
 
Price Caps, € cents     
Retail Retail Wholesale 
Voice outgoing  Voice incoming   
49 24 30 
46 22 28 
43 19 26 
40 16 23 
37 13 20 
34 10 17 
 
 
The model yields the following we lfare results for this option in the three different elasticity 
scenarios (results compared to 2007; results until 2009-10 driven by the existing roaming 
regulation; thereafter by the regu latory option here analysed):65 
 
Table 13: 
 
Pessimistic Scenario           
€ billion (Delta δ) 2007-
08 2008-09 2009-10 2010-11 2011-12 2012-13 
δ Consumer Welfare 2.265 2.570 2.953 3.533 4.126 4.800 
δ Profits -1.167 -1.074 -1.070 -1.205 -1.359 -1.559 
δ Social Welfare 1.098 1.495 1.883 2.328 2.767 3.241 
       
Minus One Scenario           
€ billion (Delta δ) 2007-
08 2008-09 2009-10 2010-11 2011-12 2012-13 
δ Consumer Welfare 2.578 2.991 3.550 4.460 5.520 6.898 
δ Profits -.621 -.414 -.292 -.289 -.337 -.467 
δ Social Welfare 1.958 2.577 3.258 4.171 5.183 6.431 
       
Optimistic Scenario           
€ billion (Delta δ) 2007-
08 2008-09 2009-10 2010-11 2011-12 2012-13 
δ Consumer Welfare 2.741 3.215 3.879 4.996 6.371 8.264 
δ Profits -.337 -.063 .133 .232 .270 .210 
δ Social Welfare 2.404 3.152 4.012 5.228 6.641 8.474 
 
Graphically, this may be depicted as follows  (for two different elasticity scenarios): 
                                                 
65 See note 3 above. Owing to the increased retail margin implicitly granted by this option, actual retail price 
levels of slightly below the Eurotariff price caps have been assumed.   
 
EN 9 7            EN  
Chart 5: 
 
 
 
Chart 6: 
 
 
 Welfare Effects - IA Glide Path - Optimistic Elasticity
2.7413.2153.8794.9966.3718.264
-337-63133232 270 2102.4043.1524.0125.2286.641 8.474
-1.00001.0002.0003.0004.0005.0006.0007.0008.0009.000
07-08 08-09 09-10 10-11 11-12 12-13? Consumer Welfare ? Profits ? Social WelfareWelfare Effects - IA Glide Path - Pessimistic Elasticity 
2.2652.5702.9533.5334.1264.800
-1.167-1.074 -1.070-1.205-1.359
-1.5591.0981.4951.8832.3282.767 3.241
-2.000-1.00001.0002.0003.0004.0005.0006.000
07-08 08-09 09-10 10-11 11-12 12-13
? Consumer Welfare ? Profits ? Social Welfare
 
EN 9 8            EN 5.3. SMS roaming regulation as proposed by the ERG 
The ERG has proposed to extend the scope of the roaming regula tion to include prices for 
SMS roaming. One of its proposals would set a Eu rotariff retail price cap of 15 eurocents 
combined with a wholesale price cap of 8 euro cents for a period of f our years, starting in 
2009.  The welfare impacts of this would be as fo llows for two different elasticity scenarios 
(calculated as consumer and overall welf are gains as a result of SMS regulation in addition to 
the existing voice regulation, see section 4 above): 
 
Table 14: 
 
Pessimistic 
Scenario   
€ million (Delta δ) 2009-10 
δ Consumer Welfare 707 
δ Social Welfare 639 
  
Optimistic 
Scenario   
€ million (Delta δ) 2009-10 
δ Consumer Welfare 995 
δ Social Welfare 1301 
 
The expected drop in industry profits - in the worst-case scenario - would be €68 million, and thus sufficiently outweighed by the e xpected benefits from regulation. 
 
5.4. SMS roaming regulation as proposed in this impact assessment 
This impact assessment proposes to extend the scope of the roaming regulation to include 
prices for SMS roaming, and to set a Eurotariff re tail price cap of 11 eu rocents combined with 
a wholesale price cap of 4 eurocents for a period of f our years, starting in 2009. 
 
The welfare impacts of this would be as fo llows for two different elasticity scenarios 
(calculated as consumer and overall welf are gains as a result of SMS regulation in addition to 
the existing voice regulation , see section 4 above): 
 
 
EN 9 9            EN Table 15: 
 
Pessimistic 
Scenario   
€ million (Delta δ) 2009-10 
δ Consumer Welfare 884 
δ Social Welfare 716 
  
Optimistic 
Scenario   
€ million (Delta δ) 2009-10 
δ Consumer Welfare 1243 
δ Social Welfare 1514 
 
The expected drop in industry profits – in the worst-case scenario - would be €168 million, and thus sufficiently outweighed by the expected benefits from regulation.
 
EN 100           EN A comparison with the ERG proposal shows that fo r SMS both consumer welfare and social welfare 
gains are more pronounced in the regulatory option favoured by this impact assessment. 
 
Chart 7: 
Welfare Effects SMS regulation
pessimistic elasticity scenario 
707
639884
716
01002003004005006007008009001000
δ Consumer Welfare δ Social WelfareERG Proposal CEE Proposal 
Chart 8: 
 
Welfare Effects SMS regulation
 optimistic elasticity scenario 
9951301
12431514
02004006008001000120014001600
δ Consumer Welfare δ Social WelfareERG Proposal CEE Proposal