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 - Summary of the impact assessment {COM(2008) 580 final} {SEC(2008) 2489}
Date: 2008-09-23
Institutions: European Commission
Subjects: approximation of laws, communications systems, mobile phone, regulation of telecommunications, telecommunications, transmission network

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.9.2008 
SEC(2008) 2490 

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 

SUMMARY OF THE IMPACT ASSESSMENT  

{COM(2008) 580 final} 
{SEC(2008) 2489} 

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EXECUTIVE SUMMARY 

1. 

BACKGROUND 

The  European  Commission  must  review  the  functioning  of  the  Roaming  Regulation  and 
report 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  there  is  need  to  extend  its  duration  and/or  to  amend  it.  The 
European  Parliament  and  Council  also  charged  the  Commission  specifically  with  reviewing 
developments  in  wholesale  and  retail  charges  for  roaming  data  communication  services, 
including SMS and MMS, and, if appropriate, including recommendations regarding the need 
to regulate these services. 

This impact assessment (IA) report examines options arising from the Commission's review 
of the functioning of the Roaming Regulation. In particular it examines the possible extension 
of its duration beyond its current expiry date of 30 June 2010 with regard to voice roaming 
services  and  the  possible  extension  of  its  scope  to  cover  SMS  roaming  and/or  packet  data 
roaming services. On 1 September the Impact Assessment Board provided comments on this 
document which have been taken into account. 

2. 

DEVELOPMENTS SINCE THE ADOPTION OF THE ROAMING REGULATION 

The  Roaming  Regulation  entered  into  force  on  30  June  2007  and  the  Commission  services 
already commenced preparations for the review of the functioning of the Roaming Regulation 
in  the  Autumn  2007.  Implementation  and  the  transition  to  the  'Eurotariff'  in  particular  went 
smoothly, with only a few exceptions noted by National Regulatory Authorities (NRAs).  

In  association  with  the  Commission,  the  European  Regulators  Group  (ERG)  initiated  an 
extensive six-monthly data collection exercise which has formed the basis for two Benchmark 
Reports. Under this reporting exercise, it was found that prices at retail and wholesale levels 
have  not  varied  sufficiently  from  the  maximum  allowed  ceilings  to  conclude  that  these 
markets  are  now  competitive.  The  Report  also  identified  an  issue  with  the  way  many 
operators bill for roaming services on a per-minute basis as opposed to actual time consumed.  

The  reports  also  demonstrate  that  there  appears  to  have  been  little  movement  in  prices  for 
SMS  roaming  services  in  most  Member  States,  at  the  retail  and  wholesale  levels.  Also,  for 
data services, the average data price per MB shows a diverse picture where the differences in 
price between countries remain large, and some countries still have very high average prices.  

2.1. 

Public consultation 

The  European  Commission  launched  a  wide-ranging  public  consultation  on  7  May  2008 
asking for comments on the review of the Roaming Regulation and on the possible extension 
to  SMS  and  data  roaming  services.  While  most  operators  are  against  extension  of  the 
regulation  of  voice  roaming  services,  most  NRAs  and  Member  States  and  some  smaller 
operators and consumer groups believe it should be extended.  

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On the issue of per-minute and per-second billing operators generally believe that this should 
be left to the market to resolve while the ERG and consumer groups believe that urgent action 
is needed to deal with what they call the ‘hidden charge’ issue.  

The ERG noted that there appears to be little movement in SMS retail roaming prices up to 
April 2008. They have therefore recommended the introduction of a price cap on the average 
wholesale  SMS  roaming  rate,  and  the  amendment  of  the  Eurotariff  obligation  to  include  an 
offer  of  SMS  roaming  at  a  retail  rate  not  greater  than  a  specified  maximum  cap.  Consumer 
organizations have also expressed themselves in favour of SMS regulation at both wholesale 
and  retail  level.  On  the  other  hand,  the  GSM  Association  and  mobile  operators,  with  some 
exceptions, are generally against such regulation.  

With regard to data roaming, there was almost a general consensus on the desire to eliminate 
‘bill shock’. Consumer organisations have also expressed themselves in favour of regulation 
at both wholesale and retail levels. The ERG believes that formal and immediate regulatory 
action  is  required  to  improve  transparency  and  eliminate  bill  shock.  The  GSM  Association 
and the majority of operators have expressed themselves against price regulation although a 
number of operators support regulation at the wholesale level.  

2.2. 

Other developments 

The Commission services have remained open to contacts with interested parties throughout 
the  process.  The  Commission  also  commissioned  a  study  by  independent  consultants  which 
was published by the Commission on 27 June 2008.  

Commissioner Reding warned the industry in February 2008 at the GSM World Congress in 
Barcelona that prices for SMS and data roaming needed to be reduced by July 2008 in order 
to avoid regulation. Commissioner Reding also wrote to the CEOs of all mobile operators in 
the European Union on 4 June 2008, requesting information on their price offerings for SMS 
and  data  roaming  services  in  the  EU,  as  well  as  on  transparency  measures  taken  for  those 
services, as at 1 July 2008.  

All  NRAs  have  provided  the  operator-specific  data  which  was  gathered  by  them  as  part  of 
their  general  monitoring  activities.  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.  

3. 

PROBLEM DEFINITION  

3.1. 

Voice Roaming 

Even  though  consumers  have  benefited  from  lower  voice  roaming  charges,  the  evidentiary 
record since adoption of the Regulation indicates that the structural problems with the voice 
roaming  market  have  remained  intact.  In  its  response  to  the  public  consultation,  the  ERG 
confirms that the fundamental problems which existed prior to the current Regulation remain. 

3.2. 

Voice billing unitisation 

The  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.. The 
relevant provisions of the Regulation did not however specify explicitly what should be the 

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minimum  units  of  time  by  reference  to  which  the  prices  for  wholesale  and  retail  roaming 
voice services were to be calculated. The ERG benchmark data report for September 2007–
March  2008  estimated  that  per-minute  billing  practices  add  on  average  around  24%  to  a 
typical retail bill for calls made and 19% for calls received using the Eurotariff. The different 
billing  unitisation  practices  employed  by  mobile  operators  seriously  undermines  the 
consistent application of the Eurotariff. 

3.3. 

SMS 

Similar to the situation for voice 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,  consumers  often  only  become  aware  of  the  high  prices  charged 
when the service is used. Community SMS roaming prices have an impact on millions of EU 
citizens. SMS services are particularly used by younger consumers. The level of the wholesale 
charges  for  sending  an  SMS  while  roaming  within  the  Community  does  not  appear  to  be 
justified by the underlying costs and there appears to be insufficient competitive pressures on 
operators to bring prices down.  

3.4. 

Roaming packet switched data services 

Concerns  as  to  the  level  of  charges  for  data  roaming  services  were  raised  in  the  political 
discussions  that  preceded  the  adoption  of  the  Regulation.  While  there  have  been  some 
positive developments, prices 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 underlying costs of providing the services and frequently give rise to the 
problem  of  bill  shock.  The  persistence  of  high  wholesale  charges  for  data  roaming  services 
(particularly  on  non-preferred  networks)  resulting  inter  alia  from  traffic  steering  limitations 
results in an extreme variation in wholesale costs. These excessive wholesale charges lead to 
distortions of competitive conditions which undermine the smooth functioning of the internal 
market. 

4. 

OBJECTIVES 

The general objective of EU action is to promote the further development of the single market 
for  electronic  communications  services,  which  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 telephone networks for EU-wide roaming services when travelling 
within the Community are not unjustifiably higher than the charges payable by that user when 
calling, sending SMS or data within the consumer's home country.  

5. 

ALTERNATIVE POLICY OPTIONS 

This  IA  considers  alternative  approaches  to  targeted  regulation  such  as  self-regulation,  co-
regulation and soft law. However, in light of the particular nature of the problems identified it 
is concluded that these options are not feasible (see Chapter 5). 

Options for regulation are evaluated in accordance with the following criteria: Effectiveness; 
Competition; Efficiency; Consistency; Coherence.  

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6. 

VOICE ROAMING POLICY OPTIONS 

A number of policy options are considered for voice roaming. This includes no policy change 
which in this case would mean that the Regulation would expire on 30 June 2010. However, it 
is concluded that there is a significant risk that the underlying lack of competitive pressures in 
the voice roaming market would translate into a return to higher retail and wholesale prices if 
the  pricing  obligations  in  the  Regulation  were  to  disappear  on  its  expiry  in  2010.  For  this 
reason it is concluded that the Regulation should be extended beyond 2010 for three years to 
30 June 2013.  

The  transparency  measures  for  voice  roaming  services  are  an  indispensable  element  of  the 
current  Regulation.  However  it  is  considered  that  transparency  measures  alone  will  not  be 
effective.  

It  is  further  concluded  that  the  regulation  should  be  extended  at  both  wholesale  and  retail 
level. Without wholesale regulation there is a risk of disrupting the orderly functioning of the 
roaming market by putting smaller operators at a dramatic competitive disadvantage. Equally, 
if regulation is applied at wholesale level only, it is likely that the consumer will not see the 
benefits in the form of lower retail prices.  

This  IA  then  considers  options  for  the  structure  of  extended  voice  regulation,  specifically 
whether there should be a glide path for reductions in the levels of the current price ceilings at 
wholesale and retail levels and, if so, the magnitude of such reductions. It is concluded that 
these  ceilings  should  continue  to  decline  to  reflect  anticipated  reductions  in  costs.  It  is 
concluded  that  the  most  effective  approach  is to  set  a  glide  path  which  continues  the  linear 
decline  inherent  in  the  current  regulation  at  the  retail  level  while  allowing  for  bigger 
reductions  at  the  wholesale  level  to  reflect  forecasted  reductions  in  costs.  This  approach  is 
pro-competitive as it gives greater flexibility for competition.  

7. 

BILLING UNITISATION POLICY OPTIONS 

The divergent approaches applicable to the billing of roaming calls create different conditions, 
thereby  undermining  the  consistent  application  of  the  Eurotariff  and  distorting  competitive 
conditions in the single market. It is therefore appropriate for the Regulation to harmonise the 
obligations on mobile operators in this regard.  

The  options  for  addressing  this  issue  include  no  policy  change,  a  move  to  strict  per-second 
billing, modified per-second billing and adjusting the levels of the caps. It is concluded that 
modified  per  second  billing  is  the  most  effective  approach  as  it  means  that  consumers  will 
generally  only  be  charged  for  what  they  consume  while  allowing  operators  to  recover 
reasonable call set-up costs and flexibility to differentiate their offers by means of a maximum 
30 second charging interval at the commencement of the call. Incoming calls and wholesale 
calls should be charged on a strict per-second basis.  

8. 

SMS POLICY OPTIONS 

As in the case of voice roaming, a variety of options to address the problems identified in the 
SMS  roaming  market  are  considered.  However,  the  discrepancy  between  domestic  SMS 
prices and SMS  roaming prices  remains  unjustifiably high. Despite recent strong calls from 

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the  European  Commission  and  national  regulators  for  significant  price  reductions,  there  has 
been relatively little movement in the market.  

Transparency  measures  for  SMS  roaming  services  are  considered  essential.  However,  it  is 
considered that transparency measures alone will not be effective to address these problems.  

To regulate only at wholesale level would assume that market forces would be sufficient to 
guarantee  a  substantial  pass-through  of  wholesale  reductions  to  the  retail  level  within  a 
relatively  short  period.  Conversely,  without  wholesale  regulation  there  is  a  risk  that  smaller 
operators  could  suffer  margin  squeeze  because  they  may  face  relatively  high  wholesale 
charges while their retail prices are capped.  

As for voice, it is considered that a combination of transparency measures as well as retail and 
wholesale  regulation  would  ensure  an  effective  outcome.  This  view  is  supported  by  ERG 
which believes that the wholesale SMS charges are not justified by costs to the host operator.  

The  Commission  services  conclude  that  the  Regulation  should  be  amended  to  include 
regulatory measures at wholesale and retail levels as well as transparency for SMS roaming 
services with effect from 1 July 2009 for a period of four years to 30 June 2013.  

The IA examines three options for regulation of wholesale and retail SMS roaming charges. 
The first is proposed by the Danish national regulatory authority (NITA) and is a cost-based 
model while the other options were proposed by ERG. The NITA model proposes 3.48 cents 
at  retail  levels  and  0.8  cents  at  wholesale  level.  The  first  ERG  option  proposes  a  cap  at  15 
cents at retail level and 8 cents at wholesale level. The second ERG option proposes 11 cents 
at  retail  level  and  4  cents  at  wholesale.  While  the  NITA  approach  has  much  merit  it  is 
considered  that  it  would  produce  price  ceilings  which  are  too  aggressive  for  practical 
application in almost all Member States. 

At  wholesale  level,  the  second  option  is  preferred  over  the  first  ERG  proposal  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  the  NITA  proposal.  At  retail 
level, the second ERG proposal is clearly preferable from a consumer perspective.  

9. 

DATA ROAMING POLICY OPTIONS 

The  continuing  discrepancy  between  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. Lack of transparency remains a key problem and it is far from certain 
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.  Therefore,  while  regulatory 
intervention should be treated cautiously, it is considered that the 'no policy change' option is 
not feasible.  

It is concluded that two measures in particular should be required to address transparency: the 
provision of basic price information is essential for consumers and should be  proposed as a 
regulatory measure. Equally, allowing the consumer to choose cut-off limits would provide a 
very  effective  tool  for  dealing  with  the  problem  of  bill  shock  and  should  therefore  also  be 
proposed.  

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The possibility of regulation at retail and wholesale levels is also carefully considered in this 
IA.  High  wholesale  charges  (particularly  on  non-preferred  networks),  combined  with  traffic 
steering difficulties for data roaming, are distorting competitive conditions and causing a lack 
of predictability for operators in relation to their wholesale costs. A wholesale safeguard cap 
would eliminate these excessive charges while allowing competition to play in the rest of the 
wholesale  market.  Such  a  ceiling  needs  to  be  sufficiently  low  to  address  the  'bill  shock' 
problem  while  being  sufficiently  above  some  current  market  offers  to  avoid  disruption  of 
competitive forces.  

It  is  therefore  considered  that  wholesale  regulation  (in  combination  with  transparency 
measures) is necessary. The period of regulation is aligned with that of voice and SMS i.e. up 
to 30 June 2013.  

It  is  considered  that  retail  price  regulation  should  not  be  introduced  given  the  likelihood  of 
competitive pressure arising from potential substitute services in the market.  

10. 

EVALUATION AND MONITORING 

Extension of the mobile roaming regulation will continue to be monitored very closely both 
by the NRAs and the Commission. The Commission services consider that data collection of 
similar  scope  and  frequency  should  continue  to  be  carried  out  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.  Evaluation  of  the  effectiveness,  efficiency  and 
relevance  of  the  roaming  regulation  will  be  carried  out  towards  the  end  of  its  three-year 
duration as part of the review exercise.  

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