WRITTEN QUESTION E-3821/00

by W.G. van Velzen (PPE-DE) to the Commission

(7 December 2000)

Subject: Follow-up question on international roaming charges for mobile telephones

On 4 October 2000 Commissioner Monti replied on behalf of the Commission to my question of 13 July 2000 on international roaming charges for mobile telephones (E-2648/00).

The Commission's answer gives rise to a number of further questions:

1. When will the Commission publish the results of its study on the structure and level of mobile phone roaming charges in the European Union?

2. What method did the Commission use to compare the roaming charges of the various operators?

3. Is the Commission also in a position to carry out a benchmarking study of the various operators' roaming charges and to draw comparisons with practice in the USA?

4. Is the Commission prepared to carry out such a study in the near future?

5. What opportunities does the Commission have for enforcing transparency with regard to roaming charges?

6. What proportion of the price of international mobile phone conversations can be attributed to roaming?

7. Does the Commission consider that, in this period of convergence, the method for setting mobile phone roaming charges currently used by operators is still the correct one?

Answer given by Mr Monti on behalf of the Commission

(12 February 2001)

1. On 24 November 2000 the Commission reported and discussed its confidential findings at a meeting with the national competition authorities and national regulatory authorities. The Commission published on 13 December 2000 a non-confidential version of its report that is publicly available(1).

2. Because operators tend to set their retail roaming rates by marking up the underlying wholesale rates with a standard percentage (of between 10 and 35 %), the wholesale charges applied between mobile network operators largely determine the cost of retail roaming rates. In the absence of preferential roaming and discounting the cost of buying wholesale roaming in a particular country appears to be practically identical for different operators.

For wholesale rates, the Commission has compared the wholesale charges of different operators with the retail charges for comparable non-roamed international calls offered by the same operator, with best practice levels, and with cost data where available. However, because most mobile network operators are not presently under ex ante regulatory obligations to keep detailed cost accounting data, such data are rarely available. Based on the data collected in the sector inquiry, there does not appear to be any significant relationship between differences in costs involved, and the different wholesale prices charged, or indeed between roaming costs and prices more generally.

3. Because the sector inquiry is an inquiry under the competition rules it does not aim to establish benchmarks. Instead a comparative assessment of prices is used as one of several prima facie indicators to establish priorities in investigating price levels and pricing practices of particular operators or groups of operators. Moreover, even best practice roaming prices do not appear to be cost-based. Using benchmarks could cause prices to converge at levels that are not cost-based and could facilitate collusion.

In the United States the billing principle for mobile calls is receiving party pays, whereas in the Community it is calling party pays. Hence, mobile use and take-up in the United States differs from the Community, and roaming prices for calls within the United States and between Member States are not readily comparable(2).

4. A study looking at price levels in the United States will add little value, as Community and United States data are not readily comparable. Hence, undertaking such a study is not contemplated.

5. At wholesale level, roaming prices are already highly transparent between mobile operators, which may facilitate tacit or active collusion between these operators. At retail level, enforcing or encouraging price transparency for operators under sector specific or general consumer protection rules, is primarily a task for national regulatory authorities (NRAs) and consumer watchdogs. In the context of individual competition cases the Commission may on a case by case basis require retail price transparency, and/or insist that wholesale price reductions are passed on to benefit consumers.

6. Because roamed calls received or made on a visited network do not constitute part of an international mobile call made on a home network, but instead are a different type of call, there can be no share of the price of an international mobile call that would be reasonable to attribute to roaming. If the wholesale prices of roamed calls are compared with the retail prices of comparable non-roamed calls on the same visited network, there appears to be no sound reason why wholesale roaming calls should be more expensive. Although some additional costs are usually incurred for the handling of roamed calls (e.g., the cost of setting up roaming agreements and billing arrangements), considerable costs are saved as well (e.g. the cost of marketing, advertising, and customer credit risk). However, as the inquiry is based on the competition rules it is not possible to make statements on what would constitute a reasonable cost or a reasonable price for international GSM roamed calls in general.

7. It is not for the Commission to declare whether particular pricing methods are appropriate unless they infringe the competition rules as such. In addition to other technological and commercial developments, convergence may provide new incentives to compete in roaming markets. If sufficient competitive pressures emerge it appears likely that neither the mechanism by which operators determine retail rates by applying standard mark-ups to wholesale rates, nor the parallel pricing at wholesale levels that is prevalent today, will be sustainable.

(1) http://europa.eu.int/comm/competition/antitrust/others/sector_inquiries/roaming/.

(2) See e.g. the comparative discussion in Cellular Mobile Pricing Structures and Trends, OECD, Paris, May 2000 (DSTI/ICCP/TISP(99)11/FINAL).