COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT OF POLICY OPTIONS IN RELATION TO THE COMMISSION'S REVIEW OF THE FUNCTIONING OF REGULATION (EC) No 544/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 18 JUNE 2009 ON ROAMING ON PUBLIC MOBILE TELEPHONE NETWORKS WITHIN THE COMMUNITY
Date: 2011-07-06
Institutions: European Commission
Subjects: comparative study, consumer protection, interactive network, market intervention, mobile phone, price disparity, price regulations, single market, telecommunications industry, transmission network

EUROPEAN COMMISSION 

Brussels, 6.7.2011 
SEC(2011) 870 final 

COMMISSION STAFF WORKING PAPER 

IMPACT ASSESSMENT OF POLICY OPTIONS IN RELATION TO THE 
COMMISSION'S REVIEW OF THE FUNCTIONING OF REGULATION (EC) No 
544/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 18 
JUNE 2009 ON ROAMING ON PUBLIC MOBILE TELEPHONE NETWORKS 
WITHIN THE COMMUNITY 

{COM(2011) 407 final} 
{SEC(2011) 871 final} 

 
 
 
 
  
 
TABLE OF CONTENTS 

IMPACT ASSESSMENT .......................................................................................................... 5 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

1.6. 

1.7. 

1.8. 

1.9. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

2.6. 

Procedural issues and consultation of interested parties .............................................. 5 

Background .................................................................................................................. 5 

Implementation of the Roaming Regulation ................................................................ 5 

BEREC Analysis and Benchmark Data Reports.......................................................... 5 

Public consultation ....................................................................................................... 6 

Meetings with interested parties................................................................................... 7 

Commission studies ..................................................................................................... 7 

Development of an economic model............................................................................ 7 

Commission Services Inter-service Group................................................................... 7 

Impact Assessment Board ............................................................................................ 7 

PROBLEM DEFINITION ........................................................................................... 7 

Definition of roaming services..................................................................................... 8 

Market Size and segments............................................................................................ 9 

Evolution in wholesale and retail roaming charges ................................................... 10 

Comparison of roaming prices with price ceilings in the Roaming Regulation ........ 11 

Comparison of roaming prices with underlying costs................................................ 12 

Comparison of roaming prices with domestic prices................................................. 13 

2.7.  What are the underlying causes of the problem? ....................................................... 13 

2.8.  Who is affected by the problem (specific actors, sectors …)?................................... 17 

2.9.  Why is public intervention necessary, why at the European level?........................... 17 

2.10.  Conclusion on the roaming market and its development ........................................... 20 

3. 

3.1. 

3.2. 

3.3. 

4. 

4.1. 

4.2. 

Definition of the policy objectives............................................................................. 22 

General objectives...................................................................................................... 22 

Specific objectives ..................................................................................................... 23 

Operational objectives................................................................................................ 24 

ALTERNATIVE POLICY OPTIONS....................................................................... 26 

Option 1: No regulation ............................................................................................. 27 

Option 2: Maintaining the current approach .............................................................. 27 

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4.3. 

4.4. 

4.5. 

Option 3a: Decoupling of roaming services............................................................... 33 

Option 3b: Additional wholesale Access Measures................................................... 34 

Option 3c – Safeguard price caps accompanying the decoupling and wholesale 
access measures.......................................................................................................... 36 

4.6. 

Option 3d: Spot market .............................................................................................. 38 

5. 

5.1. 

5.2. 

5.3. 

5.4. 

5.5. 

5.6. 

5.7. 

5.8. 

5.9. 

Assessment of the policy options............................................................................... 39 

Qualitative assessment ............................................................................................... 39 

Identification of the relevant impacts......................................................................... 39 

Qualitative assessment of Option 1: No Regulation .................................................. 41 

Qualitative assessment of Option 2a: Continuation à l’identique – current price caps
.................................................................................................................................... 41 

Qualitative assessment of Option 2b: Extension of the current methodology with 
adjusted annual price caps incl retail data.................................................................. 42 

Qualitative assessment of Option 2c: Roam like at Home......................................... 43 

Qualitative assessment of Option 3a: Unbundling option.......................................... 43 

Qualitative assessment of option 3b: Improved wholesale access measures............. 44 

Qualitative assessment of Option 3c: Decoupling plus MVNO access plus safeguard 
price caps.................................................................................................................... 46 

5.10.  Qualitative assessment of Option 3d: Spotmarket ..................................................... 46 

5.11.  Quantitative assessment ............................................................................................. 49 

5.12.  Assessment of the economic impact (Social welfare impact).................................... 49 

5.13. 

Estimation of the economic impact under each option in the EU 27......................... 49 

5.14. 

Estimation of the economic impact under shortlisted options ................................... 51 

5.15.  Assessment of the costs of implementing the roaming regulation options (incl. 

feasibility) .................................................................................................................. 52 

5.16.  Overall cost-benefit assessment of the selected policy options ................................. 54 

6. 

7. 

Conclusion.................................................................................................................. 56 

Evaluation and monitoring......................................................................................... 57 

ANNEX I.................................................................................................................................. 58 

1. 

1.1. 

1.2. 

1.3. 

Technological developments related to roaming ....................................................... 58 

Alternatives to roaming services................................................................................ 58 

Possible substitution between services within the roaming market ........................... 65 

Innovations affecting the roaming market ................................................................. 66 

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2. 

3. 

4. 

Barriers to Competition.............................................................................................. 67 

Overview of how the different stakeholders are affected .......................................... 70 

Table of impacts......................................................................................................... 77 

Annex II Qualitative Assessment ............................................................................................. 79 

ANNEX III............................................................................................................................... 84 

Annex IV – Economic Model .................................................................................................. 95 

Annex V ................................................................................................................................. 101 

Theory framework for the determination of unregulated retail and wholesale roaming prices

.................................................................................................................................. 101 

Annex VI ................................................................................................................................ 108 

Breakdown of Roaming services............................................................................................ 108 

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IMPACT ASSESSMENT 

1. 

1.1. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

Background 

In June 2007, a first Regulation on roaming on public mobile telephone networks within the 
Community (the Roaming Regulation) was adopted to contribute to the smooth functioning of 
the internal market while achieving a high level of consumer protection, fostering competition 
and transparency in the market. In July 2009, revised regulation1 was adopted and this is valid 
until 30 June 2012. In the meantime the Commission's task was to monitor and report to the 
European  Parliament  and  Council  on  the  functioning  of  the  Regulation.  The  Commission 
must review the functioning of the Regulation by 30 June 2011 at the latest.  

This impact assessment (IA) report examines options arising from the Commission's review 
of the functioning of the Roaming Regulation2 pursuant to Article 11 thereof. In particular it 
examines whether it is necessary to extend regulatory intervention beyond its current expiry 
date  of  30  June  2012  and  the  options  for  such  intervention.  In  each  case  it  examines  the 
impact of these options on consumers and the industry. 

1.2. 

Implementation of the Roaming Regulation  

The Commission has been monitoring developments in the roaming market carefully and in 
its  Interim  Report3  on  the  functioning  of  the  Regulation,  published  June  2010,  noted  that 
competition  was  not  strong  enough.  In  that  report  that  Commission  found  that,  overall, 
implementation of the amending Roaming Regulation has gone smoothly and operators have 
complied with the new provisions. Consumers are benefiting from reductions in the prices for 
voice  and  SMS  roaming  services  and  from  increased  transparency.  The  prices  for  data 
roaming  have  also  fallen  but  consumers  are  not  yet  enjoying  fully  the  reductions  seen  at 
wholesale level.  

1.3. 

BEREC Analysis and Benchmark Data Reports 

The  Commission  services  have  continued  to  work  closely  with  the  Body  of  European 
regulators  for  Electronic  Communications  (BEREC)  which  has  provided  highly  valuable 
input to the Commission's ongoing monitoring of the Roaming Regulation as well as to this 
review of the Regulation. This report draws heavily on the work carried out by BEREC and in 
particular on: 

The six collections of operator roaming data carried out by NRAs including trends in roaming 
prices and volumes for all roaming services at wholesale and retail levels as far back as the 2nd 
quarter  of  2007  and  up  to  and  including  the  first  half  of  2010.  Furthermore,  BEREC  has 

1 
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3 

Regulation (EC) No 544/2009, OJ L 167, 29.6.2009, p.12 
(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 
See COM(2010)356 final (29/06/2010) 

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published  a  number  of  other  reports  which  contribute  to  specific  requirements  of  the 
Commission's review of the Regulation4.  

Article 11 of the Roaming Regulation specifically requires that in its assessment of methods 
other  than  price  regulation  which  could  be  used  to  create  a  competitive  internal  market  for 
roaming,  the  Commission  has  regard  to  an  analysis  carried  out  by  BEREC.  To  meet  this 
obligation, in December 20105 BEREC published a full analysis the effects of the Roaming 
Regulation as well as its views as to possible future regulatory approaches. 

1.4. 

Public consultation  

The European Commission launched a wide-ranging public consultation on 8 December 2010 
seeking  comments  on  the  review  of  the  Roaming  Regulation.  The  response  rate  was  high  – 
around 90 contributions were received in total.  

Most  responses  argued  for  the  need  for  further  regulatory  intervention  beyond  2012. 
Responses from industry players were mixed – most acknowledged the inevitability of further 
regulation while a few argued that competition has developed to a level that does not warrant 
future  regulatory  intervention.  Most  respondents  acknowledged  that  the  current  Regulation 
had succeeded in bringing benefits for consumers. On the other hand, very few believed that 
competition was stronger because of the Regulation. Industry in particular was sceptical of the 
current model's ability to foster competition. 

The  Commission  had  put  forward  a  number  of  options  for  future  approaches  to  regulation. 
Among  these  were  options  which  would  link  roaming  prices  directly  to  domestic  prices. 
These  alternative  options  of  retail  price  regulation  (Roam-Like-at-Home/RLAH  or  Roam-
Like-a-Local/RLAL)  were  assessed  by  stakeholders  but  views  were  quite  divergent.  RLAL 
was the least popular option amongst operators as it would make the task of ensuring adequate 
transparency  of  tariffs  complicated.  Only  a  few  positive  replies  came  regarding  the  RLAH 
option, mostly stating that this is a better option than RLAL. The continuation of the existing 
price cap model was favoured by most stakeholder groups. 

The Commission had also suggested a number of possible structural solutions to the roaming 
problem.  Some  network  operators  and  national  authorities  expressed  doubts  on  structural 
solutions, which were considered to be costly, time consuming and (especially the decoupling 
option) challenging to implement. In this regard, it was also underlined that, if not limited to 
roaming  specific  services,  such  structural  solutions  could  even  distort  the  national  mobile 
markets which are considered to be competitive The effectiveness and general workability of 
the 'spot market' was also questioned, though supported by a few small operators. An access 
obligation  for  MVNOs  was  perceived  more  neutrally  and  some  responses  (from  smaller 
operators) highlighted its potential to promote competition. 

Most  operators  were  strongly  opposed  to  retail  data  roaming  regulation  while  consumers, 
Member States and others support this approach. If such regulation is to be proposed, MNOs 
suggested a retail cap which would allow flexibility in this new and emerging market. Other 
stakeholders (Member States, consumer representatives and some MVNOs) however argued 

4 
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http://www.erg.eu.int/documents/berec_docs/index_en.htm#board 
http://www.erg.eu.int/doc/berec/bor_10_58.pdf 

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that  the  spread  between  the  retail  price  and  the  wholesale  cap  is  too  big  and  shows  that 
competition has not kicked-in. It was widely acknowledged that current technology does not 
provide for a viable roaming substitute.  

1.5.  Meetings with interested parties 

The  Commission  services  have  held  numerous  meetings  with  mobile  operators  over  the 
course of the review of the Roaming Regulation. 

1.6. 

Commission studies  

A  Study  entitled  “Study  on  the  Options  for  addressing  Competition  Problems  in  the  EU 
Roaming  Market”  was  completed  for  the  Commission  by  WIK  Management  Consultants. 
Support for this impact assessment provided by Van Dijk Management Consultants.  

1.7. 

Development of an economic model 

In addition to the general data gathering exercise undertaken by BEREC referred to above, all 
NRAs  have  provided  directly  to  the  Commission  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 V.  

1.8. 

Commission Services Inter-service Group 

In  order  to  support  the  preparation  and  drafting  of  this  impact  assessment,  a  Commission 
Services  inter-service  group  was  established.  The  following  Commission  Services  were 
invited to participate: Secretariat General, Legal Service, Enterprise and Industry, Health and 
Consumer  Protection,  Internal  Market  and  Services,  Competition,  Economic  and  Financial 
Affairs and Trade. There were two meetings of this group. 

1.9. 

Impact Assessment Board 

On  8  April  2011  the  Impact  Assessment  Board (IAB) in  its final  opinion recommended the 
several improvements that are all included in this final impact assessment report. Following 
the IAB examination and suggestions, the following improvements were made to the report: 
(a)  the  final  impact  assessment  report  now  provides  a  more  developed  analysis  of  the  EU 
market  for  mobile  roaming  services;  (b)  the  report  analyses  and  quantifies  to  the  extent 
possible the costs that telecom operators and service providers will have to bear to implement 
the  structural  elements  of  the  preferred  option;  (c)  the  report  provides  the  improved 
comparison of options by clarifying the scoring method used and explaining its conclusions; 
(d) the report presents a more detailed summary the different positions of the stakeholders; (e) 
the quantitative analysis is further improved. 

2. 

PROBLEM DEFINITION  

Roaming  charges  are  still  an  important  impediment  to  the  single  market  and  create  an 
important cost factor for businesses and citizens in Europe. Many Europeans avoid, or curtail, 
usage of their mobile phones when travelling outside of their home Member State in order to 

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avoid incurring mobile roaming charges6. Every day European businesses and citizens are faced 
with the reality that this bottleneck to cross-border activity remains. The weak linkage between 
cost and price for roaming services indicates the lack of competition. 

The overall problem that is dealt with in this impact assessment study is that: 

“Roaming charges that are a result of market forces alone are excessive compared to costs”  

More precisely, the central question to address is if the objectives of the current Regulation 
have  been  achieved  by  the  present  provisions,  and  if  and  how  the  Regulation  should  be 
adapted after 30 June 2012. Derived from this, the overall aim for this impact assessment can 
be summarised as follows:  

“If regulation is justified, what approach should be applied for regulating roaming services 
after 30 June 2012”? 

2.1. 

Definition of roaming services  

International  Roaming7  is  a  service  that  allows  a  customer  of  a  Mobile  (Virtual)  Network 
Operator (M(V)NO)8 in one country, to obtain services (voice, SMS or data) from an MNO in 
another country. The service provider ensures that consumers remain connected to a mobile 
network  abroad  while  using  the  same  mobile  handset  (or  possibly  laptop  in  case  of  data 
roaming) and the same telephone number. A distinction can be made between wholesale and 
retail roaming services. 

Wholesale roaming services 

The term “wholesale roaming services” refers to the provision of  roaming  services between 
service providers located in different countries. More precisely, service providers that want to 
offer roaming services to their customers have to buy them from MNOs located in the visited 
countries.  To  this  end,  commercial  agreements  between  service  providers  have  to  be 
concluded. 

The wholesale roaming market is actually divided in two different parts: 

– 

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8 

The wholesale inbound roaming market is the market where MNOs can sell and buy 
roaming  services  to  each  other  by  negotiating  commercial  agreements.  As 
membership  to  GSMA  is  in  practice  required  for  service  providers  to  conclude 
agreements with foreign MNOs, this market solely includes MNOs.  

The  wholesale  resale  roaming  market  is  the  market  where  other  service  providers 
(MVNOs  and  resellers)  can  buy  roaming  services  previously  negotiated  by  their 
MNOs.  Indeed,  MVNOs  are  generally  not  able  to  access  the  wholesale  inbound 
market  for  negotiating  themselves  bilaterally  with  all  foreign  MNOs.  Generally, 

Eurobarometer 

2010 
http://ec.europa.eu/information_society/activities/roaming/docs/survey2011_en.pdf 
International  roaming  is  most  often  referred  to  as  simply  ‘Roaming’.  Unless  otherwise  indicated, 
‘roaming’ will always refer to ‘international roaming’ in the remainder of this text. 
It is assumed than MNOs as well as (full) MVNOs can conclude an inter-operator wholesale contract 
for international roaming services. 

Roaming: 

report 

on 

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MVNOs  and  resellers  negotiate  agreements  for  buying  roaming  services  via  their 
domestic MNO but this is not especially required. 

Retail roaming services 

The retail roaming services are the roaming services sold by all domestic providers (MNOs, 
MVNOs and resellers) to end-users. On this market, service providers resell to their domestic 
customers roaming services which they have bought (directly or via a domestic MNO) from a 
foreign MNO. 

2.2.  Market Size and segments9 

The  EU  market  for  mobile  roaming  services  can  be  divided  into  voice  services,  SMS  and 
broadband data services. In 2009, the retail EU roaming market10 accounted for 4,777 billion 
EUR  in  revenues.  This  can  be  divided  as  follows  between  the  different  services:  71%  for 
voice (nearly three quarters of which is relative to calls made, the rest to calls received), 17% 
for data and around 11% for SMS. For wholesale revenues, figures only differ slightly, with 
respectively  69%,  15%  and  16%  of  wholesale  non-group  roaming  revenues  coming  from 
voice,  SMS  and  data  services.  The  total  wholesale  market  size  in  2009  amounted  to  1,253 
billion EUR. 

With  a  total  EU  mobile  market  size  of  about  164  billion  EUR11,  EU  (retail  and  wholesale) 
roaming revenues appear to represent around 3,68%12 of the total EU mobile market. Between 
2007 and 2009, revenues for voice roaming fell quite significantly as a result of both lower 
prices  as  well  as  lower  volumes  of  traffic  (-3,2%).  For  SMS  roaming,  the  impact  of  the 
Regulation can already be clearly seen as total revenues in 2009 compared to 2008 decreased 
significantly despite a big increase in volume (+23,1%). Finally, for data services, the increase 
in  volume  of  43,6%  between  2008  and  2009  combined  with  the  imposed  decrease  in 
wholesale prices led to an overall decrease in revenues. At the retail level however – where no 
price ceilings were imposed for data roaming, the total revenues in 2009 remained at the same 
level as in 2008. 

The structure of the EU roaming market has not substantially changed since the introduction 
of roaming regulation in 2007 in terms of actors in the market. There are around 100 mobile 
network licences granted in 27 Member States. Half of these operators are subsidiaries of or 
have co-operation agreements with the four main market players. Almost 80% of EU citizens 
subscribe  to  one  of  the  four  main  mobile  groups  (460million  subscribers).  While  mobile 
operators' strategies (e.g. in terms of negotiations with suppliers or investment decisions) are 
European,  mobile  services  are  produced  and  marketed  at  the  national  level.  For  example, 
when purchasing retail roaming services as part of the mobile service bundle, the end-user has 
a  choice  between  2  or  6  network  operators  depending  on  the  Member  State.  In  addition  to 

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12 

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 approach. See the annex 
for a detailed explanation.  
I.e. excluding revenues from rest of world traffic 
See  15th  Progress  Report  on  the  Single  European  Electronic  Communications  Market  (15th 
Implementation Report), figure is for 2008. 
The BEREC report “International Mobile Roaming Regulation” of December 2010 indicates a market 
size for roaming services of 4,2% on average for the EU in 2009. 

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existing mobile network operators, retail roaming services are provided also by mobile virtual 
network  operators,  MVNOs.  MVNOs  market  share  varies  from  one  Member  States  to 
another. In March 2010 their cumulated market share reached 20% in Germany and Denmark, 
between  10-19%  in  the  UK,  the  Netherlands  and  Finland.  In  the  remaining  countries  the 
market share is below 10%.  

Technological  developments  related  to  roaming,  including  possible  substitution  between 
services within the roaming market as well as detailed description of barriers to competition 
on the European roaming markets are presented in more details in Annex I.  

2.3. 

Evolution in wholesale and retail roaming charges 

When considering the problem that “Roaming charges that are a result of market forces alone 
are excessive compared to costs”, the evolution of tariffs is a useful starting point for a more 
thorough analysis. Roaming charges at the wholesale and retail level for the different services 
offered  have  steadily  decreased  over  time.  This  is  shown  by  the  following  graphs  with  EU 
averages for the different services considered:  

Figure : Evolution of wholesale and retail prices for voice roaming (per min), 2007-2010 
(SOURCE: BEREC database on roaming data collection) 

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Figure  1:  Evolution  of  wholesale  and  retail  prices  for  SMS  roaming  (per  SMS),  2007-
2010 (SOURCE: BEREC database on roaming data collection)  

Figure 2: Evolution of wholesale and retail prices for data roaming (per MB), 2007-2010 
(SOURCE: BEREC database on roaming data collection)13  

From  the  above,  it  thus  appears  at  first  sight  that  wholesale  and  retail  prices  have  steadily 
declined, and that declines in wholesale and retail prices have occurred simultaneously and in 
a rather coordinated way. As will be discussed in the next paragraph, this however is largely 
due to the regulations at both wholesale and retail level that are in place since 2007.  

Moreover, upon closer inspection it becomes clear that although the absolute margin between 
wholesale and retail prices has remained constant or has slightly declined, in relative terms the 
difference  between  wholesale  and  retail  prices  has  even  increased  in  recent  years,  thus 
enlarging  the  relative  operator  margin  (e.g.  for  voice,  the  difference  between  wholesale  and 
retail  prices  has  risen  from  49%  in  Q2  2007  to  81%  in  Q2  2010).  Finally,  for  retail  data 
services, the only service currently not subject to price regulation, declines in wholesale prices 
do not appear to have been structurally passed through to the retail level: between Q2 2009 
and  Q2  2010  (so  in  the  first  year  of  application  of  wholesale  data  roaming  price  caps), 
wholesale  prices  have  decreased  by  about  70%,  whereas  retail  prices  decreased  more 
marginally  with  about  15%.  This  evolution  is  in  stark  contrast  with  previous  conclusions14 
that  “the  analysis  of  the  evolution  in  wholesale  and  retail  prices  between  2007  and  2008 
suggested  that  there  is  a  higher  likelihood  of  pass-through  of  wholesale  price  reductions  to 
end-users [for data] than is the case for voice or SMS roaming services”. 

2.4. 

Comparison of roaming prices with price ceilings in the Roaming Regulation 

In a price-regulated environment, more important than the absolute evolution of the prices is 
how these compare to the price caps that were defined in the Roaming Regulation. The most 

13 

14 

Since  Q1  2010,  the  BEREC  database  makes  a  distinction  between  retail  tariffs  applicable  to  prepaid 
versus  post-paid  customers.  Therefore,  a  weighted  tariff  has  been  determined,  based  on  respective 
volumes of roaming data services used by prepaid and post-paid customers. More precisely, on average 
for Q1 and Q2 2010; 13% of roaming data volumes was transmitted by prepaid user and 87% by post-
paid subscribers. 
See SEC(2008) 2489 – page 25. 

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recent  benchmark  data  that  exists  on  the  roaming  tariffs  applied  in  the  different  Member 
States stems from the BEREC international roaming benchmark data collection for the period 
January  –  June  2010.  Since  the  current  price  caps  for  retail  and  wholesale  voice  and  SMS 
roaming  services  and  for  wholesale  data  roaming  services  only  came  into  force  on  1  July 
2010,  the  following  graphs  set  out  the  most  recent  BEREC  results  for  average  EU  tariffs 
applied against the price caps applicable in the previous step of the glide path, i.e. from July 
2009 to June 2010. 

As  the  above  graph  shows,  average  EU  tariffs  in  general  are  very  close  to  the  price  caps 
defined  by  the  2009  Regulation.  Differences  for  regulated  wholesale  tariffs  range  from 
respectively 63,6015% and 18,85% lower for data and voice service to tariff at the same level 
as the price caps for SMS roaming. 

2.5. 

Comparison of roaming prices with underlying costs 

For voice roaming, an estimation of the underlying costs per min was made at the Member 
State  level,  with  very  conservative  estimations  based  on  two  times  the  current  mobile 
terminating  rate  (MTR),  2cEUR  for  the  international  transit  and  2cEUR  for  the  roaming 
specific  costs16.  It  can  be  concluded  that  current  retail  roaming  prices  are  on  average  118% 
higher than the outcome of our estimated underlying costs. The differences vary from +20% 
for Ireland (which could be partly explained by the second most high MTR in the EU 27) and 
+515% for Cyprus (which in turn has by far the lowest MTR) 

Another  more  recent  approach  developed  by  BEREC17  makes  a  further  distinction  between 
technical costs, sales and marketing costs and common costs. While remaining conservative 
(e.g. for the terminating part of the routing, it is still assumed that all calls are terminated at 
more expensive mobile networks), the methodology for estimating underlying costs also takes 
a  more  forward  looking  approach  by  estimating  costs  for  the  period  2012-2015  (e.g.  taking 
into account the expected further decrease of terminating rates to the LRIC level, at least for 
the terminating leg18). The results of the new methodology suggest an average wholesale costs 
of 5,42 cEUR/min and between 5,69-8,13 cEUR/min when including retails costs. 

Similarly for data and SMS the underlying costs are extremely low compared to the current 
caps.19  A  similar  approach  as  developed  for  voice  roaming  services  has  led  to  following 
results:  the  average  wholesale  costs  per  SMS  is  0.81  cEUR  (  between  1,41  and  2,01  cEUR 
when retail costs are included) whilst wholesale costs for data per MR are estimated at 8,08 
cEUR (between 8,49-12,12 cEUR when including retail costs). 

15 

16 

17 
18 

19 

This is compared to the cap of 1 EUR/MB on 1 July 2010; this will however further go down to 0,5 
EU/MB on 1 July 2011. 
This is consistent with the approach taken in the Impact Assessment for the amended Regulation – SEC 
(2008) 2489.  
See “International Mobile Roaming Regulation” – BEREC Report – December 2010 
For the originating leg, a Fully Distributed Costing (FDC) approach is used in order to also cover the 
cost of coverage (i.e. ‘the access cost’). 
A comparison at the country level, based on publicly available data, was not possible for SMS and data 
services. 

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2.6. 

Comparison of roaming prices with domestic prices  

It can be concluded that roaming prices for voice services are on average 200% higher than 
the  domestic  Average  Revenue  Per  Minute  (APPM).  For  SMS,  no  readily  available 
information on average retail prices per SMS at the Member State level could be found.  

These  elements  clearly  confirm  a  previous  statement  by  the  ERG20  (i.e.  before  the 
introduction  of  Regulation  544/2009)  that  the  difference  between  domestic  and  roaming 
prices appears to be no better for SMS than for voice and that those differences are unlikely to 
be  justified  on  the  basis  of  roaming-specific  costs.  The  introduction  of  the  price  ceiling 
already  largely  reduced  the  roaming  cost  for  SMS,  but  these  remain  very  much  above  the 
underlying costs. 

Finally,  for  data  services,  a  first  comparison  was  made  based  on  data  collected  on  mobile 
broadband  offers  and  internal  research  by  Van  Dijk  Management  Consultants  related  to  Q1 
200921. It was observed that many domestic offers already contain a number of Gigabyte (GB) 
(most  often  1,  3,  5  or  10GB)  in  the  monthly  subscription  fee.  Additional  volume  can  be 
bought  at  an  additional  cost  per  GB.  After  the  elimination  of  some  extreme  values,  and 
assuming  a  total  monthly  consumption  of  respectively  1,  5  and  10GB,  an  EU  average 
domestic price for mobile data could be derived. Depending thus on the total consumption, an 
average cost of 12; 15,6 and 17,5cEUR per MB22 was obtained.  

The BEREC report on International Mobile Roaming Regulation also provides benchmarking 
information  on  domestic  mobile  data  services.  The  results  obtained  indicate  a  European 
domestic average of 4,8cEUR per MB. 

Based on these elements, it can be concluded that the gap between the prices for domestic and 
(non-regulated) retail data roaming services23 ) remains enormous ( > 95%) and is thus very 
far  from  reaching  the  DAE  Key  performance  target  of  differences  between  roaming  and 
domestic tariff approaching zero by 2015. 

2.7.  What are the underlying causes of the problem? 

The  impact  of  the  2007  and  2009  roaming  regulation  on  competition  has  been  limited.  The 
BEREC data suggests that there have been no major developments which change this position 
i.e.  prices  are  still  clustered  close  to  the  maximum  level  of  the  caps,  except  in  the  case  of 
wholesale  data.  The  structural  issues  which  were  identified  as  causing  mobile  retail  and 
wholesale roaming markets to be not effectively competitive are still evident. These include 
lack  of  (or  substantial  imperfections  in)  retail  roaming  substitutes  and  relatively  inelastic 
demand for roaming services for a significant part of the customer base: only few subscribers 

20 
21 

22 

23 

Submission to Public Consultation for the Impact Assessment SEC(2008) 2489 
Collection  of  data  made  during  the  same  data  collection  period  as  for  the  DG  INFSO  Broadband 
Internet Access Cost (BIAC) Study in April 2009. 
The higher cost per MB in case of a consumption of 10GB compared to a lower consumption is caused 
by the higher cost for additional GB that are added to the cost of those tariff plans that do not include 10 
GB in the fixed subscription fee. 
The overall average for on-net and off- net at Q2 2010 was 1,30 EUR/MB, whereas the overall average 
for off-net traffic was 2,604 EUR/MB 

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chose their operator based on the roaming charges offered. In the wholesale roaming market, 
the majority of deals are reciprocal, so that purchasers buy and sell wholesale roaming from 
the same counterparty while negotiating agreements for residual traffic with most (if not all) 
other operators to ensure good network coverage for their roaming customers. For relatively 
small volumes of residual traffic, there is not much incentive to compete vigorously on price, 
especially for larger operators.  

To illustrate the reasons for these problems in more detail, the following section will focus on 
the  specificities  of  the  roaming  market  and  the  market  failures  that  are  at  its  heart.  A 
distinction will naturally be made between the wholesale and retail market. 

Wholesale market 

Since  the  widespread  use  and  efficiency  of  traffic  steering,  the  wholesale  roaming  price 
offered to an operator is principally driven by the amount of traffic that this operator is able to 
offer to send back to the country with which it is negotiating24. Bilateral negotiations between 
operators  are  greatly  affected  by  the  amount  of  traffic  that  the  other  operator  will  in  return 
steer  onto  the  other  operator’s  network,  this  way  increasing  the  operator’s  revenues. 
Therefore,  negotiations  principally  evolve  around  agreeing  to  ‘balance  traffic’,  and  then  to 
apply  a  marginal  rate  (wholesale  roaming  price)  to  the  remainder  of  the  traffic25.  It  was 
confirmed by market players that the volume of traffic an operator has to offer in return, at 
least plays a role in the price it can obtain for its roaming customers26.  

Another  argument  recently  raised,  more  specifically  in  the  “Study  on  the  Options  for 
addressing  Competition  Problems  in  the  EU  Roaming  Market”,  commissioned  by  the 
Commission  as  a  preparatory  study  for  the  present  Impact  Assessment,  is  that  the  data 
available on applicable roaming tariffs shows a somewhat twisted view of reality. It is argued 
that  bilateral  negotiations  between  operators  solely  focus  on  the  rate  to  be  applied  to 
unmatched minutes (thus in excess of the balanced traffic), whereas the matched minutes are 
simply exchanged at the wholesale cap. Whereas the negotiated  price  for  unbalanced traffic 
can thus in some instances be as much as 40% less than the regulated cap, this is not as such 
shown in the statistics, since the relatively small amount of unbalanced minutes is mixed in 
with  the  high  volume  of  balanced  traffic.  Whereas  this  theory  presents  good  news  for  the 
wholesale  market  in  itself,  i.e.  this  would  mean  that  there  is  more  price  competition  in  the 
wholesale market than has been assumed until now based on the available data, it could also 
be  concluded  that  in  this  case  the  difference  between  the  retail  prices  actually  paid  and  the 
retail prices that should be applicable based on the underlying costs, is even greater than had 
been presumed, thus suggesting that the problem on the retail roaming market is even greater.  

Another problem in the wholesale inbound market often raised by full MVNOs is the fact they 
are in practice excluded from this market. Looking closer, the underlying problem relates to 

24 

25 

26 

EUI  Working  Paper  RSCAS  2010/62  -  Robert  Schuman  Centre  for  Advanced  Studies  –  Florence 
School of Regulation – A Structural Solution to Roaming in Europe, by Tony Shortall 
For  the  sake  of  clarity  it  should  be  mentioned  that  the  wholesale  cap  as  regulated  by  the  Roaming 
Regulation  applies  to  all  traffic  and  sets  thus  the  upper  boundary  both  for  balanced  and  unbalanced 
traffic. 
See “Study on the Options for addressing Competition Problems in the EU Roaming Market”, by WIK 
Consult for DG INFSO 

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the  fact  that  bilateral  negotiations  for  roaming  services  are  most  often  based  on  STIRA 
agreements  (i.e.  standard  documents  regularly  amended  giving  a  general  framework  to 
conclude  agreements  with  foreign  MNOs),  which  can  currently  only  be  used  by  GSMA 
members.  MVNOs,  however,  cannot  have  the  required  GSMA  membership.  Although  in 
theory,  other  types  of  contracts  could  be  concluded,  since  STIRA  agreements  are  not 
obligatory, in practice these introduce a higher degree of uncertainty resulting thus in much 
higher  transaction  costs27.  Furthermore,  it  appears  that  MVNOs  could  obtain  GSMA 
membership  by  paying  high  fees  and  after  fulfilling  some  technical  requirements28. 
Theoretically  again,  full  MVNOs  could  thus  be  able  to  negotiate  roaming  agreements  with 
foreign MNOs. However, in practice, since technical conditions for GSMA membership are 
difficult to fulfill and since agreements out of the STIRA framework are more costly, MVNOs 
are excluded from the wholesale inbound market. To improve this situation, the GSMA has 
however  mentioned  that  they  are  currently  preparing  to  allow  MVNOs  use  standard 
commercial documents such as STIRA. 

The  exclusion  of  MVNOs  from  the  wholesale  inbound  market  as  explained  in  the  previous 
section has several consequences on the wholesale resale market. The most obvious is the fact 
that,  as  MVNOs  cannot  directly  negotiate  with  foreign  MNO’s,  they  must  buy  roaming 
services from a domestic MNO, most of the time their host MNO. As no price cap has been 
imposed  on  the  wholesale  resale  market,  and  since  domestic  MNOs  are  at  the  same  time 
suppliers for the MVNOs (on the wholesale market) as well as competitors for the MVNOs 
(on  the  retail  market),  MVNOs  often  encounter  margin  squeeze  problems.  Such  a  strategy 
seems easy to understand since domestic MNOs - by imposing prices for the MVNOs that are 
close  to  the  retail  price  cap  -  are  maximizing  their  own  revenue  from  resale  of  roaming 
services  and  reducing  at  the  same  time  the  margin  that  MVNOs  can  make  by  reselling 
roaming services to end users on the retail market. 

The  wholesale  roaming  market  presents  many  characteristics  of  a  natural  oligopoly  market, 
which is practically a synonym to low competitive pressures. This is aggravated by the fact 
that  there  exist  few  alternatives  at  the  wholesale  level  for  operators  wanting  to  provide  a 
service  to  their  clients  when  abroad.  Substitutes  that  have  developed  rather  recently  are 
internalization and localization. Internalization is the process whereby operators form roaming 
alliances,  roaming  partner  agreements,  roaming  hubs  etc.  to  minimize  the  costs  of  roaming. 
This  phenomenon  has  of  course  only  become  effective  since  the  more  widespread  use  of 
traffic steering. Localization refers to the emergence of global MVNOs, which have access to 
networks  in  different  countries  on  local  terms  and  conditions  based  on  domestic  wholesale 
agreements  or  MVNO  regulations.  On  the  retail  level,  they  provide  local  numbers  to  their 
subscribers  for  each  of  the  different  countries  within  their  area  of  presence.  Whereas  these 
developments might create some competitive pressure on wholesale roaming prices, they are 
not  expected  to  become  full  roaming  substitutes.  Localization  for  instance  has  the 
disadvantage that consumers need to have more than one mobile number, which is considered 
to be rather inconvenient. Internalization from its end is not aimed at by all operators, i.e. it is 
typically  less  interesting  to  operators  with  a  positive  roaming  traffic  balance  (those  who 
receive more roaming minutes than their domestic clients cause abroad). 

27 
28 

See. BEREC Report – International Mobile Roaming Regulation – December 2010, P.48 
See. BEREC Report – International Mobile Roaming Regulation – December 2010, P.71 

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The In its Interim Report, which was published on 29 June 2010, the Commission noted that 
while  consumers  are  benefiting  from  lower  roaming  charges,  and  that  broadly  speaking 
compliance  has  been  good,  competition  in  this  market  is  not  yet  strong  enough.  The  latest 
BEREC data, covering the first two quarters of 2010, suggests that there have been no major 
developments which change this position i.e. prices are still clustered close to the maximum 
level of the caps, except (possibly) in the case of wholesale data. Retail data prices (which are 
not  regulated)  are  also  falling,  but  remain  significantly  higher  than  the  average  wholesale 
rates  in  most  countries.  The  average  wholesale  price  also  fell  more  in  both  relative  and 
absolute  terms  than  the  average  retail  price  resulting  in  higher  margins  for  operators  and 
suggesting a lack of competition. 

Retail market 

Like in the wholesale market, the Roaming regulation has not brought about competition in 
the retail roaming market. In its Interim Report, the Commission noted that while consumers 
are  benefiting  from  lower  roaming  charges,  competition  in  this  market  is  not  yet  strong 
enough. 

As discussed above, there are little or no substitutes to roaming at the retail level. This lack of 
pressure from substitutes is a first reason as to why the market appears not to be functioning 
well. Another cause of concern in the roaming retail market is the limited demand elasticity 
among mobile users. This demand elasticity can take two forms, the first one being the price 
responsiveness at the time of selection of an operator/ a subscription, the second one being the 
price  responsiveness  at  the  time  of  roaming,  i.e.  when  the  customer  is  abroad  and  is 
contemplating using the roaming service.  

When selecting a specific tariff plan for a subscription with a specific operator, the roaming 
prices  attached  to  this  offer  have  little  influence  on  the  decision  of  the  consumer.  This  is 
because it is only one component of a complete mobile services bundle, which moreover often 
represents only a minor fraction of a consumer’s total spend on mobile communications. The 
low elasticity is thus linked to a lack of interest from the consumer who has to buy a bundle of 
services (where roaming represents only one of the different services concerned). This could 
change  if  roaming  could  be  purchased  as  a  stand  alone  service.  There  is  also  a  lack  of 
transparency,  since  comparison  of  the  roaming  tariffs  of  different  operators  is  a  time-
consuming task, especially since tariffs can differ from one country to the other and because 
roaming  tariffs  are  just  one  of  the  items  included  in  a  long  price  list  of  bundled  services. 
Again, this could change if roaming was offered as a stand alone service, easily allowing for 
comparison between alternative roaming offers. 

Recent data suggests that usage elasticity, i.e. elasticity linked to use of the roaming service 
when  abroad,  is  also  rather  low.  The  preparatory  study  for  the  present  Impact  Assessment 
estimated  the  elasticity  for  voice  and  SMS  to  be  in  the  range  of  -0,2  tot  -0,3,  whereas  the 
elasticity  for  data  roaming  possibly  would  be  higher,  but  is  difficult  to  assess  since  usage 
might also be growing because of an increase in the use of smart phones.  

A full description of the barriers to competition in the roaming market is provided in Annex 1.  

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2.8.  Who is affected by the problem (specific actors, sectors …)? 

The  stakeholders  affected  by  the  problem  of  roaming  charges  can  be  divided  in  three  main 
categories: 

• 

• 

• 

Network operators and service providers; 

Customers (both businesses and consumers); 

Public authorities (especially NRAs)  

Regarding network operators and service providers, the figure below provides an overview of 
how  each  of  the  different  categories  of  providers  participate  to  the  typical  value  chain  of  a 
mobile service provider: 

Figure 3: Value chain of different categories of mobile service providers 

A  detailed  assessment  of  how  and  to  what  extent  all  of  these  stakeholders  would  indeed  be 
impacted under each of the policy options is further elaborated in Annex 1. 

2.9.  Why is public intervention necessary, why at the European level? 

Need for public intervention 

High retail prices on the international roaming market have been a source of concern for many 
years. If the problem mostly concerned voice calls at the beginning, it progressively extended 
to  SMS  messages  and  exchange  of  data.  The  excessive  tariffs  applied  for  using  a  mobile 
phone abroad can have a very damaging effect on consumer welfare.  

Despite past EU interventions29 to reduce roaming charges for European customers, they are 
still high and much higher than those charged at the domestic level (e.g. up to > 25 times for 
data services). Moreover, these prices do not reflect the underlying cost for providing roaming 
services as margins up to over 95% can be observed. In her recent speech in September 2010, 
Vice President Neelie Kroes, emphasised this point and mentioned that examples of excessive 

29 

See Directive 2002/21/EC, Regulation 717/2007 and Regulation 544/2009. 

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charging for mobile downloading abroad “bear little relation to the true cost of supplying the 
service”30.  

The European Commission Communication of June 2010 notes that “for voice and SMS, the 
extent to which operators offer prices below the levels of the regulated caps is considered as a 
key indicator of the level of competition in the market”31. Regarding data roaming, the same 
Communication  noted  that  even  if  tariffs  are  decreasing  at  wholesale  as  well  as  retail  level 
since  the  introduction  of  the  wholesale  cap,  the  margins  made  by  mobile  operators  are  still 
very  high  at  retail  level.  The  benefits  of  the  reduced  wholesale  prices  have  not  yet  been 
reflected on the retail market. 

The  lack  of  competitive  pressure  in  the  international  roaming  market  is  one  of  the  biggest 
issues. This occurs both at wholesale and retail level. The quasi-oligopolistic structure of the 
mobile  network  industry32  and  the  existence  of  very  few  substitutes  do  not  encourage 
competition on the international roaming market and do not force mobile operators to provide 
services at the lowest possible price. 

At  the  retail  level,  the  lack  of  competitive  pressure  is  also  perceptible.  The  European 
Regulators  Group  noted  in  2008  that  regulation  solely  at  the  wholesale  level  does  not 
guarantee that lower wholesale tariffs would result in lower retail prices33. 

Why intervention at the EU level?  

The cross-border nature of the international roaming market has already pushed the ERG in 
December 200534 to mention that the NRAs cannot individually manage the issue of very high 
retail prices. 

One of the most important arguments was the fact that it is impossible for a NRA which has 
to  protect  the  welfare  of  national  consumers  to  control  the  actions  of  mobile  operators  of 
visited countries, located by definition in other Member States.  

The  NRAs  are  also  supposed  to  promote  the  interests  of  their  national  consumers  and  they 
have no incentive to force their own national providers to reduce their wholesale tariff since 
the  beneficiaries  of  this  measure  would  be  foreigners  and  since  nothing  guarantees  that 
national providers could benefit from similar reductions in other Member States. 

Since individual Member States have no incentive to regulate in a way that takes into account 
the possible effect of its regulation on the other Member States, a centralized intervention at 

30 

31 
32 
33 

34 

Neelie  Kroes  European  Commission  Vice-President  for  the  Digital  Agenda  Telecoms  markets  – 
Working together for change Brussels, 23 September 2010. Speech/10/472. 
See COM(2010)356 final (29/06/2010) 
The market is characterised by a limited number of players and an obvious lack of transparency.  
See  IRG/ERG  Response  to  the  Commission’s  public  Consultation  on  Review  of  the  functioning  of 
Regulation 717/2007 and of its possible extension to SMS and data roaming services, 28 July 2008, also 
confirmed in the BEREC Report – International Mobile Roaming Regulation – December 2010. 
See ERG letter to the Directorate general of the Commission's DG information society, Fabio Colasanti, 
December 2005. 

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the European level is preferable as this would better take into account the general interest of 
all European Member States. A European approach would also avoid that individual Member 
States  take  divergent  approaches  for  dealing  with  the  problem  of  high  prices,  which  would 
create  obstacles  to  the  Internal  Market  since  European  services  providers  and  consumers 
would  be  treated  differently  according  to  home  country  they  belong  to  and  the  country  in 
which they are offering or consuming roaming services. 

Moreover,  the  excessive  retail  prices  for  roaming  services  paid  by  the  European  consumers 
when traveling in another Member State, as well as the difference between roaming tariffs and 
domestic prices for using mobile phones are considered to be an obstacle to the completion of 
the  Digital  Single  Market.  The  establishment  of  a  single  market  for  telecommunications  is 
today  a  priority  for  the  European  Commission.  According  to  Vice  President  Kroes,  “a  true 
digital  market  is  a  market  where  effective  competition  ensures  that  citizens,  customers  and 
businesses do not experience substantially different services or costs when they pass a border. 
A true Single Market is one where the price differences between voice, SMS and data relate 
only to the actual cost of providing these different services”35.  

Based on all elements presented above, the harmonization of national regulations in order to 
ensure and to improve the functioning of the Internal Market is therefore a key argument in 
favour of an intervention at the EU-level 

Another  argument  is  the  protection  of  the  European  consumer  which  has  always  been  an 
important  principle  at  the  European  level.  Written  into  the  treaties36,  it  is  a  general  and 
underlying objective of all policies in the European Union.  

Can EU act, and if so, how? the principles of subsidiarity and proportionality  

On the basis of the article 114 of the Treaty on the functioning of the European Union37, the 
European  legislator  has  already  adopted  2  successive  temporary  Regulations  in  2007  and 
2009 contributing through the harmonization of the national legislation in the establishment of 
an  internal  market.  Although  the  legal  basis  for  these  Regulations  was  contested  by  some 
mobile operators, the European Court of Justice (ECJ) recently confirmed the validity of the 
application of Art 95 TEC38 as a legal basis for the 2007 Regulation39. According to the ECJ, 
“the object of Regulation No 717/2007 is indeed to improve the conditions for the functioning 
of the internal market and that it could be adopted on the basis of Article 95 EC“40. 

35 

36 
37 
38 
39 

40 

See  Neelie  Kroes  European  Commission  Vice-President  for  the  Digital  Agenda  Telecoms  markets  – 
Working together for change Brussels, 23 September 2010. Speech/10/472. 
See title XV of the Treaty on the functioning of the European Union. 
Previous Art.95 TEC 
See New Art. 114 Treaty on the functioning of the European Union 
See  Case  C-58/08:  Judgment  of  the  Court  (Grand  Chamber)  of  8 June  2010  (Reference  for  a 
preliminary  ruling  from  the  High  Court  of  Justice  of  England  and  Wales,  Queens’s  Bench  Division 
(Administrative  Court)  (United  Kingdom))  —  The  Queen  on  the  application  of  Vodafone  Ltd, 
Telefónica O2 Europe plc, T-Mobile International AG, Orange Personal Communications Services Ltd 
v Secretary of State for Business, Enterprise and Regulatory Reform (Regulation (EC) No 717/2007 
See Case C-58/08: Judgment of the Court (Grand Chamber) of 8 June 2010, §48. 

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As shown in the previous section, the cross-border nature of the international roaming market 
forced the NRAs to recognize that actions at the national level would not be sufficient to deal 
with the problem of excessive prices on the market and that divergent actions among Member 
States  would  be  ineffective  and  harm  the  establishment  and  the  functioning  of  the  internal 
market.  

The European Court of justice also concluded that the principle of proportionality is respected 
in the case of Regulation 717/2007. The Court found that the particular characteristics of the 
roaming  market  allowed  the  legislator  to  believe  that  reduced  tariffs  at  the  wholesale  level 
will  not  necessary  result  in  reduced  prices  at  the  retail  level.  The  ECJ  then  emphasized  the 
objective of consumer protection and on the temporary nature of the Regulation41. 

The  setting  of  prices  caps  by  the  European  legislator  aims  to  correct  in  the  short  term  the 
dysfunctions observed on the international roaming market by lowering retail prices and thus 
avoiding  consumers  paying  excessive  roaming  charges  when  travelling  in  another  Member 
State.  Given  the  above  mentioned  characteristics  of  the  international  roaming  market, 
regulation  at  the  wholesale  level  as  well  as  at  the  retail  level  is  justified.  Caps  solely  at 
wholesale level do not automatically guarantee that consumers will benefit from the reduced 
wholesale prices. Ceiling prices at the retail level only could squeeze small providers’ margin, 
favouring thereby only large mobile operators. 

It  is  also  important  to  mention  that  the  temporary  basis  of  current  roaming  regulation  is  a 
crucial  argument  to  assess  the  proportionality  of  the  European  action.  This  underlines  the 
European  legislator’s  efforts  to  create  the  conditions  for  competition  to  develop  on  the 
international roaming market so that, in the future, competitive pressure will be sufficient to 
guarantee low retail prices with a less constraining regulation or even without any regulation. 
The  proportionality  of  regulatory  options  including  elements  which  aim  at  addressing  the 
structural  problems  in  the  EU  roaming  market  should  be  assessed  against  the  objective  of 
achieving  competitive  market.  For  example,  implementation  costs  of  structural  solution(s) 
enhancing  competitive  dynamics  should  be  weighted  against  the  costs  of  continued  price 
regulation in the absence of competitive pressure. 

2.10.  Conclusion on the roaming market and its development 

Based  on  the  evidence  presented  above,  the  following  conclusions  can  be  drawn  on  the 
European roaming market and its development: 

– 

– 

The roaming market is significant in terms of size (4,777 billion EUR in 2009); 

Roaming price levels have declined steadily in the last few years, but this is mainly 
due  to  the  regulation  of  wholesale  and  retail  prices  (cf.  conclusion  below  on  the 
difference with price ceilings); 

41 

See Case C-58/08: Judgment of the Court (Grand Chamber) of 8 June 2010, §69. 

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– 

– 

– 

– 

– 

– 

– 

– 

– 

42 
43 

For  retail  data  roaming  services,  only  services  currently  not  subject  to  price 
regulation,  declines  in  wholesale  prices  (-70%42)  do  not  appear  to  have  been 
structurally passed through to the retail level (-15%43).  

The  margin  between  wholesale  and  retail  prices  in  absolute  terms  has  remained 
constant  or  has  slightly  declined.  This  means  however  that  the  margin  in  relative 
terms has risen significantly; 

Average EU tariffs remain in general very close to the price caps defined by the 2009 
Regulation; the only exception are wholesale data roaming tariffs which were in Q2 
2010 63,6% below the cap of 1 EUR/MB (which is however further declining to 0,5 
EUR/MB  on  1  July  2011).  Competitive  market  forces  are  thus  not  reducing  the 
roaming prices much further; 

There are large variations between the minimum and maximum national prices when 
compared to the EU average per services. These variations are particularly strong for 
(from  
data 
the 
-90,33%  to  +279,26%  compared  to  EU  averages).  These  variations  are  further 
hindering factors for the accomplishment of the single market. 

non-regulated 

roaming 

service 

retail 

The comparison of the roaming prices with the underlying costs indicates very large 
differences both at the retail and at the wholesale level (from ± 50% margin up until 
>90%). This confirms that there is today no meaningful relation between the roaming 
tariffs  and  the  underlying  costs  and  that  there  are  significant  margins  for 
improvement when bringing the prices down to cost based levels; 

Based  on  the  comparison  of  the  roaming  prices  with  the  domestic  prices  (retail),  it 
was  concluded  that  roaming  prices  are  typically  a  multiple  of  the  price  at  the 
domestic  level.  Voice  roaming  calls  were  on  average  3  to  4  times  more  expensive 
than domestic outgoing calls; for SMS and data, the ratio is respectively 2,5 and 25 
to 35 times higher; 

Transparency  measures  taken  so  far  have  been  positively  welcomed  by  consumers 
and have improved their awareness of roaming prices and their ability to control their 
invoices.  It  could  however  not  be  observed  if  or  how  these  have  actually  impacted 
the take-up of roaming services by consumers; 

A number  of suggestions  were made  by market players  for  modifying  the scope of 
the  transparency  measures  (e.g.  including  VAS  services,  excluding  pre-paid  data 
customers from the bill control measures as well as MMS) as well as regarding the 
implementation  of  the  measures  (e.g.  suitability  for  new  devices  such  as  e-readers, 
application of average exchange rate outside the euro zone); 

The  volume  of  roaming  voice  traffic  has  remained  rather  stable  over  the  last  few 
years. SMS roaming has increased more significantly in volumes during the last four 
quarters  for  which  information  is  available  (+23,1%)  than  for  the  four  quarters 
preceding  that  period  (+4,3%).  This  could  possibly  indicate  more  significant 
substitution of voice by SMS, e.g. arising from the current economic crisis. Finally, 

Between Q2 2009 and Q2 2010 
Between Q2 2009 and Q2 2010 

EN 

21 

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data  roaming  is  still  growing  fast,  although  at  a  slower  pace  during  the  last  four 
quarters (+43,6%) compared to the preceding four quarters (+102,46%). Again, part 
of this could possibly be explained by the current economic climate; 

– 

– 

A  number  of  –  at  least  partial  –  substitutes  are  available  for  roaming  services, 
allowing  consumers  to  reduce  their  costs.  None  of  these  alternatives  are  however 
sufficiently  easy  to  use  in  order  to  convince  consumers  to  use  them  as  real 
substitutes. As such, the existing partial substitutes – that are rather to be considered 
as  a  complement  to  roaming  services  -  do  not  put  competitive  pressure  on  the 
roaming market; 

Within  the  roaming  market,  SMS  was  indicated  as  the  main  substitute  used  for 
reducing the cost of roaming; 

Technological developments in terms of devices (e.g. dual-SIM phones or smartphones) may 
in  the  future  allow  some  (although  limited)  competitive  pressure.  However,  this  is  not 
expected in the short or medium term. Development of new all IP networks (especially LTE) 
supporting  higher  capacity  and  possibly  leading  to  further  development  and  more  intensive 
use of data may in the longer term eliminate voice and SMS roaming problems (as voice and 
sms  would  become  part  of  the  data  traffic),  but  would  not  as  such  solve  data  roaming 
problems.  In  conclusion,  in  the  absence  of  pro-competitive  structural  measures,  the  market 
alone is not expected to deliver much lower roaming prices in the upcoming years. 

3. 

DEFINITION OF THE POLICY OBJECTIVES 

Based  on  this  framework  of  objectives,  different  policy  options  can  be  analysed  in  order  to 
address how the problem of roaming charges that are too high as a result of market forces 
could  be  dealt  with  and  thus  to  evaluate  whether  the  current  roaming  regulation  should  be 
adapted and if so, how this should be done in order to create a Digital Single Market. 

3.1. 

General objectives 

For  defining  the  general  objectives  of  the  policy  initiative  sought  for,  it  is  useful  to  take  a 
broader view of the general long term EU policies and objectives in which the policy initiative 
would  be  situated.  More  specifically,  the  EU  2020  Strategy  which  was  launched  by  the 
Commission  on  3rd  March  201044,  aims  that  Europe  would  ‘be  turned  into  a  smart, 
sustainable  and  inclusive  economy  delivering  high  levels  of  employment,  productivity  and 
social cohesion’. 

One of the building blocks of this new strategy is the new Digital Agenda for Europe (DAE)45 
which  defines  a  number  of  the  ‘Key  Performance  Targets’  for  attaining  the  Digital  Single 
Market. In relation to international roaming services, the target is that ‘the difference between 
roaming and national tariffs would approach to zero by 2015’46. This target will be achieved 

44 

45 
46 

See  Communication  from  the  Commission:  Europe  2020  –  A  strategy  for  smart,  sustainable  and 
inclusive growth, COM (2010) 2020 of 3rd March 2010. 
See http://ec.europa.eu/information_society/digital-agenda/index_en.htm. 
See Annex 2 of the Digital Agenda for Europe 

EN 

22 

   EN 

 
                                                 
if competition in mobile markets gives consumers the rapid and easy choice of a roaming 
service at, or close to, a relevant competitive domestic price level. 

Given these aims of the EU 2020 and the DAE and referring to Chapter 2 on why public and 
EU intervention are required, the issue that is dealt with in this IA is to improve the conditions 
of  the  functioning  and  ensure  further  promotion  of  the  development  of  the  Digital  Single 
Market with regard to Community wide roaming services.  

Referring  to  the  Framework  Directive47,  achieving  a  true  Digital  Single  Market  requires  an 
intervention that meets three general policy objectives: 

• 

• 

• 

The first general objective relates to ensuring the development of a single coherent 
regulatory  framework,  contributing  to  the  development  of  the  internal  market  (cf. 
also Article 8.3 of the Framework Directive). 

The  second  general  objective  relates  to  stimulating  and  strengthening  sustainable 
competition  in  the  Digital  Single  Market  (cf.  also  Article  8.2  of  the  Framework 
Directive).  

Finally, the third general objective is to promote the interest of citizens and to ensure 
a  high  level  of  consumer  protection  for  EU  consumers  (cf.  Article  8.4  of  the 
Framework Directive). 

3.2. 

Specific objectives  

For each of the three general objectives above, a number of specific objectives can further be 
derived.  Specific  objectives  for  ensuring  the  development  of  a  single  coherent  regulatory 
framework, contributing to the development of the internal market: 

• 

• 

Objective 1:  Prevent  distortions  between  Member  States  i.e.  in  terms  of  regulatory 
divergences so that conditions for competition on are equal across the ; 

Objective 2:  Ensure  an  optimal  level  of  governance  in  terms  of  avoiding  isolated 
measures at the Member States level.  

Specific  objectives  for  stimulating  and  strengthening  sustainable  competition  in  the  Digital 
Single Market: 

• 

• 

Objective 3:  Ensure  that  competitive  market  developments  are  stimulated  and  that 
technological developments are not hindered; 

Objective 4:  Strengthen  the  competitiveness  of  European  industry  by  ensuring  that 
businesses have access to competitive roaming prices. 

Specific  objectives  for  promoting  the  interest  of  consumers  and  ensuring  a  high  level  of 
consumer protection for all EU consumers: 

• 

47 

EN 

Objective 5:  Ensure user choice and transparency; 

See Directive 2002/21/EC; amended by Directive 2009/140/EU 

23 

   EN 

 
                                                 
• 

• 

Objective 6:  Ensure  that  prices  are  at  a  levels  reflecting  underlying  costs  (as  they 
would result from competitive market forces); 

Objective 7:  Ensure  that  consumers  can  easily  benefit  from  prices  reflecting 
underlying costs; 

3.3. 

Operational objectives 

For  each  of  the  specific  objectives  presented  above,  a  number  of  operational  objectives  or 
“measures” can be identified.  

Specific objective 

Operational measures 

Objective 1: 

Prevent 
between Member States 

distortions 

Objective 2:  

Ensure an optimal level of 
governance 

Objective 3: 

that  competitive 
Ensure 
market  developments  are 
stimulated 
that 
technological 
developments 
hindered 

and 

not 

are 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

Ensure regulatory coherence between member states; 

Allow  for  consistent  implementation  of  the  chosen 
regulatory approach in all Member States; 

Ensure 
conditions for roaming apply in all Member States. 

competitive  market 

comparable 

that 

Ensure that the heterogeneity of Member States (e.g. 
countries with positive compared to negative roaming 
traffic balances) is given sufficient attention in order 
to correctly evaluate the distribution of impacts on all 
MS. 

Ensure  that  smaller  network  operators  and  MVNOs 
can  benefit  from  competitive  wholesale  markets  and 
compete  effectively  at  the  retail  market  (avoid  that 
markets become too concentrated); 

that  challenges  regarding 

Ensure 
technical 
feasibility  of  imposed  measures  do  not  lead  to 
operators exiting the market; 

the 

Allow MVNOs to use own IMSI codes; 

Allow  operators 
full  MVNOs)  currently 
excluded  from  the  STIRA  framework  to  use  the 
available standard templates for roaming agreements; 

(e.g. 

Allow  for  the  recuperation  of  innovation  costs 
(limited in the case of roaming services); 

Ensure  that  regulatory  intervention  does  not  weaken 
the global position of European mobile operators; 

Ensure  that  there  is  no  risk  of  price  squeeze 
(especially for the smaller operators); 

EN 

24 

   EN 

 
 
 
Specific objective 

Operational measures 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

Objective 4: 

Strengthen 
competitiveness 
European industry 

the 
of 

Objective 5: 

Ensure  user  choice  and 
transparency 

Ensure that the market for wholesale roaming is open 
to  different  type  of  providers  (e.g.  MNO  as  well  as 
MVNO)  and  that  no  discrimination  takes  place  for 
the conclusion of wholesale contracts; 

Ensure that wholesale roaming prices are transparent 
(e.g.  how  do  wholesale  resale  roaming  prices  for 
MVNOs  relate  to  wholesale  inbound  roaming  prices 
for  MNOs,  how  are  roaming  prices  to  be  applied  in 
case of VAS,…); 

Provide  operators  the  possibility  to  further  develop 
imposed  service 
services 
provisions; 

in  parallel  with 

the 

Ensure  that  MVNOs  have  sufficient  room  in  their 
wholesale  resale  agreement  in  order  to  differentiate 
the retail roaming products. 

Allow market entry of specialized roaming operators, 
offering stand alone roaming services across Europe 

Ensure levels of roaming prices that are competitive 
at the global level; 

Allow  business  users  to  negotiate  special  roaming 
terms  so  that  these  can  benefit  from  competitive 
roaming charges. 

Ensure  that  the  user  can  control  /  monitor  its 
international roaming expenditure; 

Ensure  user  choice  regarding  bill  control  measures 
(e.g. what limit); 

Ensure  user  choice  in  terms  of  its  (unbundled) 
provider of roaming services; 

Ensure  easy  access  to  information  on  the  applicable 
tariffs; 

Ensure  easy  access  to  information  on  possible 
options  or  choices  available  to  the  end-user  (e.g. 
regarding bill control measures); 

Ensure availability of information on roaming tariffs 
in the appropriate language. 

EN 

25 

   EN 

 
 
Specific objective 

Operational measures 

Objective 6: 

Ensure that prices are at a 
levels 
reflecting 
underlying  costs  (as  they 
from 
result 
would 
competitive market forces) 

Objective 7: 

Ensure  that  all  categories 
of  consumers  can  benefit 
from 
reflecting 
underlying costs 

prices 

• 

• 

• 

• 

• 

Ensure  that  price/structural  mechanisms  are  put  in 
place  to  avoid  unreasonable  margins,  leading  to 
excessive prices, can be obtained by operators; 

Ensure  that  levels  of  roaming  tariffs  are  better 
aligned with tariffs for domestic mobile services (i.e. 
ensure  that  differences  are  close  to  what  is  justified 
based on the underlying costs); 

Ensure that the price reductions at the wholesale level 
are transferred to the retail level. 

Ensure  that  the  decrease  of  roaming  prices  for  one 
category  of  roaming  consumers 
the 
detriment of another category of consumers; 

is  not  at 

Ensure  that  compliance  with  regulation  can  be 
monitored. 

4. 

ALTERNATIVE POLICY OPTIONS 

This section examines a range of options for addressing the problems highlighted in previous 
sections.  Apart  from  complete  removal  of  regulation  (also  considered  below)  the  options 
broadly  fall  into  two  categories  i.e.  options  involving  continued  price  regulation  or  options 
involving structural approaches aimed at tackling the root causes of the problem but possibly 
also  including  safeguard  price  regulation.  For  the  purposes  of  this  impact  assessment  these 
options will be grouped as follows: 

1. 

2. 

No regulation after June 2012  

Maintaining the current approach of applying both wholesale and retail price cap 
regulation,  including  the  extension  of  the  retail  price  caps to  data  roaming  services 
(in b and c below). Three variations are considered: 

(a)  Continuation à l’identique with the same price caps (baseline scenario); 

(b)  Extension  of  the  current  methodology  with  adjusted  annual  price  caps 

plus retail data roaming price caps;  

(c)  Roam-Like-Home/Roam like a Local with fixed mark-up. 

3. 

Structural  solution  -  introduction  of  a  combination  of  2  or  3  new  elements  at  the 
wholesale and retail levels: 

(d)  decoupling (home and visited);  

EN 

26 

   EN 

 
 
 
 
(e)  granting access to mobile virtual network operators (MVNOs);  

(f) 

the above combined with safeguard price caps.  

(g)  Spot market  

4.1. 

Option 1: No regulation 

“Option 1: No regulation” means the expiry in June 2012 of the current roaming Regulation 
544/2009 without replacing it by any other form of regulation. 

Maximum  price  caps  would  no  longer  be  applicable  at  the  wholesale  level,  or  at  the  retail 
level. Operators would be free to apply any roaming charges they want on both the wholesale 
and the retail market. 

Operators  would  also  no  longer  be  obliged  to  apply  any  transparency  measures  in  order  to 
allow  customers  to  better  control  their  roaming  expenses.  Charging  on  a  per  second  basis 
would also become optional at the wholesale and at the retail level as would the maximum 30 
seconds of initial charging period. 

Most responses to the public consultation on roaming argued for a need of a further regulatory 
intervention  beyond  2012,  this  is  particulary  true  for  consumer  organisations  and  national 
authorities.  Industry  response  was  mixed  –  most  acknowledged  at  least  the  inevitability  of 
further  regulation  and  some  argued  that  competition  has  developed  to  a  level  that  does  not 
warrant future regulatory intervention.  

4.2. 

Option 2: Maintaining the current approach 

Option 2(a): Continuation à l’identique – same price ceilings 

This  assumes  the  same  price  caps  and  the  same  regulatory  approach  as  in  Regulation 
544/2009 would be maintained and that the regulation would not be extended to new areas. 

The regulatory approach in Regulation 544/2009 consists of a combination of both wholesale 
and  retail  price  caps  (for  voice  services  and  SMS),  wholesale  price  caps  (for  data  services) 
and  transparency  measures  allowing  consumers  to  better  control  their  expenditure  for 
international  mobile  roaming.  Furthermore,  obligations  regarding  the  unitization  of  billing 
were  introduced.  For  this  impact  assessment,  this  first  scenario  will  be  considered  as  the 
baseline scenario. Although the estimation of economic impacts of various scenarios vis-à-vis 
the baseline scenario is carried out for the period  2012-2014,  in  the  overall  assessment  it  is 
assumed that under the baseline scenario the same price caps would apply for the period of 
ten years, i.e. the proposed duration of the revised Regulation.  

Most respondents to public consultation acknowledged that the current regulation succeeded 
to bring benefits for consumers. Much fewer, however, believed that competition was stronger 
because  of  the  current  regulation.  Industry  response  in  particular  was  sceptical  of  current 
model's  ability  to  foster  competition.  Few  industry  stakeholders  argued  for  wholesale  price 
caps regulation only and elimination of retail price cap regulation. 

EN 

27 

   EN 

 
Option 2(b): Extension of the current methodology with adjusted price ceilings plus cap 
on data roaming 

For  the  second  scenario,  further  annual  adjustments  will  be  determined  following  a 
methodology that is consistent with the one that was previously developed for the Regulation 
544/200948. Furthermore a price ceiling for retail data roaming is added.  

The methodology for determining the glide path is based on the analysis of the structure and 
level of forward looking underlying production costs (where relevant incl. retail costs) and the 
assumption that the regulated price caps should reflect these costs. A detailed analysis of the 
underlying  costs  of  roaming  services  is  presented  in  the  BEREC  report  on  the  Roaming 
Regulation.  

Format of the price caps 

For  voice  services,  the  price-caps  are  derived  based  on  the  difference  between  the  current 
level  of  the  caps  and  the  estimated  underlying  costs  and  are  determined  in  a  linear  way,  as 
was  done  for  the  current  Regulation,  i.e.  in  terms  of  a  reduction  by  an  equal  fixed  annual 
amount  (i.e.  3  cEUR)  per  year.  For  SMS  roaming,  one  single  price  ceiling  for  the  whole 
regulated period was  determined as  - unlike for voice services - it was difficult to predict a 
significant downward trend for underlying  SMS  roaming  costs  at  the  time  when  the  current 
regulation  was  developed.  This  has  however  changed  now  and  consequently  a  glide  path  is 
included for SMS. Finally, for data service, a non-linear price cap was set for the wholesale 
services. This will now be replaced by price caps with a glide path, both at the wholesale and 
retail level. 

The  approach  presented  above  leads  to  the  following  price  caps  for  each  of  the  roaming 
services: 

Voice services 

Based on the estimated average cost for wholesale roaming it was first of all concluded that a 
continued reduction by 4cEUR per year over a three year period would lead to approximately 
the  cost  estimated  by  BEREC  (i.e.  5,42cEUR).  This  reduction  corresponds  to  a  compound 
annual reduction of ± 30%. 

For  determining  the  retail  roaming  price  caps,  account  was  taken  of  the  fact  that  the  price 
ceilings in the 544/2009 Regulations aimed at increasing the margin available to operators to 
100% (compared to the level of 65,3% in 2008). However since significant competition has 
failed  to  materialize  over  the  course  of  the  current  Regulation  it  is  considered  that  for  this 
scenario  a  margin  of  100%  is  unnecessarily  high.  It  is  therefore  proposed  for  the  adjusted 
annual price ceilings under this option, that a margin of 70% should be applied, at least for the 
retail calls made. 

48 

See SEC(2008) 2489 

EN 

28 

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By  consequence,  the  price  ceiling  per  minute  of  retail  calls  made  (‘Retail  outgoing’)  was 
determined based on the adjusted price ceiling for roaming calls, including a mark-up of 70%. 

For the retail calls received (‘Retail incoming’) no corresponding regulated wholesale ceilings 
are available. However, the BEREC report has provided inputs on the underlying wholesale 
costs  for  receiving  a  roaming  call  (i.e.  5,3cEUR).  It  could  be  observed  that  the  current 
regulated  cap  for  a  retail  incoming  call  is  indeed  approximately  100%  higher  than  the 
corresponding wholesale cost. Therefore, in order to allow for a glide path for these services 
as  well,  it  was  decided  to  bring  the  retail  mark-up  down  to  50%49.  This  implies  that 
assumption  was  taken  that  mobile  operators  are  mainly  focusing  their  retail  efforts  at 
stimulating  increased  consumption  by  their  own  customers,  which  is  reflected  in  the 
allocation of a lower retail cost for call received compared to calls made.  

in EUR/min (excl. VAT)

1 July 
2012 

1 July 
2013 

1 July 
2014 

Retail outgoing 

Retail incoming 

Wholesale 

0,24

0,10

0,14

0,17

0,09

0,10

0,10 

0,08 

0,06 

Table 1: Adjusted annual price caps for voice roaming services 

SMS services 

The  forward  looking  underlying  costs  estimated  by  BEREC  for  the  wholesale  costs 
correspond  on  average  with  the  outcome  of  the  pure  NITA  approach50  of  June  2008  (i.e. 
0,8cEUR).  Minimum  and  maximum  costs  correspond  respectively  to  0,06cEUR  and 
2,67cEUR. Based on these elements, it was decided to bring the wholesale price cap for SMS 
down to 2cEUR. 

Keeping in mind that it could be too drastic to bring the wholesale roaming cap down from 
4cEUR51 to 2cEUR at once, it could be envisaged to introduce a glide path for the SMS price 
ceilings, as was previously done for voice roaming.  

Furthermore, the difference between the wholesale and retail costs for SMS roaming consists 
of the internal network cost for terminating the SMS on the own network or an average SMS 
terminating paid if the SMS is sent to another network, as well as a compensation for retail 
costs (incl. reasonable return). These additional retail cost elements were previously estimated 
at  7cEUR52.  The  new  forward  looking  costing  exercise  of  BEREC  now  indicates  a  much 

49 

50 
51 

52 

This is still the upper limit of the range of retail mark-ups that were considered by BEREC in the report 
‘International Mobile Roaming Regulation’ – December 2010 
See SEC(2008)2489 – page 59 
I.e. corresponding to 2 times 2cEUR in order to account for an allowance for the unrecovered cost of 
SMS terminating. 
Approximately twice the cost of terminating 25% of the SMSs on the own network (valued at a cost of 
0,5cEUR)  and  75%  of  the  costs  on  another  network  (valued  at  4,4cEUR);  resulting  in  a  weighted 

EN 

29 

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lower cost of 0,53cEUR (for prospective cost-based terminating charge) and a retail mark-up 
between 5% and 50%.  

It needs however to be kept in mind that the retail roaming charges should allow the operator 
to  pay  for  the  (domestic)  termination  of  the  SMS.  The  charges  for  this  service  are  not 
regulated and amounted to 4,4cEUR on average in 2008. Bringing the component relating to 
domestic termination down to the prospective cost level of 0,53cEUR could therefore be too 
drastic, so an intermediate valuation for this service could be more appropriate. Again, given 
the significant gap between the current roaming price ceilings and the underlying costs, it is 
suggested that a glide path would be introduced. 

The  calculations  described  above,  lead  to  the  following  price  ceilings  over  the  period  of 
regulation:  

in EUR/SMS sent 
(excl. VAT)

1 July 2012  1 July 2013  1 July 2014 

Retail 

Wholesale 

0,05 

0.03 

0,05 

0.03 

0,03 

0.02 

Table 2: Adjusted annual price caps for SMS roaming services 

Data services 

BEREC  indicates  an  average  wholesale  cost  of  8cEUR/MB,  whereas  the  maximum  cost 
presented  equals  15cEUR/MB.  Given  the  remark  that  cost  for  mobile  data  could  be 
overestimated, it was considered that a glide path towards the level of the average wholesale 
costs is a not too aggressive approach. More precisely, the estimated average wholesale cost 
for data roaming can be reached by a fixed annual decrease of 10 to 20cEUR/MB53. Based on 
the  BEREC  estimate  for  average  cost  per  MB  a  target  wholesale  cap  of  10c  in  2014  is  not 
unreasonable.  This  leads  to  the  following  adjusted  annual  price  ceiling  over  the  period  of 
regulation: 

in EUR/MB of data transmitted 
(excl. VAT

1 July 2012  1 July 2013  1 July 2014 

Wholesale 

0,30 

0,20 

0,10 

Table 3: Adjusted annual price caps for data roaming services (wholesale) 

Method for applying the retail price caps for data  

53 

average  costs  of  3,4cEUR  times  two  in  order  to  include  an  allowance  for  the  unrecovered  cost  of 
termination (cf. SEC(2008) 2489 – page 61). 
As of 1 July 2011, in accordance with the current Regulation, the wholesale cap is set at the level of 
0,50cEUR which means a reduction of 20 cEUR on 1 July 2012. 

EN 

30 

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Based on the BEREC data it is clear that the gap between the average retail prices that were 
observed  in  201054  and  the  estimated  underlying  costs  is  very  significant.  Given  that  past 
experience has shown that operators do not tend to pass decreases of wholesale prices on to 
the consumers (but generally retain higher retail margins), in the absence of pro-competitive 
structural changes, it would be reasonable to limit the retail margins to 70%, as for retail calls 
made and SMS. 

Given the considerations above with regard to safeguard retail caps and allowing a 70% mark-
up at retail level produces the following glide path for retail and wholesale prices:  

in EUR/MB of data transmitted 
(excl. VAT)

1 July 2012  1 July 2013  1 July 2014 

Retail 

Wholesale 

0,51 

0.30 

0,34 

0.20 

0,17 

0.10 

Table 4: Annual safeguard price caps for data roaming services (retail) 

In summary the following price caps can be proposed for Option 2b  

Voice  

Retail outgoing 

Retail incoming 

Wholesale 

SMS 

in EUR/min (excl. VAT)

1 July 
2012 

1 July 
2013 

1 July 
2014 

0,24

0,10

0,14

0,17

0,09

0,10

0,10 

0,08 

0,06 

in EUR/SMS sent (excl. VAT)

1 July 
2012 

1 July 
2013 

1 July 
2014 

0,05

0,03

0,05

0,03

0,03 

0,02 

Retail  

Wholesale 

Data 

in EUR/MB of data transmitted 
(excl. VAT)

1 July 
2012 

1 July 
2013 

1 July 
2014 

Retail 

0,51

0,34

0,17 

54 

The overall average for on-net and off- net at Q2 2010 was 1,30 EUR/MB, whereas the overall average 
for off-net traffic was 2,604 EUR/MB 

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Wholesale 

0,30

0,20

0,10 

This option was particularly welcomed by the consumer organisations and to some extent by 
the  national  authorities.  Industry  response  was  negative  towards  continued  downward  retail 
price regulation and especially negative with regard to retail regulation of data services, which 
in  most  industry  stakeholders  view  would  negatively  influence  any  competitive  dynamics 
exhibited by data roaming market. 

Option 2c – Roam like at home/Roam like a local 

This approach links the roaming price paid by the individual customer to the domestic price 
for national calls by that same customer. We consider here the variant “RLAH+X” (that is, the 
roaming price is an amount greater than the corresponding domestic price). In principle, the 
roaming  premium  covers  two  things.  First,  it  allows  recovery  of  the  genuine  (albeit  small) 
additional costs of provision of roaming. Second, it aims to deal with issues that arise from 
price differences across Europe. The option only delivers tariffs “like at home” if the value of 
X is indeed sufficiently small. This requires two preconditions:  

(a) 

(b) 

Wholesale prices very close to cost-oriented levels; and  

Broad similarity in domestic tariffs across Europe.  

If the conditions permit "X" to be set at a sufficiently low level, i.e. including low wholesale 
roaming prices, providers might take the commercial decision to offer “Single Europe” tariffs 
where the price of a call, for example, was the same wherever the customer was situated, i.e. 
in their home country or another EU Member State.  

In roam like a local, the roaming price is linked to the price paid for national domestic calls in 
the visited country (as opposed to the roamer's home country). Again, this could be seen as a 
method of reaching the DAE target.  

This  method  also  requires  adoption  of  a  mark-up  to  avoid  at  least  some  of  the  problems 
mentioned  above.  The  size  of  the  mark-up  can  be  “tuned”  so  that  roaming  prices  approach 
domestic prices to a lesser or greater extent, according to the policy objective.  

This method has some of the characteristics of “Roam like at home” but also some significant 
differences.  On  the  positive  side,  the  linkage  of  roaming  prices  to  domestic  prices  in  the 
visited  country  significantly  reduces  the  scope  for  margin  squeeze.  On  the  other  hand,  the 
measure is less consumer-friendly. The consumer would pay a different price in each visited 
country (unlike at present). Most would have little idea in advance what they will be paying 
(unless  they  take  the  trouble  to  search  for  the  information).  For  those  who  disregard  the 
welcome SMS messages, they will have little idea of the charge until they receive their bill. 
The  method  would  also  necessitate  a  significant  statistical  exercise,  probably  annually,  to 
establish and calculate a benchmark rate for each visited country, increasing significantly the 
regulatory burden for industry and regulators as regards implementation and compliance. 

Responses  to  public  consultation  on  the  alternative  approaches  for  price  regulation  (Roam-
Like-at-Home/RLAH  or  Roam-Like-a-Local/RLAL)  were  quite  divergent.  Regulators, 

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32 

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national  authorities  and  consumer  organizations  argued  to  continue  with  the  current  price 
regulation approach. In those instances where industry stakeholders expressed interest in the 
alternative  price  regulation  models,  there  was  no  consensus  regarding  which  of  the 
alternatives, RLAH or RLAL, model would be better.  

4.3. 

Option 3a: Decoupling of roaming services  

Option  3a  relates  to  the  introduction  of  an  additional  structural  measure  at  the  retail  level. 
This  option  is  also  often  referred  to  as  “decoupling”  or  “(pre-)selection”  of  the  roaming 
operator. Under this option, roaming services would no longer always be offered as part of a 
bundle with domestic mobile services. Instead, customers would be able to easily choose and 
purchase roaming services from an operator other than the provider of the domestic services.  

Selection of the most appropriate scenario  

Based on the assessment of advantages and disadvantages as presented in the Table below, it 
was concluded that unbundling in the domestic market is the most promising approach and the 
other  two  approaches  are  excluded  from  further  analysis.  The  selected  scenario  would  thus 
allow  consumers  to  opt-out  of  the  default  roaming  services  offered  by  their  provider  of 
domestic roaming services and pre-select  an alternative  home  operator for  roaming services 
only. Each time the customer roams, the retail roaming service would automatically switch to 
this alternative provider. 

As  the  unbundling  option  consists  of  a  measure  that  is  meant  to  improve  the  awareness  of 
customers  of  the  level  roaming  prices,  considering  that  this  should  lead  to  competitive 
pressure  bringing  the  prices  closer  to  cost  levels,  this  assessment  is  mainly  made  from  the 
viewpoint of the consumers: 

Unbundling  in  the  domestic 
market (home country) 

Unbundling 
country 

in 

the  visited 

Choose  your  operator  at 
the border 

Advantages 

Consumers  are  familiar  with  the 
other  mobile  operators  offering 
services in their country; 

Information  on  roaming  offers  is 
available  in  the  language  of  the 
consumers; 

An  opt-out  approach  could  avoid 
that  all  consumers  are  obliged  to 
modify 
their  mobile  contract, 
even  if  they  never  use  roaming 
services. 

Competitive pressure could in 
some  circumstances  be  more 
important  as  the  operators  in 
the  visited  countries  have  a 
direct possibility for attracting 
new  customers  (the  choice  of 
roaming 
could 
become comparable to e.g. the 
choice  of 
rental 
a 
company). 

operator 

car 

The  relation  with  the  own 
operator  supplying  domestic 
services  would  be 
retail 
maintained; 

Consumers  would  not  be 
obliged  to  do  research  on 
foreign 
and 
their  offer 
subscribe 
abroad 
before 
about 
since 
available 
and 
tariffs would be sent by SMS 
at each border. 

providers 
to 
travelling 
information 

providers 

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Advertising  campaigns  to  make 
the  consumers  aware  about  the 
opportunity  of  selecting  another 
provider 
and 
regarding  the  different  available 
tariff  plans  could  be  more 
effective. 

roaming 

for 

Consumer  would  have  the  same 
roaming  services  provider  for  all 
European countries. 

Disadvantages 

If  not  accompanied  by  mandated 
wholesale access at cost oriented 
prices, this option risks not being 
effective. 

Consumers  are  not  familiar 
with the other mobile operators 
offering  services  in  the  visited 
country; 

alternative 

Not  all  consumers  would  switch 
towards 
more 
advantageous  offers.  However, 
the  consumers  who  would  not 
switch  towards  alternative  more 
should 
advantageous 
normally 
the 
reduction  of  prices 
to  be 
expected  due  to  the  competitive 
pressure created by such offers. 

benefit 

offers 

from 

if 

It  could  very  soon  become 
very 
a 
cumbersome 
roaming operator needs to be 
chosen  every  time  you  cross 
a  border  (even  if  the  home 
provider 
is  assisting  by 
providing an overview of the 
tariffs  available  at  different 
operators; 

Information  on  roaming  offers 
is possibly not available in the 
visiting 
language 
consumers; 

the 

of 

This  scenario  is  per  definition 
“opt-in”  so  imposes  a  large 
administrative  burden,  also  for 
users  with 
limited 
roaming traffic volumes. 

very 

Consumer would have to select 
a  different  provider  in  each 
visited  European  Member 
State. 

received 

different 

Information 
by 
SMS  giving  an  overview  of 
available 
the 
providers’ 
could 
possibly be too short to make 
choice. 
a 
Problems  of 
transparency 
could appear. 

considered 

tariffs 

Table 5: Comparison of possible scenarios for the unbundling option  

Despite  that  most  respondents  to  the  roaming  public  consultation  agreed  that  a  structural 
solution should always be preferred instead of price regulation, most of the respondents from 
all stakeholder groups were not certain or convinced about feasibility, costs and complexity of 
the decoupling/unbundling option. Only few stakeholders were of the opinion that unbundling 
solution would deliver the best result. 

4.4. 

Option 3b: Additional wholesale Access Measures  

Option 3b relates to the introduction of an additional structural measure at the wholesale level. 
Depending on the scenario selected, these measures can relate to the access to specific levels 

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of wholesale charges or to the access to specific services itself. Moreover, these services can 
be restricted to roaming services or correspond to all mobile services. 

Selection of the most appropriate scenario  

The  table  below  compares  possible  approaches  for  defining  an  additional  measure  for 
wholesale access: 

apply 

Same  wholesale 
caps 
to 
MNOs 
and 
MVNOs 

Limited  wholesale 
access  for  MVNOs 
for roaming  

Advantages 

Full  wholesale  access  for  MVNOs  for  all 
mobile services 

Enabling  MVNOs 
to  gain  access  to 
regulated 
wholesale 
could 
greater 
competition 
retail 
services 

prices 
stimulate 

for 
roaming 

Enabling  MVNOs  to 
gain 
to 
access 
services 
roaming 
stimulate 
could 
competition 
greater 
for 
roaming 
services 

retail 

Disadvantages 

could 

option 

greater 
stimulate 
This 
competition 
for  all  mobile  services  by 
allowing  that  any  MNO  or  MVNO  would  be 
entitled to enter any other EU national market 
on  the  basis  of  guaranteed  wholesale  access 
(at regulated prices); 

As  the  presence  of  the  same  M(V)NO  in 
different EU member states could replace the 
need  for  wholesale  roaming  agreements,  this 
could  stimulate  the  emergence  of  a  true  pan-
European mobile market. 

could 

If  not  limited  to  the  roaming  services,  this 
the 
options 
development  of  competition  in  the  domestic 
markets,  going  far  beyond  what  is  necessary 
to solve roaming specific problems  

strongly 

distort 

Table 6: Comparison of possible approaches for defining additional wholesale measures  

Decoupling (Option 3a) is not likely to be effective without also adding an access obligation 
which  will  facilitate  market  entry.  Therefore  Option  3(a)  should  be  combined  with  Option 
3(b). It was concluded that the best approach consists of a combination of the first and second 
approach.  This  implies  that  MVNOs  would  have  the  choice  between  continuing  buying 
roaming services from their domestic MNOs (while having the guarantee that the rate applied 
are  consistent  with  the  regulated  price-caps  at  the  wholesale  level)  and  directly  negotiating 
roaming  agreements  with  MNOs  in  other  member  states  (allowing  MVNOs  to  benefit  from 
the same conditions as MNOs at the inbound market). 

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Furthermore, while the combination of these options is likely to produce positive competitive 
effects in the roaming market, safeguard retail price regulation is desirable to ensure that the 
existing  consumer  benefits  are  preserved  during  a  transitional  period  of  implementation  of 
such structural solutions. Such safeguard caps should be set at sufficiently high levels which 
do not distort the potential competitive benefits of structural solutions and could be removed 
completely once the structural approaches have had an opportunity to deliver concrete gains 
for all consumers.  

In  their  responses  to  the  roaming  public  consultation,  smaller  operators  and  several  non-
operator  industry  stakeholders  supported  additional  measures  for  wholesale  access  for 
roaming. 

4.5. 

Option 3c – Safeguard price caps accompanying  the decoupling  and wholesale 
access measures 

The above (Options 3a and 3b) combined with safeguard price caps. The unbundling measure 
combined  with  MVNO  access  is  assumed  to  introduce  competitive  pressure  in  the  retail 
market. Stringent retail price caps would therefore not be needed to get competitive prices for 
the consumers. However, it would be appropriate to keep retail caps, set at a sufficiently high 
level  to  leave  room  for  competition  in  order  to  ensure  a  safety-net  for  consumers  until  the 
unbundling  measure  has  had  an  opportunity  to  become  fully  operational  and  effective.  It  is 
expected  that  the  retail  safeguard  caps  would  remain  in  place  for  a  period  of  years  into  the 
course of the next Roaming Regulation.  

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The retail safeguard caps would follow a glidepath until the structural solution is in place (two 
years  after  the  commencement  of  the  next  Regulation  i.e.  by  June  2014)  after  which  the 
safeguard caps would remain flat for up to a further two years. These caps could be removed 
completely  thereafter.  The  other  features  of  the  structural  solution  i.e.  the  wholesale  caps 
(kept  at  the  level  of  1  July  2015)  and  the  regulatory  obligations  to  facilitate  the  consumer's 
ability to choose an alternative provider for roaming services only, would need to remain in 
place  for  a  longer  period,  in  order  to  ensure  regulatory  stability  and  predictability  for 
operators, and in particular for new entrants in the decoupled roaming market. However, it is 
possible  that  the  wholesale  caps  could  also  be  removed  following  a  subsequent  two-yearly 
review  (e.g.  six  years  after  the  commencement  of the  next  Regulation).  In  this  respect,  it  is 
important  to  note  that  the  wholesale  market  for  data  roaming  services  exhibits  more 
dynamism than the corresponding wholesale markets for voice and data.  

Price caps at the wholesale level 

Since  the  unbundling  option  consists  of  adding  a  structural  measure  at  the  retail  level,  it 
would  not  imply  any  change  at  the  wholesale  level.  There  is  no  reason  to  believe  that 
providing MVNOs with similar conditions as MNOs would as such lead to lower wholesale 
charges. By consequence, the same wholesale price caps will be applied as under Option 2b. 
These are summarized for all services in the table below: 

in EUR (excl. VAT)

1 July 
2012

1 July 
2013

1 July 
2014 

Voice (per minute) 

SMS (per SMS) 

Data (per MB) 

0,14 

0,03 

0,30 

0,10 

0,03 

0,20 

0,06 

0,02 

0,10 

Table 7: Wholesale price caps for the unbundling option  

Safeguard price caps at the retail level 

At the retail level, a specific set of safeguard price caps have been defined. Indeed, while the 
proper  functioning  of  the  unbundling  measure  combined  with  MVNO  access  is  assumed  to 
introduce competitive pressure in the retail market, it would be appropriate to foresee a safety-
net  for  consumers  while  awaiting  the  unbundling  measure  to  become  fully  operational  and 
effective.  More  precisely,  the  assumption  was  taken  that,  compared  to  the  baseline  scenario 
only 50% of the additional decrease for bringing down the caps at cost based levels (including 
retail margin) would be taken into account. It is then up to the market to deliver further price 
decreases. 

This leads to the following set of safeguard retail price caps: 

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in EUR (excl. VAT)

1 July 
2012

1 July 
2013

1 July 
2014 

Voice-calls made (per minute) 

Voice-calls received (per minute) 

SMS (per SMS) 

Data (per MB) 

0,32 

0,11 

0,10 

0,90 

0,28 

0,10 

0,10 

0,70 

0,24 

0,10 

0,10 

0,50 

Table 8: Retail safeguard price caps for the unbundling option  

Transparency measures and unitization of billing 

The  same  measures  regarding  transparency  and  the  unitization  of  billing  would  continue  to 
apply as under the current Regulation 544/2009. 

4.6. 

Option 3d: Spot market 

The  spot  market  refers  to  a  trading  mechanism  which  would  be  able  to  remove  the  current 
barrier  related  to  the  fact  that  the  volume  of  roaming  traffic  that  an  operator  can  offer  in 
return, largely determines the wholesale prices in the wholesale inbound market. If this spot 
market works well, it would lead thus to cost oriented wholesale prices for all roaming traffic 
and all operators instead of the much higher outcome of the current negotiations, leading to 
much higher wholesale charges which are solely actually paid for the unbalanced traffic.  

Moreover, since MVNOs would also be allowed to access this market, the spot market could 
also  (and  to  the  extent  that  MVNOs  would  actually  directly  go  to  the  spot  market)  remove 
those barriers that are specific to the resale market. Those barriers relate mainly to the strong 
dependency of MVNOs on the home MNOs, the fact that supply in the resale market does not 
allow for differentiation and the high risk of price squeeze for MVNOs. 

More precisely, the spot market would separate the offer to supply a given number of roaming 
minutes  in  a  given  visited  country  from  the  offer  to  purchase  a  given  number  of  roaming 
minutes.  Bilateral  traffic  exchanges  would  be  disallowed.  Total  volumes  of  demand  and 
supply would be broken down in standard size “bonds” in order to allow for easy and neutral 
trading. 

The  implementation  of  this  option  would  require  the  obligation  that  all  wholesale  inbound 
roaming traffic would need to be purchased by means of open trading (e.g. via an electronic 
platform). 

Overall a neutral reaction from the stakeholders in reply to public consultation respondents to 
the  public  consultation.  Some  industry  stakeholders  questioned  applicability  of  spot  market 

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principles  for  roaming,  which  as  such  is  not  a  commodity.  Several  smaller  operators 
expressed interest in spot market for roaming. 

5. 

ASSESSMENT OF THE POLICY OPTIONS  

5.1. 

Qualitative assessment 

The  following  paragraphs  present  the  qualitative  assessment  of  the  impact  of  each  of  the 
seven policy options. Next to a more general description of the expected consequences of the 
implementation  of  each  option,  a  detailed  analysis  is  made  of  the  type,  magnitude  and 
likelihood  of  impacts  corresponding  to  each  policy  option.  These  are  presented  for  each 
option  individually  in  Annex  II.  The  table  in  which  the  assessment  of  all  impacts  of  all 
options is compared is presented at the end of this section.  

5.2. 

Identification of the relevant impacts 

The  impact  of  each  policy  option  will  be  assessed  in  relation  to  each  of  the  seven  specific 
objectives. These specific objectives have been derived from the general objectives. These in 
turn  are  drawn  from  the  Framework  Directive  for  electronic  communications  which  is 
generally considered to be contributing greatly to the functioning of electronic communication 
services and, in that way, to the overall development of the EU economy. Since the specific 
objectives  are  directly  linked  to  the  general  objectives  from  which  they  are  derived,  the 
assessment  of  the  impacts  at  the  specific  objective  level  will  provide  for  the  most  detailed 
possible approach. Moreover, given the relation between the specific and general objectives, it 
is redundant to assess impacts of policy options in relation to the general objectives.  

This  can  be  illustrated  by  the  following  example:  the  assessment  of  the  extent  to  which  a 
policy option (directly) contributes to the specific objective 5 regarding ensuring user choice 
and  transparency  also  indicates  how  it  will  (indirectly)  contribute  to  the  promotion  of  the 
interests  of  consumers  and  ensuring  a  high  level  of  consumer  protection  for  EU  consumers 
(cf. General objective 3).  

The relationship between the list of impacts and the specific and general objectives is further 
illustrated below: 

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39 

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    GENERAL OBJECTIVES   

The general objectives contribute to the overall EU2020 
Strategy and DAE and relate to achieving a true Digital 
Single Market, in accordance with the Framework Directive: 

They consist of:   

-   Ensuring the development of a single coherent 

regulatory framework;   

-   Stimulating and strengthening sustainable 
competition in the Digital Single Market; 

-   Promoting the interest of consumers and ensuring a 

high level of consumer protection 

SPECIFIC OBJECTIVES  
Objective 1:    Reduce distortions between 
Member States ;  
Objective 2:    Ensure an optimal level of 
governance;  
Objective 3:    Ensure that competitive market 
developments and  technological developments 
are not hindered  
Objective 4:    Strengthen the competitiveness 
of Europ ean industry;  
Objective 5:   Ensure user choice and 
transparency;  
Objective 6:  Ensure that prices are at levels 
reflecting underlying costs; 
Objective 7:  Ensure that consumers can
 benefit from prices reflecting underlying costs

IMPACTS  

Per specific objective:  
 Identification of economic, 
social and environmental 
IMPACTS  
impacts.  

Per impact: 

 Assessment provides 
indications of the extent to 
which the policy options  
specific objectives, and 
thus indirectly the general 
objectives are attained. 

Figure  4:  Illustration  of  how  the  impacts  directly  relate  to  the  specific  and  indirectly 
relate to the general objectives  

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It should be noted that the ‘Baseline Scenario’ against which the impacts of all options will be 
assessed,  consists  of  a  situation  in  which  the  current  state  of  affairs  is  maintained,  thus 
corresponding to “Option 2a: Continuation “à l’identique” (with July 2011 Caps)”.  

The  assessment  of  all  of  the  impacts  under  each  of  the  options  is  done  by  analysing  the 
magnitude of the expected impact, as well as the likelihood that the impact will actually occur 
as a result of the proposed policy option.  

5.3. 

Qualitative assessment of Option 1: No Regulation 

In the case of expiry of the current roaming Regulation, the current lack of competition at the 
wholesale as well as at the retail level indicates that prices will not decrease. They are much 
more likely to increase due to a reduced number of operators able to actually compete on the 
retail market. Indeed, market failures exposed in the table presenting barriers to competition 
on  the  wholesale  and  on  the  retail  markets  (Annex  I)  clearly  express  concerns  about  the 
current lack of competition in the roaming market.  

Removing  the  wholesale  regulation  would  most  probably  lead  to  worse  wholesale  deals  for 
small  MNOs  since  terms  of  commercial  agreements  are  linked  with  the  volume  of  services 
that  the  MNOs  can  offer  in  return  to  the  foreign  MNO.  Small  MNOs  would  have  no  other 
choice (unless they join a group or alliance of mobile operators) than either increasing their 
retail price to compensate their increasing wholesale  charges  or  suffering  margin  squeeze  if 
retail prices are maintained. 

MVNOs would still suffer from margin squeeze, and this situation could even become worse 
in the case of MVNOs buying roaming  services  from small  MNOs which could themselves 
suffer from margin squeeze. 

In any case, removing regulation would result in a smaller number of providers fully able to 
compete on the retail market without margin squeeze. Big MNOs could still compete at the 
current  retail  prices  but  will  have  no  incentive  to  decrease  retail  roaming  prices  since 
competitive  pressure  would  be  reduced.  It  is  even  more  likely  that  big  MNOs  will  increase 
retail prices in order to benefit from higher profits. 

In summary and referring to the objectives identified in Chapter 3, it can be concluded  that 
under  Option  1,  there  would  be  no  development  of  a  single  coherent  regulatory  framework 
(cf. General Objective 1). Furthermore, sustainable competition in the Digital Single Market, 
in  which  all  mobile  operators  would  participate,  would  not  be  stimulated  and  strengthened 
(cf. General Objective 2).. 

Finally,  consumers  will  not  benefit  from  truly  competitive  offers  and  will  no  longer  be 
protected as is the case under the current regulation. This would lead to reduced user choice 
and transparency (cf. Specific objective 5), prices that remain high above the underlying costs 
(cf.  Specific  Objective  6)  and  a  significant  risk  that  some  categories  of  consumers  would 
suffer from material increases of roaming charges (cf. Specific Objective 7). 

5.4. 

Qualitative assessment of Option 2a: Continuation à l’identique – current price 
caps 

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The baseline scenario implies that the problem of high roaming charges as would continue to 
be  dealt  with  in  the  same  way  as  dealt  with  by  Regulation  544/2009.  It  is  clear  that  the 
baseline  scenario  would  mainly  focus  on  preventing  excessive  retail  tariffs  while  ensuring 
transparency  of  roaming  charges  and  preventing  ‘bill  shock’  for  data  roaming  services  (cf. 
General objective 3 regarding promoting the interest of consumers and ensuring a high level 
of consumer protection for all EU consumers). 

Furthermore, the intervention at EU level has led to more uniform rates being applied across 
Europe.  Moreover,  it  was  ensured  that  no  measures  at  the  country  level  can  be  taken  that 
would introduce negative cross-country externalities (cf. General objective 1). 

Finally, the current regulatory approach does not deal in a structured way with a number of 
barriers at both the wholesale (inbound and resale) market and retail market. By consequence, 
there  is  e.g.  almost  no  transfer  of  reductions  in  wholesale  charges,  leading  to  retail  tariffs 
below  the  maximum  caps  and  there  remain  significant  differences  between  wholesale  rates 
available to MNOs and to MVNOs (cf. General Objective 2). 

The effects of this option would be temporary, as it would not tackle the underlying problem 
of  the  lack  of  competition  in  the  roaming  market.  Therefore,  a  new  regulatory  intervention 
would be required after the period concerned, creating a significant regulatory uncertainty for 
the operators. 

5.5. 

Qualitative assessment of Option 2b: Extension of the current methodology with 
adjusted annual price caps incl retail data  

The main difference between this scenario with adjusted annual price caps, compared to the 
baseline scenario, is better roaming prices for all users. The main advantage of this approach 
is that it would lead to the achievement of the DAE target (general objective) as the retail caps 
established for 1 July 2015 (for voice, data and SMS) are approaching domestic level prices. 
This would also lead to a further strengthening of the competitiveness of European Industry 
(cf.  Specific  Objective  4),  but  would  especially  ensure  that  prices  would  be  closer  to  levels 
reflecting  underlying  costs  (cf.  Specific  Objective  6).  Since  retail  prices  would  be  set  at  a 
lower level than under the baseline scenario, there could finally be a slightly higher risk that 
the  new  technological  developments  would  develop  less  since  there  is  less  room  for  the 
recuperation of initial investments (cf. Specific objective 3).  

There  would  be  an  improvement  in  the  development  of  the  single  market  since  minimal 
uniform  safeguard  caps  would  be  imposed  on  all  Member  States  (cf.  Specific  Objective  1). 
Furthermore,  imposing  retail  price  caps  for  data  could  distort  competitive  market 
developments (cf. Specific objective 3).  

Furthermore,  defining  price  caps  for  data  could  have  a  limited  but  positive  effect  on  the 
choice between roaming tariff plans available to consumers (cf. Specific objective 5) and on 
reducing  the  difference  between  roaming  and  domestic  charges  while  somewhat  increasing 
the transfer of price reductions at the wholesale level to the retail level (cf. Specific Objective 
6). 

EN 

42 

   EN 

 
The effects of this option would be temporary, as it would not tackle the underlying problem 
of  the  lack  of  competition  in  the  roaming  market.  Therefore,  a  new  regulatory  intervention 
would be required after the period concerned, creating a significant regulatory uncertainty for 
the operators. 

5.6. 

Qualitative assessment of Option 2c: Roam like at Home  

Roam like at home is more consumer-friendly than roam like a local (cf. Specific objective 5) 
since the customer's experience of bill shock in using services abroad is minimised. Subject to 
the  size  of  the  mark-up,  consumers  would  face  charges  for  roaming  services  closer  to 
domestic  levels.  The  “roaming  price”  would  no  longer  be  a  material  consumer  issue.  A 
"welcome  SMS”  could  be  retained  to  ensure  tariff  transparency,  especially  where  the 
customer has a bundled or "unlimited” domestic tariff, given that a small payment (roaming 
supplement)  would  apply  when  abroad.  While  doing  very  little  to  promote  competition  (cf. 
Specific objective 3) in the provision of roaming services, the method ensures that the benefits 
of domestic retail competition are automatically passed through to roaming users (cf. Specific 
objective 7).  

BEREC estimates that, for 2012, the value of the mark-up might well need to be around 10c 
per minute for outgoing voice calls in order to avoid margin squeezes. While this would lead 
to  lower  prices  than  are  typical  at  present  for  some  consumer  segments,  overall  the  option 
would lose all its advantages compared to Eurotariff price caps (assuming European average 
prices are the same in each case), as regards bringing roaming prices closer to domestic levels. 
(cf. Specific objective 6).  

5.7. 

Qualitative assessment of Option 3a: Unbundling option 

From the demand perspective, it is expected that the unbundling option could have a positive 
impact  on  the  competitiveness  of  European  Industry  (cf.  Specific  Objective  4)  as  the 
decoupling of the roaming services would further increase the bargaining power of this high 
usage  segment.  Furthermore,  all  users  could  benefit  from  increased  choice  regarding  the 
applicable tariff plan (cf. Specific Objective 5) since each customer would have access to all 
tariff  plans  of  all  national  operators.  Unbundling  would  bring  about  a  consistent  regulatory 
approach and therefore would help to avoid distortions between Member States. 

Since  the  unbundling  option  focuses  on  the  retail  market,  Option  3a  is  not  expected  to 
improve  the  market  conditions  at  the  wholesale  level  (cf.  Specific  Objective  3)  unless 
combined with Option 3b. There is a slight positive effect of lower wholesale caps compared 
to  the  baseline  scenario  and  the  unbundling  is  expected  to  lead  to  the  development  of 
additional  retail  services,  but  enabling  this  requires  however  tackling  a  number  of  technical 
challenges on the compliance and administrative cost related to this option.  

Depending on the interest of consumers to have a different provider of their roaming services 
and  the  willingness  of  domestic  operators  to  compete  against  each  other  (e.g.  in  a  specific 
market niche), the unbundling option could make operators reduce their retail charges in order 
to retain existing clients or to attract new clients. As such, Option 3a would thus reduce the 
difference  between  the  roaming  charges  and  the  domestic  charges  and  underlying  costs  (cf. 
Specific Objective 6). Despite the significant inelasticity of demand for bundled retail voice 
and  SMS  roaming  service  observed  today,  the  competitive  offer  of  such  services  separately 

EN 

43 

   EN 

 
from other parts of the mobile bundle may allow the consumers to easily compare prices and, 
in case of significant differences, switch to alternative roaming suppliers. Moreover, the data 
used for this impact assessment suggests that the demand for data roaming services is more 
elastic.  Taken  this  into  account  together  with  the  forecasted  increase  in  data  traffic, 
unbundling has potential to enhance retail competition significantly in the medium term.  

Moreover, it should be considered that also consumers who do not switch towards alternative 
more advantageous roaming offers should normally benefit from the reduction of prices to be 
expected  due  to  the  competitive  pressure  created  by  such  offers.  In  this  respect,  it  is  again 
important to note that the market for data roaming services exhibits more dynamism than the 
corresponding  markets  for  voice  and  SMS.  Given  that  data  traffic  is  expected  to  increase 
strongly in the future it is expected that this will also have a bearing on the markets for voice 
and  SMS  (at  least  for  the  strongly  growing  number  of  smart-phone  users).  However  it  will 
take some time to implement this solution which suggests that the continuation of safeguard 
retail price caps may be necessary for a period of time. As indicated, decoupling alone may 
not  create  the  conditions  for  new  entry  to  the  roaming  market.  It  may  therefore  need  to  be 
accompanied  by  access  obligations  (see  Option  3b  below)  which  facilitate  the  entry  of 
dynamic new players. 

5.8. 

Qualitative assessment of option 3b: Improved wholesale access measures  

A consistent regulatory approach to wholesale access would help to avoid distortions between 
Member  States  Since  the  improved  wholesale  market  conditions  could  result  in  a  situation 
whereby  M(V)NOs  request  access  to  foreign  MNOs  in  order  to  be  hosted  as  MNOs,  this 
could lead to the development of pan-European virtual networks by these providers and could 
enable  them  to  offer  the  same  roaming  tariff  plans  to  customers  in  different  countries.  The 
chances of this happening however are increased significantly if this option is combined with 
Option 3a. 

EN 

44 

   EN 

 
It is expected that Option 3b would have a positive impact on competitive market conditions 
(cf.  Specific  Objective  3).  The  improved  access  conditions  for  MVNOs  would  clearly 
increase the availability of wholesale roaming services at the same conditions for all operators 
(at  least  for  the  “unbalanced”  part  of  traffic)  and  reduce  the  risk  of  price  squeeze  via  the 
availability of cost based wholesale services55. The changes at the wholesale level would most 
probably also introduce more competition in the business segment and as such strengthen the 
competitiveness of European industry (cf. Specific Objective 4). This effect was estimated as 
less important than under Option 3a since the roaming offers would still remain bundled with 
domestic  mobile  services.  More  precisely,  the  importance  of  competitive  pressure  would 
depend on the extent to which MVNOs would succeed in increasing their market share in the 
business sector and the likelihood that businesses would select another provider for all mobile 
services, triggered by the possibility of obtaining lower roaming rates.  

Furthermore,  Option  3b  is  expected  to  slightly  increase  user  choice  and  transparency  (cf. 
Specific  Objective  5),  but  to  a  lesser  extent  than  the  unbundling  option.  On  the  one  hand, 
there  would  indeed  be  a  larger  number  of  operators  that  are  actually  capable  of  providing 
attractive roaming tariff plans. On the other hand, that fact that roaming offers would still be 
bundled  with  domestic  services  could  make  the  tariff  options  less  transparent  and  require 
customers to be willing to change the provider for all of their mobile services.  

The  extent  to  which  the  lower  prices  at  the  wholesale  level,  available  to  all  providers  (cf. 
Specific  Objective  6),  will  actually  be  transferred  to  the  retail  level  will  depend  on  the 
likelihood  that  consumers  will  indeed  be  interested  in  a  better  deal  for  roaming  services  as 
well  as  on  their  attitude  towards  the  barrier  of needing  to  switch  to  another  provider  for  all 
mobile services at once. Since MVNOs would have more room for lowering the retail charges 
compared  to  Option  3a,  a  more  significant  reduction  of  the  difference  between  the  roaming 
and domestic charges could possibly be realized. Again, the significant inelasticity of demand 
for retail voice and SMS roaming service observed today is likely to reduce the efficiency of 
this regulatory option whereas the more elastic demand for data roaming services may indeed 
make  consumers  adapt  their  behavior  and  consider  better  roaming  charges  as  a  trigger  for 
changing to another roaming provider. 

Finally, it is questionable whether all customers will actually benefit from more advantageous 
roaming offers. However, Specific Objective 7 would be satisfied if customers could benefit 
form  such  offers.  Moreover,  it  should  be  considered  that  consumers  who  do  not  switch 
towards  alternative  more  advantageous  roaming  offers  should  normally  benefit  from  the 
reduction of prices to be expected due to the competitive pressure created by such offers. The 
risk that some categories of users would have a limited benefit is expected to be higher in the 
case where there is no unbundling as low usage consumers would be locked into their bundled 
mobile offers. The chances of boosting competition are increased significantly if this option is 
combined with retail structural obligations (Option 3a).  

55 

As MVNOs margin is currently very small, it could be expected that the availability of cost based tariff 
will represent a significant reduction, introducing more competitive pressure in the retail market. 

EN 

45 

   EN 

 
                                                 
5.9. 

Qualitative  assessment  of  Option  3c:  Decoupling  plus  MVNO  access  plus 
safeguard price caps 

Decoupling (option 3a) in combination with enhanced access obligations (option 3b) is likely 
to have a significant impact on competition in the roaming market (cf. Specific Objectives 3 
and  4),  although  this  solution  will  take  time  to  implement.  This  structured  solution  would 
avoid  distortions  between  Member  States  by  ensuring  a  consistent  regulatory  approach 
thereby contributing to the development of the Single Market. Essentially it is considered that 
for decoupling to be fully effective it would need to be combined with an access obligation 
which will facilitate market entry by new or existing players including pan-European roaming 
service providers. However given that this solution will take time to implement there will be a 
need  to  ensure  continued  consumer  protection  against  excessive  roaming  charges  by 
maintaining safeguard caps for all services at an appropriate level for a period of time. This 
combination of obligations should lead to the possibility for a sustainable competitive solution 
to the roaming without the need for long terms price regulation.  

5.10.  Qualitative assessment of Option 3d: Spotmarket 

Finally, the creation of a spot market for wholesale roaming services would first of all provide 
no guarantee that more uniform prices across the EU would be obtained or that roaming prices 
would  be  aligned  to  the  domestic  charges  of  the  different  Member  States  (cf.  Specific 
Objective 1).  

Moving  towards  a  system  in  which  roaming  service  would  be  traded  on  a  spot  market  to 
which  all  M(V)NO  would  have  access,  would  clearly  increase  the  availability  of  these 
services  under  the  same  conditions  for  all  operators,  thereby  also  reducing  the  risk  of  price 
squeezes  (cf.  Specific  objective  3).  However,  the  whole  structure  of  the  market  would  be 
shaken up since all competitively and commercially grown alliances would be broken down. 
This structure would be replaced by a new structure which would take a lot of effort and time 
to  put  in  place,  first  of  all  to  ensure  trading  of  existing  services  and  technologies  today  but 
also it would also need to come up with approved EU wide agreements on how to deal with 
new  services  (e.g.  specific  machine-to-machine  services,  LTE56  based  services…)  before 
these  can  be  traded  on  the  spot  market.  These  agreements  would  possibly  imply  a  delay  in 
commercializing these technologies between EU Member States. 

It is not expected that this drastic change in the roaming market structure would be beneficial 
to  the  European  Industry  (cf.  Specific  objective  4)  since  it  would  be  uncertain  if  the 
advantageous offers by multi-country alliances would still be possible once all of the national 
partners of these alliances would need to pass via the spot market. The spot market would also 
definitely  make  it  much  more  difficult  for  operators  to  provide  pan-European  mobile  offers 
since the underlying wholesale conditions would become too variable. 

Furthermore,  the  impact  on  user  choice  and  transparency  (cf.  Specific  objective  5)  and  the 
extent to which retail prices would better reflect underlying costs (cf. Specific objective 6) is 
assessed to be moderately positive and comparable to the impact that the improved wholesale 
access measures could have (cf. Option 3c). 

56 

Long term evolution, the latest standard in the mobile network technology 

EN 

46 

   EN 

 
                                                 
Finally, establishing a spot market, will not ensure that all categories of users would be able to 
benefit from price better reflecting the underlying costs (cf. Specific Objective 7) and would 
not bring competition at retail level.  

Summary of the qualitative assessment of all options – per objective 

s
p
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2
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1
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O

b
2
n
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O

Ensuring the development of a single coherent regulatory framework 

Objective 1: Reduce distortions between member states 

Total 
Objective 1 

-8 

0 

+3 

+1 

+5 

+2 

+8 

0 

Objective 2: Ensure an optimal level of governance 

Total 
Objective 2 

Total 

-2 

-10 

0 

0 

0 

0 

+0 

0 

+3 

+1 

+5 

+2 

0 

+8 

0 

0 

Stimulating and strengthening sustainable competition in the Digital single market 

Objective  3:  Ensure  that  competitive  market  conditions  are  stimulated  and  that 
technological developments are not hindered 

Total 
Objective 3 

-14 

0 

-1 

-1 

+6 

+10 

+12 

-3 

Objective 4: Strengthen the competitiveness of European Industry  

Total 
Objective 4 

Total 

-3 

-17 

0 

0 

+4 

+6 

+3 

+3 

+5 

0 

+3 

+5 

+9 

+13 

+17 

-3 

Promoting the interest of consumers and ensuring a high level of consumer protection 
for all EU consumers 

Objective 5: Ensure user choice and transparency 

EN 

47 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
s
p
a
c
d
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t
s
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A

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b
3
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c
3
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p
O

s
p
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f
a
s
+
b
3
+
a
3

d
3
n
o
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t
p
O

n
o
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t
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l
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R
o
N

a
2
n
o
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t
p
O

1
n
o
i
t
p
O

b
2
n
o
i
t
p
O

Total 
Objective 5 

-8 

0 

+3 

+1 

+6 

+2 

+10 

+2 

Objective 6: Ensure that prices are at levels reflecting underlying costs (as they would 
result from competitive market forces) 

Total 
Objective 6 

-10 

0 

+8 

+4 

+2 

+2 

+8 

+2 

Objective 7: Ensure that all categories of consumers can benefit from prices reflecting 
underlying costs 

Total 
Objective 7 

Total  

-12 

-30 

Overall total  

-57 

0 

0 

0 

+3 

0 

+0 

+0 

+1 

0 

+14 

+5 

+8 

+5 

+20 

+11 

+22 

+19 

+19 

+44 

+4 

1 

Table 9: Summary of score per option and per objective57 

In summary, it can be concluded that Option 1 (no regulation) runs the risk of a return to high 
roaming charges and consequently scores least best for all of the three general objectives. The 
more positive assessment of Option 2b compared to the baseline scenario is fully due to the 
fact  that  better  prices  would  be  secured  for  customers  of  all  segments  (industry  as  well  as 
consumers)  and  is  further  strengthened  by  the  inclusion  of  caps  for  retail  data  services. 
However this approach does not address the underlying problems and is likely to mean long 
term price regulation. 

The  structural  approaches  outlined  in  Options  3a  and  3b  will  take  significant  time  to 
implement but together hold the promise of a sustainable long term solution. The combination 
of  these  options,  with  transitional  safeguard  price  caps  (Option  3c),  rates  very  positively 
against  on  all  objectives.  Finally,  Option  3d  is  not  expected  to  have  a  very  positive  overall 
impact.  

On  the  basis  of  the  above  assessment  it  is  proposed  to  carry  out  quantitative  assessment  on 
Option 1, Option 2a, Option 2b and Option 3c. 

57 

Please see Annex II for the detailed assessment and explanation of the scoring mechanism. 

EN 

48 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
5.11.  Quantitative assessment  

For  the  quantitative  assessment  of  the  policy  options,  a  distinction  is  made  between  the 
economic  impact  (social  welfare),  and  the  compliance  and  administrative  cost  of 
implementing  the  specific  options.  Estimates  for  the  social  welfare  and  these  costs  are 
presented  in  detail  in  the  following  sections.  In  order  to  facilitate  comparison  between  the 
options on a quantitative basis, they are compared over a four year period commencing on 1 
July 2012. After mid-2015 it is assumed that the effects of competition will have developed. 
Furthermore  it  is  envisaged  that  competition  will  also  be  effective  at  the  wholesale  level 
meaning that these caps should have no material effect in economic terms. 

5.12.  Assessment of the economic impact (Social welfare impact) 

For the assessment of the economic impact, a detailed economic model has been developed. 
The aim of this model is the determination in the aggregate and for each country the effect of 
different  regulatory  options  on  roaming  quantities58  and  revenues,  consumer  and  producer 
surplus, and total social welfare. An underlying roaming market model analyses how roaming 
wholesale  and  /  or  retail  prices  are  expected  to  evolve  due  to  market  forces,  e.g.  without 
regulation.  

The  paragraphs  below,  firstly,  present  the  results  of  the  economic  model  estimating  the 
impact,  measured  as  the  variation  of  producer  and  consumer  surplus  against  the  baseline 
scenario,  of  each  regulatory  option.  Secondly,  this  economic  impact  (social  welfare)  is 
assessed  against  total  sector  turnover  and  gross  operating  surplus59  of  the  electronic 
communications sector to put the figures into perspective. Finally, the estimated distribution 
of this economic impact under each of the policy options defined above will be discussed. 

5.13.  Estimation of the economic impact under each option in the EU 27 

An economic model has been developed for estimating the economic impact (social welfare) 
of each regulatory option in the EU 27. This social welfare can very briefly be described as 
the sum of the producer surplus (or industry profits) and the consumer surplus.  

The consumer surplus can be defined as “the amount that consumers are willing to pay for a 
given good or service minus the amount they are required to pay”60. For a single good, it can 
be measured by the area of the triangle below the demand curve and above the observed price. 
In  reference  to  the  industry  profit,  “the  amount  paid  to  the  sellers  above  and  beyond  the 
required  minimum”61  to  bring  forth  production,  it  can  be  determined  by  the  area  below  the 
observed  prices  and  above  the  cost  function  (see  below  the  comparison  between  two 
hypothetical scenarios). 

58 

59 

60 
61 

Demand  has  been  calibrated  with  the  country-wise  retail  and  wholesale  roaming  data  available  from 
BEREC. 
Cf.  Code  12  170  of  Commission  Regulation  (EC)  N°  2007/98  of  17  December  1998  concerning  the 
definitions of characteristics for structural business statistics. 
Fundamentals of Managerial Economics , Mark Hirschey - 2009 
Idem 

EN 

49 

   EN 

 
                                                 
Baseline Scenario

Target Scenario

Consumer Surplus

Producer Surplus

C

D

Demand

Costs

Q

Q''

P

P‘‘

P

P‘

A

B

Consumer Surplus

Producer Surplus

Demand

Costs

Q

Q'

Impact Assessment

P

P‘

P‘‘

Consumer Surplus

Producer Surplus

+

Social Welfare Gain

Demand

Costs

Q

Q'

Q''

Figure 5: Illustration of how the economic impact (social welfare) has been determined 

In this sense, this impact assessment aims at estimating the social welfare gains resulting from 
the  potential  implementation  of  each  regulatory  option,  that  is,  the  sum  of  the  variations  of 
consumer  surplus  and  industry  profits.  According  to  the  graphs  above,  the  variation  of 
consumer surplus will be derived from (C-A) and the variation of industry profits from (D-B).  

The calculation of the social welfare is structured in 6 steps: 

• 

• 

• 

• 

• 

• 

Step  1.  Determination  of  the  relevant  parameters  for  the  Status  Quo  of  the 
International Roaming market. 

Step 2. Estimation of the demand parameters. 

Step 3. Determination of the relevant prices by service for each regulatory option. 

Step  4.  Estimation  of  the  quantities  (traffic  volume)  by  service  for  each  regulatory 
option. 

Step  5.  Estimation  of  the  revenues  and  costs  by  service  for  each  regulatory  option 
over the relevant period. 

Step  6.  Estimation  of  the  industry  profits  (or  producer  surplus),  consumer  surplus 
and social welfare for each regulatory option over the relevant period. 

EN 

50 

   EN 

 
 
5.14.  Estimation of the economic impact under shortlisted options 62 

The  estimates  of  the  accumulated  economic  impact,  for  the  price  caps  of  the  shortlisted 
options (plus Option 1) listed in the Table below, over the relevant period (2012-2014) have 
the following values at EU level as measured against the baseline scenario (Option 2a): 

Option 1 

Option 2.a. 

Option 2.b. 

Option 3.c. 

No 
Regulation 

Baseline 
Scenario 

Adjusted price 
caps incl. retail 
data 

Unbundling + 
Access + 
safeguard caps

Consumer surplus (m €) 

-18.604,64 

Total profits (m €) 

4.998,48 

Welfare (m €) 

-13.606,16 

----- 

----- 

----- 

6.323,50 

3.656,7363 

-4.901,99 

-2.373,1964 

1.421,51 

1.283,54 

Table  10:  Estimated  economic  impact  (accumulated  over  the  relevant  period)  for  each 
regulatory option 

Option 1 has a significant negative impact. Following the results presented above, the option 
of  de-regulating  tariffs  is  inadequate,  due  to  the  current  lack  of  competition  at  both  the 
wholesale and the retail levels. The market equilibrium, driven freely by market forces, would 
result in a significant increase in prices and a high social welfare loss.  

62 

63 

64 

In analysing the options we assume that the policy measures would be applied homogeneously across 
countries. Therefore they will be assessed at the EU level, though the differences between countries are 
in some cases significant. 
The  consumer  welfare  impacts  calculated  for  this  option  constitute  a  conservative  minimum  and  the 
actual  welfare benefits  are  likely  be higher  (taking  into  account  the benefits  of  increased  competition 
which will arise from this option). 
The  implementation  costs  of  the  structural  solutions  have  not  been  factored  in  these  figures.  It  is 
estimated by the industry that the implementation of unbundling would cost around EUR 300 million at 
the industry level compared with the annual roaming revenue of around EUR 5 billion and with the total 
annual  revenue  of  around  EUR  164  billion.  It  is  important  to  note  that  this  is  one-off  cost  and  is 
necessary to address the structural problems in the roaming market. Unbundling provides a long term 
solution  and  therefore  the  implementation  costs  should  be  spread  over  a  longer  time  horizon.  For 
instance, if the cost is distributed over the ten year period, which is the proposed duration of the revised 
Regulation, the (nominal) annual cost for industry would be EUR 30 million. If this cost is incorporated 
into the producer surplus figures (table 10, p.48), the overall welfare of options 3c will be reduced, but 
only marginally (approximately from 1.284 m € to 1.193 m €). 

EN 

51 

   EN 

 
  
                                                 
On the other hand, options 2b and 3c involve positive and comparable gains of social welfare. 
These  options  both  foresee  that  consumers  would  benefit  from  lower  prices  for  all  roaming 
services.  While  option  3c  is  expected  to  have  also  an  effect  on  prices  mainly  due  to  the 
increased  competition,  both  options  foresee  a  retail  data  price-cap  (glide-path  towards  cost 
oriented level), in addition to the existing price-cap for the rest of services, namely voice and 
SMS.  

Regarding  the  differences  among  these  options,  it  should  be  mentioned  that  Option  3c  is 
based  on  a  competition  enhancing  structural  approach,  allowing  a  less  strict  retail  price 
regulation,  leaving  space  for  market  forces  to  determine  prices.  The  consumer  welfare 
calculation above is based only on the safeguard caps foreseen under this option and does not 
take into account the downward pricing effect arising from competition enhancing structural 
measures. On the other hand, it should mentioned that the welfare estimates above do not take 
into account the implementation costs (see section 5.15) which are estimated by the industry 
to be around EUR 300 million at the industry level. This represents less than 10% of annual 
roaming revenues and 0.2% of the total annual revenue. The costs will be one-off but at the 
same  time  the  unbundling  provides  a  long  term  solution  that  would  bring  benefits  over  a 
longer time horizon. The general finding of small elasticities for roaming services, except for 
retail data, implies that the effects on total welfare are small – and therefore the differences 
between these options are also small, since reductions in prices only imply that consumers pay 
less  for  roughly  the  same  consumption  -  that  is,  create  a  transfer  from  firms  to  consumers. 
However, this may change due to the expected growth of data, as lower data roaming prices 
are expected to lead to higher data roaming consumption. 

However, it can be observed that while achieving similar levels of social welfare gain, these 
options might be considered as less distortionary since they produce less variation in producer 
and consumer surplus.  

It  should  also  be  considered  that  the  positive  effects  of  option  3c  would  remain  over  time, 
while the effects of option 2b would disappear if no new price cap were introduced after the 
period concerned. 

5.15.  Assessment  of  the  costs  of  implementing  the  roaming  regulation  options  (incl. 

feasibility) 

The table below presents an overview of the cost of implementing the different policy options 
assessed.  These  “costs  of  managing  the  system”  comprise  both  administrative  costs  (i.e. 
related to ‘costs incurred by enterprises, the voluntary sector, public authorities and citizens 
in  meeting  legal  obligations  to  provide  information  on  their  action  or  production,  either  to 
public authorities or to private parties’65) as well as some substantive compliance costs, e.g. 
for the implementation of the organization and management of the option. 

For the assessment of the cost of implementing the roaming regulation, the focus is both on 
comparing the cost of implementation between options and providing a basis for comparison 
with the outcome of the economic model. 

65 

See http://ec.europa.eu/governance/impact/docs/key_docs/sec_2005_0791_anx_en.pdf) 

EN 

52 

   EN 

 
                                                 
Option 1 

No Regulation 

Option 2 

Option 2b 

Caps  of  2012 
Baseline 

- 

Annually  adjusted 
caps 

Option 3c 

Unbundling 
+ 
Access  +  safeguard 
caps 

ADMINISTRATIVE COSTS 

For mobile operators 

cost 

Same 
for 
reporting  as  under 
current Regulation  

cost 

Same 
for 
reporting  as  under 
current Regulation. 

Additional  cost  for 
specific 
system 
changes  and  billing 
arrangements. 

No costs 

For NRAs/BEREC 

Additional 
implementation 
extra 
plus 
costs 
monitoring  will  be 
required  in  order  to 
measure 
these 
structural options are 
indeed  delivering  in 
terms  of  bringing 
retail 
the 
down 
prices  below 
the 
safeguard caps. 

if 

from 
Benefiting 
Option  3c 
implies 
more  research  costs 
and  dealing  with 
additional invoices. 

No costs 

cost 

Same 
for 
monitoring  as  under 
current Regulation 

cost 

Same 
for 
monitoring  as  under 
current Regulation 

For Consumers  

effort 

is 
More 
required 
if 
transparency and bill 
shock  measures  no 
longer apply. 

COMPLIANCE COSTS 

FOR MOBILE OPERATORS 

No specific costs 

No specific costs 

No costs 

No costs 

Need 
to 
wholesale 
agreements. 

update 

Need  to  update  and 
extend 
wholesale 
agreements. 

number 

of 
A 
technical, 
security 
and routing issues to 
deal with. 

EN 

53 

   EN 

 
 
 
 
Option 1 

No Regulation 

FEASIBILITY 

- 

Option 2 

Option 2b 

Caps  of  2012 
Baseline 

- 

Annually  adjusted 
caps 

Option 3c 

Unbundling 
+ 
Access  +  safeguard 
caps 

The  impact  assessment  for  the  current 
regulation  confirmed 
limited  additional 
burden  compared 
to  previous  market 
analysis approach. 

Complex  and  time 
required 
to 
implement. 

In terms of administrative costs it is considered that Option 1, 2a and 2b would not result in 
significant  incremental  costs  since  these  either  involve  no  regulation  (although  continued 
monitoring would be required) or the continuation of the status quo - the costs of compliance 
and the administrative costs are the same as those already being incurred. Industry has already 
incurred the costs of compliance (e.g. with data collection and implementation of the cut-off 
limit for data roaming). Option 3c will take time to implement since there are a large number 
of  technical,  security  and  routing  issues  to  deal  with.  The  practical  implementation  would 
involves issues such as implementation of multi IMSI SIM cards with an EU-wide roaming 
authentication  algorithm,  special  signalling  protocol  to  reroute  incoming  calls,  adapting 
billing  procedures.  First  there  will  have  to  be  agreement  at  EU  level  on  the  details  of  how 
these  regulatory  obligations  will  work.  This  will  involve  the  Commission,  BEREC  and 
industry working together possibly leading to the need for guidelines by the Commission. The 
involvement  of  standardization  bodies  may  be  required.  Secondly  there  will  be  an 
implementation phase whereby operators will make the necessary adjustment to their systems 
to ensure compliance. On the other hand, once the structural solution is in place the costs of 
monitoring and compliance are expected to decrease. In contrast Option 2b does not offer a 
long term solution and is likely to lead to prolonged price regulation.  

5.16.  Overall cost-benefit assessment of the selected policy options 

Based  on  the  detailed  qualitative  and  quantitative  assessment  outlined  in  the  previous 
sections, the tables below present a ranking of policy options: 

Qualitative assessment  

EN 

54 

   EN 

 
 
 
 
 
 
Option 1 

Option 2a 

Option 2b 

Option 3c 

No Regulation 

Caps of 2012 

Annually  adjusted 
caps 

3a  +  3b  +  safeguard 
caps 

Ensuring the development of a single coherent regulatory framework 

Total 

-10 

0 

+3 

+8 

Stimulating and strengthening sustainable competition in the Digital single market 

Total 

-17 

0 

+3 

+17 

Promoting the interest of consumers and ensuring a high level of consumer protection for 
all EU consumers 

Total  

-30 

Overall 
total  

-57 

Ranking   4 

0 

0 

3 

+14 

+20 

2 

+19 

+44 

1 

Quantitative assessment – social welfare model  

Option 1 

Option 2a 

No Regulation 

Caps of 2012 

Option 2b 

Option 3c 

Annually adjusted 
caps 

3a + 3b + safeguard 
caps 

Consumer surplus 

Total (m EUR) 

-18.604,64 

Total Profits 

Total (m EUR) 

4.998,48 

Welfare 

Total (m EUR) 

-13,606,16 

- 

- 

- 

6.323,50 

3.656,73 

-4.901,99 

-2.373,19 

1.421,51 

1.283,54 

EN 

55 

   EN 

 
 
 
 
 
 
 
Option 1 

Option 2a 

No Regulation 

Caps of 2012 

Option 2b 

Option 3c 

Annually adjusted 
caps 

3a + 3b + safeguard 
caps 

Consumer surplus 

Ranking  

3 

- 

2 

1 

Though  the  differences  among  options  2b  and  3C  are  relatively  small,  the  first  place  in  the 
ranking  from  an  economic  impact  point  of  view  is  therefore  given  to  the  option  that  is  the 
least distortionary. Also as mentioned in previous chapters, the consumer welfare calculation 
for option 3c is based only on the safeguard caps foreseen under this option and does not take 
into  account  the  downward  pricing  effect  arising  from  competition  enhancing  structural 
measures. 

Quantitative assessment – Cost of implementation 

Option 1 

Option 2a 

Option 2b 

Option 3c 

No Regulation 

Caps of 2012 

Annually  adjusted 
caps 

3a  +  3b  +  safeguard 
caps 

Administrative costs 

Compliance costs 

Feasibility 

Ranking  

1 

1 

1 

1 

6. 

CONCLUSION 

2 

2 

2 

2 

2 

3 

2 

3 

3 

4 

3 

4 

When  measured  on  a  qualitative  and  quantitative  basis  Option  2b  and  3c  both  demonstrate 
positive  social  welfare.  Option  2b  (price  capping)  performs  marginally  better  from  a 
consumer protection point of view, as it foresees a direct incisive intervention at retail level, 
ensuring by regulation that - irrespective of market conditions - all consumers would at any 
moment  pay  lower  prices.  On  the  other  hand  Options  3c  offers  the  possibility  of  enhanced 
competition  for  roaming  services,  which  is  expected  to  lower  prices  for  consumers,  while 
keeping  safeguard  price  caps  for  a  certain  period.  By  increasing  competition  through 
structural measures this option would lead to long-lasting effects and a more stable regulatory 

EN 

56 

   EN 

 
 
 
 
 
 
 
 
 
 
framework  over  a  longer  period  of  time.  Option  2b  would  not  introduce  pro-competitive 
structural  changes  and  would  probably  need  to  be  followed  by  new  regulated  retail  prices 
after  2015.  It  is  therefore  proposed  to  adopt  a  revised  Roaming  Regulation  on  the  basis  of 
Option 3c for a period of 10 years with reports on its functioning by the Commission every 2 
years.  

7. 

EVALUATION AND MONITORING 

Extension of the mobile roaming regulation will continue to be monitored very closely both 
by  the  individual  NRAs,  BEREC  and  the  Commission.  Already  under  the  current  roaming 
regulation, NRAs were required to collect data not only on retail and wholesale voice tariffs 
but  also  on  SMS  charges  and  data  roaming  charges.  This  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  market  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 BEREC provided a very 
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  that  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  Roaming  Regulation  in  individual  Member 
States. The Commission can supplement the national regulators’ data collection by its own ad 
hoc  studies  or  surveys  on  main  market  and  technical  developments,  charging  systems, 
contract  conditions,  business  vs.  residential  customers'  tariffs,  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 entire mobile market as such, as 
part  of  its  regular  monitoring  of  the  implementation  of  the  regulatory  framework  for 
electronic  communications.  This  monitoring  exercise  as  well  as  various  studies  on  specific 
issues in electronic communications markets commissioned regularly by the Commission will 
provide  a  sufficiently  broad  overview  of  the  context  in  which  the  Roaming  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  initiative  to  ensure  compliance  in  accordance 
with the terms of the amended Regulation. 

With  respect  to  evaluation  of  the  extended  Roaming  Regulation,  it  is  foreseen  that  the 
Commission  would  review,  taking  into  the  account  the  opinion  of  BEREC,  and  report  to 
Council  and  Parliament  in  2015.  Thereafter  the  Commission  will  carry  out  regular  reports 
every 2 years before the Regulation expires in 2022. 

EN 

57 

   EN 

 
ANNEX I 

1. 

TECHNOLOGICAL DEVELOPMENTS RELATED TO ROAMING 

Regarding technological developments related to roaming, the next sections mainly focus on 
the  comparison  of  possible  substitutes  that  could  provide  for  less  expensive  solutions  for 
consumers when using voice, SMS or data mobile services abroad. The extent to which these 
are  actually  also  perceived  as  a  substitute  by  consumers,  will  furthermore  impact  the 
probability that these substitutes have a competitive pressure on the roaming prices. A second 
part briefly points out what the possible substitution is between services within the roaming 
market.  After  that,  the  most  recent  evolutions  in  possibilities  regarding  traffic  steering  are 
presented and finally, an overview is given of how the roaming market could be affected by 
recent innovations.  

1.1. 

Alternatives to roaming services  

The  possible  alternatives  have  been  explicitly  limited  to  mobile  alternatives  to  roaming  as, 
according to a 2010 OECD’s report on international mobile roaming services “The preference 
of consumers for roaming services suggests that the possibility of using the mobile phone as 
they  do  at  home  is  very  much  appreciated”66.  Some  studies67  had  also  already  shown  that 
solutions such as public phones, hotel telephones, call shops are not regarded by end-users as 
good substitutes to international roaming. The main reasons are again the lack of mobility, as 
well as the fact that the end-user cannot receive incoming calls on his usual number (for voice 
and SMS) and the high cost of the alternative service. Note that given the increased demand 
for data services and the possible technological developments in this area (compared to voice 
and SMS which are regarded as “mature markets68”), alternatives requiring a laptop have also 
been considered. 

In  order  to  assess  and  to  compare  possible  alternatives  to  roaming,  the  5  following  criteria 
have been considered: 

1.  Mobility: refers to the possibility of being able to move while using voice, SMS or 

data services and not being constrained to go to specific places for using them; 

2.  Availability: refers to the availability of the alternative itself as well as of the technical 

coverage voice, SMS and data services; 

3.  Accessibility: relates to the possibility of being reached at any time and at any location 

on the same phone number; 

4.  Affordability:  concerns  the  investment  (one-off  cost)  and  the  cost  of  using  (recurring 

cost depending on the volume of services) for using the alternative services; 

66 

67 
68 

“International mobile roaming services: Analysis and policy recommendations”, OECD, March 2010, 
P.31  
Examples OECD 2009 and 2010 
See e.g. “International Mobile Roaming Regulation” – BEREC Report – December 2010 (pag 45) and 
graphs  in  the  previous  section  presenting  the  respective  evolution  in  volume  of  voice,  SMS  and  data 
retail roaming traffic. 

EN 

58 

   EN 

 
                                                 
5.  Ease of use: refers to the steps required /possible difficulties before being able to use 

the service as well as the ease of the actual use of the alternative service. 

The  following  table  presents  the  comparison  of  different  possible  alternatives  to  roaming, 
based on their assessment according to the five above-mentioned criteria. The notation is used 
for assessing to what extent each of the criteria is respected:  

+++  Very good 
Good 
++ 
Rather good 
+ 
Rather bad 
- 
- - 
Bad 
- - -  Very bad 

EN 

59 

   EN 

 
Mobility 

Availability 

Accessibility 

Affordability 

Ease of use 

Local SIM card  

Without  dual  SIM 
card handset 

+++ 

The consumer can use 
the  local  SIM  card 
throughout 
the 
territory  covered  by 
chosen 
local 
the 
provider’s network. 

-  

- -  

+ 

- - 

The  user  needs  to 
from  one 
switch 
SIM card to another 
when  he  wants  to 
make  a  local  call  or 
he/she  needs  to  buy 
a 
second 
(unblocked)  handset 
for  the  local  SIM 
card. 

traditional 
Some 
(mainly 
handsets 
those  subsided  by 
MNO)  are  blocked 
for other SIM card.  

If the user has only one 
is  not 
handset,  he 
reachable  at  his  home 
number 
he 
switches  to  the  local 
SIM card. 

when 

The  consumers  can 
local 
from 
benefit 
tariffs 
their 
for 
outgoing local calls. 

with 

to 
The  user  needs 
an 
deal 
additional 
phone 
number  which  has 
limited 
validity 
duration. 

incoming 
For 
the 
calls  however, 
they 
are  most  likely  to  be 
called  on  their  home 
number  which  leads 
the  payment  of 
to 
roaming charges. 

The  consumer  incurs 
to 
research  efforts 
find 
services 
a 
provider in the visited 
country. 

EN 

60 

EN 

 
  
 
 
 
 
+ 

+++ 

- - 

With  dual  SIM  card 
handset  active  at  the 
same time 

Dual  SIM  handsets 
are  never  subsided 
by  MNO  because 
no 
they 
have 
to 
incentive 
their 
cannibalize 
revenue; 
roaming 
consumers 
are 
therefore 
discouraged 
acquiring them. 

from 

Once  the  handset  is 
acquired, 
the  user 
benefits  from  high 
availability of voice, 
SMS 
data 
and 
services.  

A  dual  SIM  handset 
allows  the  customer  to 
keep  keeping  the  home 
and  the  local  numbers 
active at the same time. 
be 
The 
reached  at  his  home 
number  and  can  make 
calls with the local SIM 
any 
card  without 
manipulation. 

user 

can 

Idem  as  above,  but 
the  user  needs  to  buy 
dual handset phone.  

In  Europe  the  market 
for  dual  SIM  handset 
is  not  yet  much 
developed,  even  less 
for  3G  handsets.  The 
cost  of  the  handset 
will  be  much  higher 
than  for  a  traditional 
handset. 

EN 

61 

EN 

 
  
 
 
 
VoIP 

Over Wi-Fi 

Over WiMax 

Mobility 

Availability 

Accessibility 

Affordability 

Ease of use 

- - - 

- - 

++ 

- - 

specific 

The  user  needs  to  go 
places 
to 
(such  as  pubs,  hotel, 
…)  to  access  a  Wi-Fi 
connection. 

very 

Wi-Fi  hotspots  are 
available 
not 
everywhere  and  have 
a 
limited 
coverage.  This  can 
have  an  influence  on 
the  quality  of 
the 
connection if the user 
is  too  far  from  the 
modem. 

- 

- - 

higher 
is 

Compared 
to  VoIP 
over  Wi-Fi,  mobility 
since 
is 
larger. 
coverage 
However,  WiMax 
coverage  is  generally 
limited to the size of a 
city. 

Initially introduced to 
cover  areas  where 
installing  DSL  would 
have  been  too  costly, 
WiMax  technology  is 
available  in  a  limited 
number of cities. 

cheap 

This  alternative 
is 
for 
really 
outgoing  calls  if  free 
Wi-Fi  hotspots  are 
the 
available 
consumer  has  still  to 
pay  roaming  charges 
for  incoming  calls  on 
his home number. 

but 

- - 

The  user  cannot  be 
reached  at  any  time 
on  his  home  number, 
he  can  however  be 
called  on  his  Skype 
name. 

+ 

Idem as above but the 
user  needs  to  have  a 
subscription 
the 
to 
WiMax service.  

Making  calls  through 
the 
VoIP  supposes 
use  of  an  Internet 
The 
connection. 
consumer 
therefore 
needs  a  laptop  or  a 
smartphone to be able 
this 
to 
enjoy 
alternative 
to 
roaming. 

Some  MNOs  have 
blocked  the  access  to 
software 
allowing 
VoIP (such as Skype) 
or  are  charging  extra 
fees 
the 
when 
consumer is using it.  

Finally, 
using 
to  make 
software 
calls  via  an  internet 
connection  could  be 
as 
considered 
complex  for  someone 
who is not used to. 

EN 

EN 

62 

 
  
 
 
 
Mobility 

Availability 

Accessibility 

Affordability 

Ease of use 

Global or regional SIM card  

+++ 

+ 

+++ 

- - - 

The  user  can  use  the 
multi-ISMI  SIM  card 
everywhere 
(preferably 
in 
countries  for  which 
a 
the 
domestic  number  in 
the  case  of  regional 
SIM card) 

user 

has 

Multi-IMSI 
card  

SIM 

different 
(i.e. 
(from 
numbers 
countries) 
different 
are  related 
the 
to 
same SIM card) 

or 
regional 
Some 
card 
SIM 
global 
offers are available in 
the  EU  but  there  are 
not very much known 
by the consumers.  

The  consumer  can  at 
any  time  be  reached 
on 
the 
each 
different numbers. 

of 

The  multi-IMSI  SIM 
card  allows  access  to 
voice,  SMS  and  data 
a 
services 
traditional SIM card. 

as 

++ 

Multi-IMSI 
SIM 
cards  allow  reducing 
roaming 
sharply 
charges: the user pays 
a  local  rate  to  call 
within  the  country  in 
which  he  is  located 
and  an  internatio-nal 
rate to call abroad. As 
incoming  calls  are 
auto-matically 
forwarded to the local 
number of the country 
the user stays in, they 
are 
free  or  at  a 
reduced tariff.  

These  offers  are  not 
very  common  in  the 
EU 
(large  part  of 
global  SIM  card  uses 
UK 
US 
and 
numbers).  There  is  a 
lack 
brand 
of 
recognition.  

The  consumer  has  to 
deal  with  different 
numbers.  He  must 
give the right number 
to the right person. 

The  technique  of  call 
quite 
is 
back 
and 
sophisticated 
to
could be difficult

EN 

63 

EN 

 
  
 
 
 
 
 
+++ 

+ 

+ 

++ 

This  global  SIM  card 
can 
used 
be 
everywhere. 

A  lot  of  offers  for 
international 
SIM 
card are available and 
can  be  ordered  on-
line for example.  

Incoming calls on the 
home  number  can  be 
forwarded to the other 
number  if  customers 
ask for it. This option 
is  generally  charged 
to the user. 

Call back69 

With  a  global  SIM 
card,  the  availability 
of  voice,  SMS  and 
data services is high.  

for 

This  can  reduce  the 
roaming 
charges 
incoming 
since 
calls the user does not 
pay  to  receive  calls 
the 
on 
foreign/international 
number. He pays if he 
wants  to  forward  the 
calls  received  on  his 
number 
home 
(cheaper 
than 
roaming charges). For 
outgoing  calls, 
the 
rate  for  using  the  call 
back  system  is  also 
than 
usually 
roaming. 

lower 

69 

EN 

The call back system works with a SIM card and a number from a foreign country (such as Isle of Mann, Iceland, etc.). The particularity of the system is for outgoing calls: the user dial the 
number he wants to call, but his call is routed to a hub of his provider. After a few seconds, the hub is calling back the user, the user’s phone rings, when he hangs up he is in communication 
with his contact.  

64 

EN 

 
  
 
                                                 
The  above  table  shows  that  all  assessed  possible  alternatives  to  roaming  are  only  partial 
substitutes. Looking at the five criteria, we can conclude that: 

1.  Mobility:  With  the  exception  of  VoIP  over  Wi-Fi  (and  WiMax),  all  the  above 

possible alternatives allow for a high degree of mobility; 

2.  Availability: Possible alternatives linked to global or regional SIM card ensure quite 
a good availability but are not common in the EU. The same applies to the dual SIM 
card  handset.  Other  assessed  alternatives  related  to  VoIP  suffer  from  a  limited 
coverage  of  the  network  and  local  SIM  card  could  incur  problems  with  subsided 
blocked handsets. 

3.  Accessibility:  Dual  SIM  card  handsets  and  multi-IMSI  SIM  cards  (regional  SIM 
cards)  allow  the  consumer  to  be  reached  at  any  time  on  his  usual  number.  Using 
VoIP reduces the accessibility of the user who can only be reached e.g. on his Skype 
name. Consumers choosing a local SIM card need an additional handset to remain 
reachable as does the user of the call back system if he does not choose to forward 
his call on the foreign number. 

4.  Affordability: All of the possible alternatives allow for lower traffic charges (at least 
for outgoing calls) but some of them require previous investment or fees: dual SIM 
card handsets are expensive, using of an internet connection to connect to Skype is 
usually not free (except when free public hotspot is available).  

5.  Ease of use: A lack of ease of use is the main reason why consumers are not taking 
up  the  above-presented  services.  Indeed,  none  of  them  is  at  the  same  time  easy  to 
understand,  user-friendly  and  without  significant  search  efforts70.  These  possible 
alternatives  are  therefore  workable  for  business  travelers  often  going  to  the  same 
place but seem rather unrealistic for an occasional (holiday) traveler. 

It can thus be concluded that none of the assessed possible alternatives is a perfect substitute 
to roaming. This conclusion is confirmed in the recent BEREC report on International mobile 
roaming  regulation71:  “Competitive  pressure  is  not  to  be  expected  to  come  from  technology 
developments in the international roaming market at present. None of the technologies […] 
could  be  considered  as  full  substitutes  for  roaming  services  at  present.  They  rather 
complement  international  roaming  services”72.  However,  according  to  the  2010  IDATE’s 
report on the mobile market, the number of mobile VoIP users is expected to sharply grow in 
the next future73. 

1.2. 

Possible substitution between services within the roaming market 

Given the significant differences between domestic and roaming tariffs, consumers often try 
to  keep  roaming  expenses  under  control  when  travelling.  The  2010  BEREC  report  on 
International  Mobile  Roaming  Regulation  points  out  that  recent  consumer  surveys  led  in  4 
European countries highlight that “many consumers use their mobile less when roaming than 

70 
71 
72 

73 

Information is often provided in foreign languages which makes the task more difficult. 
See. BEREC Report – International Mobile Roaming Regulation – December 2010 
“International mobile roaming services: Analysis and policy recommendations”, OECD, March 2010, 
P.58 
See “Mobile 2010 : market & trends, Facts & figures” , IDATE, 2010, P.36 

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when  at  home.  The  main  reason  is  cost”74.  The  surveys  also  conclude  that  one  of  the  most 
convenient ways for the consumer to reduce roaming charges is decreasing the frequency and 
the  duration  of  voice  calls  and  replacing  them,  when  possible,  by  a  more  intensive  use  of 
SMS.  According  to  the  BEREC  report,  54%  of  Irish  and  42%  of  British  interviewees  have, 
during the last year, used SMS instead of making calls when travelling.75 

Another possible substitution between services within the roaming market is using VoIP over 
mobile  data  networks  instead  of  traditional  voice  calls.  This  possible  alternative  is  not 
widespread  throughout  the  EU  probably  due  to  the  high  cost  of  mobile  data  roaming. 
Moreover,  as  already  discussed  in  the  previous  section76,  using  VoIP  is  only  a  partial 
substitute  to  roaming  as  it  is  mostly  useful  for  outgoing  calls.  However,  compared  to  VoIP 
over Wi-Fi or WiMax, VoIP over mobile data networks can offer some advantages in terms of 
availability and mobility for the user. Indeed, the coverage of mobile networks is on average 
quite  large  in  EU  countries77  and  the  consumer  can  use  the  VoIP  services  anywhere  in  the 
visited country as far as mobile data network coverage is available (he/she is not limited into 
the relatively narrow Wi-Fi or WiMax coverage).  

The reason for substituting one roaming service for another mainly depends on their relative 
prices. Indeed, consumers prefer sending SMS over calling when abroad mainly because this 
is cheaper. In case of a sharp decrease in data roaming charges, we could thus expect a further 
decline of voice calls. 

1.3. 

Innovations affecting the roaming market  

Technological innovation enables the development of new products to be put on the market. 
In  general,  this  has  a  positive  impact  on  prices  for  consumers.  Indeed,  by  putting  new 
technologies on the market, the supplier creates new and more advanced needs for consumers, 
usually  leading  to  decreasing  prices  for  older  and  less  advanced  existing  technologies. 
Moreover, innovation increases the availability of supply since more products are put on the 
market  and  additional  possible  alternatives  appear.  This  increasing  competitive  pressure 
should normally also lead to decreasing prices for the consumer.  

As  already  mentioned  in  the  table  above  describing  possible  alternatives  to  roaming,  dual-
SIM  handsets  are  not  really  common  in  the  EU.  But  innovation  in  this  area  could  be 
considered  for  the  future  since  one  manufacturer  has  recently  launched  the  first  3G  touch 
screen  dual-SIM  phone  on  the  EU-market  and  other  ones  have  also  announced  the 
introduction  of  new  dual-SIM  handsets.  If  manufacturers  decide  to  team  up  with  service 
providers by offering dual-SIM phones linked to special tariff plans, increasing competition to 
roaming services could appear from this side. 

Still  regarding  innovation  linked  to  devices,  smartphone  sales  increased  sharply  during  the 
past  year78.  More  and  more  subscribers  are  using  data  services  probably  due  to  the 

74 
75 
76 
77 

78 

See. BEREC Report – International Mobile Roaming Regulation – December 2010. P.58 
See. BEREC Report – International Mobile Roaming Regulation – December 2010. P.63 
See section concerning VoIP in the table presenting different possible alternatives to roaming 
According to a 2008 survey of IDATE, in 2007, the mobile 3G coverage varied from one Member State 
to another (from 50% in Hungary and Latvia to 100% in Malta) but in average between 70 and 80% of 
the territory was covered. 
Last year, smartphones market penetration was on average 18% in the five biggest EU Member States 
(France, Germany, Italy, Spain and UK).  

See http://www.allaboutsymbian.com/news/item/11342_comScore_data_shows_smartphone.php  

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development  of  new  devices79  such  as  smartphones,  tablet  computers,  e-reader,  games 
consoles  and  digital  cameras  enabling  surfing  on  internet.  According  to  the  2010  BEREC 
report “these devices are expected to change communication structures such that people will 
communicate via email or social networks instead of making voice calls”80. 

The  increasing  demand  for  data  services  has  also  an  impact  on  networks.  Indeed,  a  more 
intensive use of mobile data can lead to problems of network saturation81. The development of 
the new mobile technology LTE could help to address this problem. Considered as the future 
for  4G  technology,  LTE  should  enable  increasing  capacity,  higher  transfer  rates  and  more 
spectrum  efficiency.  The  EU  has  decided  to  invest  18  million  EUR  in  research  for  LTE  in 
201082  and  the  first  LTE  networks  was  launched  by  TeliaSonera  in  Sweden  and  Norway  in 
200983. Today, auctions for the attribution of LTE spectrum are progressively taking place in 
the EU and the European commission has fixed December, 31 2012 as a deadline to complete 
it.  

2. 

BARRIERS TO COMPETITION 

The market failures presented in the two previous sections could also be considered in terms 
of  barriers  to  competition.  Indeed,  the  above  mentioned  elements  represent  obstacles  that 
make  it  more  difficult  for  potential  new  entrants  to  enter  the  market  or  that  create  unequal 
conditions under which operators are trying to compete.  

The  present  section  resumes  the  main  relevant  barriers  to  competition  on  the  European 
roaming markets84. These obstacles can be divided in 3 categories:  

– 

– 

– 

Structural  barriers  coming  from  industry  characteristics  such  as  technology, 
cost or demand. This also includes technical barriers; 

Strategic  barriers  arising  from  the  behavior  of  some  operators  on  the  market 
(mainly incumbents) to protect themselves against other ones; 

Regulatory  barriers  resulting  from  acts  issued  or  performed  by  executive 
authorities such as administrative obligations, exclusive rights, licenses, etc. 

The  following  table  presents  the  main  barriers  to  competition  within  the  wholesale  and  the 
retail  markets.  As  already  explain  in  the  section  2.1,  the  wholesale  market  can  actually  be 
divided into two different markets (wholesale inbound roaming market and wholesale resale 
roaming market) including different activities and different players. Logically, the table below 
thus also distinguishes between these two markets. 

79 
80 
81 
82 

83 
84 

See. BEREC Report – International Mobile Roaming Regulation – December 2010. P.57 
See. BEREC Report – International Mobile Roaming Regulation – December 2010. P.56 
See http://www.abs-cbnnews.com/technology/02/17/10/smartphones-growing-problem-networks  
See 
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/1238&format=HTML&aged=1&langua
ge=EN&guiLanguage=fr  
See http://www.gsacom.com/news/gsa_289.php4  
Note  that  other  barriers  to  competition  have  been  identified  in  BEREC  report  -2010.  The  summary 
presented  in  this  section  only  considered  elements  which  have  been  identified  as  relevant  within  the 
framework of this study and which could be changed by an action at the European level. 

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Barriers  to 
Competition 

Wholesale market 

Retail market 

going 

Inelasticity of demand means it is 
rational  for  MNOs  to  take  high 
markups:  Demand  for  roaming 
services depends mainly on demand 
for  travelling.  Since  consumers  are 
their 
to 
not 
consumption  of  roaming  services 
when  price  are  higher,  providers 
have no incentive to reduce them. It 
is  very  unlikely  that  this  will  be 
corrected ‘organically’  by the retail 
market. 

reduce 

Lack of perfect / good substitutes 
to  roaming  services:  This  reduces 
consumers’  bargaining  power.  If 
they  had  some  other  alternatives, 
providers  would 
have  more 
incentives  to  reduce  their  retail 
prices in order to keep their market 
share. 

Lack  of  competitive  offers  from 
MVNO:  Consumers  cannot  benefit 
from  possible  competitive  pressure 
from MVNOs for roaming services. 

of 

roaming  with 
Bundling 
services: 
mobile 
domestic 
Consumers  cannot  buy  domestic 
services  from  one  providers  and 
roaming services from another one.  

As  roaming  services  are  marginal 
compared 
to  domestic  services, 
there is no competition for roaming 
services at the retail level.  

Structural 
barriers 

Inbound market 

- 

Resale market  

Strong  dependency  of  MVNOs  on 
its  home  MNO:  MVNOs  have  few 
other  alternatives  than  to  buy  resale 
roaming services from their domestic 
MNOs.  This 
lack  of  substitutes 
reduces  MVNOs’  bargaining  power 
which  could  allow  them  to  conclude 
better deals. 

Supply  in  resale  market  does  not 
allow  for  differentiation:  MVNOs 
are  limited  in  offering  distinctive 
products  to  their  end-users  as  they 
can  only  sell  what  they  get  from 
MNOs.  The 
terms  of 
limits 
available  services  on  the  roaming 
the 
reduce 
market 
resale 
competitiveness of MVNOs.  

in 

Strategic 
barriers 

Inbound market 

The volume of roaming traffic that 
can  be  offered  in  return  largely 
determines  the  wholesale  prices  in 
the inbound market : 

The IOT is then solely applied on the 
price for “unbalanced traffic”. This is 
possible  only  since  MNOs  can  steer 
the  traffic  to  a  preferred  foreign 
network.  This  implies  that  Small 
MNOs  cannot  enjoy  as  good  a  deal 
as large MNOs. Furthermore, MNOs 
part  of  a  group  or  an  alliance  offer 
discount  prices  to  their  partners. 
MNOs which are not part of a group 
or  an  alliance  must  pay  higher 
wholesale prices. 

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Barriers  to 
Competition 

Wholesale market 

Retail market 

Resale market  

High risk of price squeeze in resale 
market 

Domestic MNOs are selling roaming 
services  to  MVNOs  at  a  very  high 
cost, often close to the price at which 
MNOs  are  selling  services  to  their 
end-user on the retail market. This is 
due  to  the  fact  that  domestic  MNOs 
are  at 
time  MVNOs 
providers  at  the  wholesale  level  and 
MVNOs  competitors  at  the  retail 
level. 

the  same 

Inbound market 

- 

Important barrier to entry 

Although MVNOs could in principal 
negotiate  freely  with  MNOs,  the 
membership  of  GSMA  is  in  practice 
to  negotiate  commercial 
required 
agreements  with  foreign  MNO,  so 
MVNOs are excluded 

Resale market  

to 

Supply  in  resale  market  is  mainly 
limited 
the  home  MNOs: 
MVNOs  cannot  directly  negotiate 
and  buy  roaming  services  from 
foreign MNOs. 

Regulatory 
barriers 

Table  11:  Overview  of  structural,  strategic  and  regulatory  barriers  in  the  roaming 
market 

Based  on  the  above  table,  it  can  be  concluded  that  the  policy  options  for  dealing  with  the 
(reasons  behind  the)  problems  identified,  will  need  to  focus  both  on  the  stimulation  and 
strengthening  of  competitive  market  developments  as  well  as  on  promoting  the  interest  of 
consumers and ensuring a high level of consumer protection in the retail market (cf. Chapter 3 
for the more detailed development of the policy objectives). 

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3. 

OVERVIEW OF HOW THE DIFFERENT STAKEHOLDERS ARE AFFECTED 

The analysis of how the  different stakeholders are affected is first of all expressed in  direct 
relation to problem; i.e. the high level of wholesale and retail roaming charges. Furthermore, 
it is analyzed what the specific interests of each type stakeholder are analysed with regard to 
roaming regulation.  

Category 
stakeholder 

of 

How are they affected? 

Network operators and service providers 

How are they affected by a high level of roaming rates? 

Big and group-integrated MNOs 

Not negatively affected by high level of wholesale roaming rates since 
they enable them to increase overall revenues. 

Small MNOs (with a small domestic market share) 

Negatively affected by high wholesale inbound tariffs since this implies 
they  will  have  to  squeeze  their  margin  when  competing  at  the  retail 
level 

MNOs 

What are their specific interests regarding roaming regulation? 

Big and group-integrated MNOs 

Interested in keeping wholesales tariffs as high as possible to ensure the 
highest possible level of roaming revenues; any regulation is considered 
as a constraint for pricing and product differentiation. 

MNOs located in countries with a positive balance 

Interested in keeping high wholesale tariffs since these operators do in 
principle not pay for wholesale inbound services (only for unbalanced 
traffic, there is an actual payment at the wholesale level). 

EN 

70 

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Category 
stakeholder 

of 

How are they affected? 

Small MNOs (with a small domestic market share) 

Interested  in  price  reductions  imposed  by  a  regulation  as  this  is  the 
easiest way of getting better deals; 

Interested  in  new  bargaining  systems  for  wholesale  inbound  services 
which are no longer based on the volume of services they can offer to 
buy  from  the  foreign  MNO  (a  practice  which  currently  reduces  their 
bargaining power). 

All MNOs 

Interested  in  a  regulation  that  keeps  administrative  and  compliance 
costs (e.g. linked to transparency measures) as low as possible 

How are they affected by a high level of roaming rates ? 

Full and light MVNOs 

Affected  by  high  level  of  wholesale  resale  tariffs  since  these  reduce 
their margin if they want to be able to compete at the retail level 

What are their specific interests regarding roaming regulation? 

MVNOs 

Full MVNOs 

Interested  in  being  more  independent  from  their  home  MNO,  e.g.  by 
being  able  to  negotiate  directly  with  foreign  MNOs  (or  via  an 
intermediary  third  party  allowing  to  reduce  overhead  costs  related  to 
roaming agreements) 

All MVNOs 

Interested  in  reducing  wholesale  tariffs  in  order  to  avoid  significant 
margin  squeeze  (margin  could  be  reduced  to  0  –and  even  become 

EN 

71 

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Category 
stakeholder 

of 

How are they affected? 

negatives-  if  the  MNO  resells  wholesale  resale  services  at  the  same 
price than his retail price85) 

Interested  in  a  regulation  that  only  imposes  transparency  measures  on 
those operators that can actually control the relevant parts of the value 
chain  required  to  implement  the  measures  in  to  avoid  excessive 
administrative and compliance costs to the other ones. Need to keep a 
balance between the benefit for the consumer and the costs imposed to 
the services provider. 

How are they affected by a high level of roaming rates? 

All resellers 

Affected by the high wholesale resale tariffs as their margin is reduced 
to enable them to compete on the retail market 

What are their specific interests regarding roaming regulation? 

Resellers 

All resellers 

Interested  in  reducing  wholesale  tariffs  to  avoid  significant  margin 
squeeze (margin could be reduced to 0 –and even lead to loses- if the 
MNO resells wholesale resale services at the same price than his retail 
price) 

Interested  in  a  regulation  imposing  transparency  measure  on  the 
operators who can organize and who control this part of the value chain 
to  avoid  excessive  administrative  and  compliance  costs  to  the  other 
ones. Need to keep a balance between the benefit for the consumer and 
the cost imposed to the services provider 

Providers 
other 
mobile 

of 
than 

How are they affected by a high level of roaming rates? 

85 

See. BEREC Report – International Mobile Roaming Regulation – December 2010, P.38 

EN 

72 

   EN 

 
 
 
 
 
 
 
 
 
                                                 
Category 
stakeholder 

of 

technologies 

How are they affected? 

All providers of other than mobile technologies 

Not  directly  affected  by  high  level  of  roaming  rates  but  benefit 
indirectly  from  this  since  the  higher  the  roaming  tariffs,  the  more 
consumers  are  interested  in  finding  another  telecommunications 
solution and the less demanding they are regarding finding the “perfect 
substitute to roaming” characteristic of the product 

What are their specific interests regarding roaming regulation? 

All providers of other than mobile technologies 

Interested in keeping roaming tariffs as high as possible to benefit from 
revenues  due  to  new  costumers  trying  to  avoid  roaming  charges.  The 
higher the roaming charges, the higher the alternative providers’ tariffs 
could  be set and thus the higher their revenues could be (for as far as 
their price setting is indeed affected by international roaming prices).  

How are they affected by a high level of roaming rates? 

Businesses with a large amount of roaming services consumption 

Less  affected  by  high  level  of  retail  roaming  rates  than  the  next 
category since they can negotiate attractive terms of contract based on 
their large volumes.  

Businesses with a lower amount of roaming services consumption 

Customers 

Businesses 

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Category 
stakeholder 

of 

How are they affected? 

– 

travelling to different destinations 

The most affected by the high retail prices of roaming services as they 
are “intermediate frequent roamers”86 but do not consume enough to be 
able to benefit from reductions 

– 

often travelling to the same destination(s) 

Less  affected  by  the  high  retail  prices  for  roaming  services  than  the 
previous  category  since  they  have  more  incentive  to  dedicate  time  for 
the search of a good alternative to roaming such as local SIM card for 
example 

What are their specific interests regarding roaming regulation? 

All businesses  

– 

– 

Interested in lower retail prices for roaming services to reduce 
their  roaming  charges  and  to  avoid  the  need  to  search  for 
alternatives to roaming which are imperfect substitutes 

Interested in keeping transparency measures allowing them to 
monitor their roaming expenses and to prevent “bill shock”. 

How are they affected by a high level of roaming rates? 

Individual 
consumers 

Individual consumer never using roaming services 

Not affected by the high level of retail roaming rate as up to now it was 
not proofed that changes in roaming tariffs have an effect on the price 
or quality of domestic services 

86 

See. BEREC Report – International Mobile Roaming Regulation – December 2010, P.9 

EN 

74 

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Category 
stakeholder 

of 

How are they affected? 

Individual consumers travelling frequently to different destinations 

Most  affected  by  the  high  level  of  retail  roaming  rates  since  they  are 
consuming  a  significant  amount  of  roaming  services  but  do  not  have 
incentive  to  search  for  alternatives  to  roaming87  since  the  duration  of 
the stay is often too short. Neither do they have any negotiating power 
to obtain a better deal from their provider. 

Individual consumer often travelling to the same destination(s) 

Less  affected  by  the  high  retail  prices  for  roaming  services  than  the 
previous  category  since  they  have  more  incentives  to  take  time 
searching  of  a  good  alternative  to  roaming  such  as  e.g.  a  local  SIM 
card. 

What are their specific interests regarding roaming regulation? 

All individual consumers using roaming services 

– 

– 

– 

Interested in lower retail prices for roaming services to reduce 
their  roaming  charges  and  to  avoid  the  need  to  search  for 
alternatives to roaming which are imperfect substitutes  

Interested in keeping transparency measures allowing them to 
monitor their roaming expenses and to prevent “bill shock” 

Public authorities 

NRAs 

How are they affected by a high level of roaming rates? 

All NRAs 

Not directly affected by high level of roaming rates but this affects the 
domestic  consumers  the  NRAs  are  supposed  to  protect  from  too  high 

87 

Except substitute such as international SIM card, but these are not really user-friendly.  

EN 

75 

   EN 

 
 
 
 
 
 
 
 
                                                                                                                                                         
Category 
stakeholder 

of 

How are they affected? 

retail prices. 

What are their specific interests regarding roaming regulation? 

NRAs from countries with a positive roaming balance 

Less  interested  in  wholesale  tariffs  regulation  since  lower  wholesale 
prices would reduce national providers’ margin and could result in fine 
in  increased  domestic  prices  (until  now  this  effect  has  never  been 
observed, but more severe price cuts could however change this). 

All NRAs 

– 

Very interested in regulation at the EU-level since they cannot 
fulfill  the  task  of  domestic  consumer  protection  they  are 
assigned by taking measures at the national-level; 

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4. 

TABLE OF IMPACTS  

The following main qualitative impacts per specific objective have been identified: 

Specific objective 

Impacts 

Economic impacts 

Objective 1: 

Reduce  distortions  between 
Member States 

• 

• 

Better 
communications operators across the EU; 

level  playing 

field 

for 

electronic 

Increased  development  of  a  European  single 
market for electronic communications. 

Objective 2:  

Economic impacts 

Ensure  an  optimal  level  of 
governance 

• 

risk 

Reduced 
cross-country 
externalities  for  specific  parts  of  the  European 
consumers. 

negative 

of 

Objective 3: 

Ensure 
market 
stimulated 
technological 
are not hindered 

that 
developments 

competitive 
are 
and 
that 
developments 

Economic impacts 

• 

• 

• 

• 

• 

Increased  availability  of  wholesale  roaming 
services  at  the  same  conditions  for  all  operators 
(e.g. incl. small players and MVNOs) (conditions 
=  price  en  access,  possibility  of  direct  bilateral 
contracts,..) 

Reduced risk of price squeeze via the availability 
of cost based wholesale services to all operators; 

Reduced  technical  barriers  for  the  provision  of 
IMSI  codes, 
services; 
roaming 
implementation of bill shock, ) 

(cf.  own 

Increased  probability  that  the  most  efficient 
technological  solution  for  making  calls  abroad 
can  develop;  (not  hindering  development  of 
substitutes) 

Increased  development  of  retail  services 
addition to the regulated service provisions. 

in 

Environmental impacts 

• 

Reduced  need  for  additional  specific  equipment 
(terminals,  cards,..)  for  being  able  to  make  calls 
in other EU Member States. 

EN 

77 

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Specific objective 

Impacts 

Objective 4: 

Economic impacts 

the 
Strengthen 
competitiveness  of  European 
industry 

• 

• 

Increased  availability  of  roaming  services  at 
competitive prices; 

Increased  availability  of  pan-European  mobile 
offers. 

Objective 5: 

Ensure  user 
transparency 

choice  and 

Economic impacts 

• 

• 

• 

Increased  control  by  the  user  of  its  international 
roaming expenditure; 

Increased  choice 
roaming tariff plan; 

regarding 

the  applicable 

Increased  probability  that  users  will  find  in  an 
easy way the best possible roaming tariff plan. 

Objective 6: 

Economic impacts 

that  prices  are  at 
Ensure 
levels  reflecting  underlying 
costs  (as  they  would  result 
competitive  market 
from 
forces) 

• 

• 

difference 
Reduced 
roaming and domestic retail charges; 

between 

international 

Increased  transfer  of  price  reductions  at  the 
wholesale level to the retail level. 

Economic impacts 

Objective 7: 

Ensure  that  consumers  can 
benefit  from  prices  reflecting 
underlying costs 

• 

• 

• 

Reduced risk that roaming prices would increase 
materially  for  some  specific  customer  segments 
(cf. ‘no losers policy’) 

Social impacts  

Social 
roaming services for social groups 

inclusion: 

Increased  affordability  of 

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ANNEX II QUALITATIVE ASSESSMENT 

OPTION 1 

OPTION 2 A 

OPTION 2 B 

OPTION 2C 

OPTION 3A 

OPTION 3B 

Option 3c 

OPTION 3D 

No Regulation 

Caps of 2012 

Annually 
adjusted caps 

Roam like 
home/local 

Decoupling 

Improved 
wholesale 
access 
conditions 

3a+3b+safeguard 
caps 

Spot market 

e
d
u
t
i
n
g
a
M

l
a
t
o
T

d
o
o
h
i
l
e
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IMPACTS 

ENSURING THE DEVELOPMENT OF A SINGLE COHERENT REGULATORY FRAMEWORK 

OBJECTIVE 1: REDUCE DISTORTIONS BETWEEN MEMBER STATES 

ECONOMIC IMPACTS 

Better level playing field for electronic 
communications operators across the 
EU 

Increased development of a European 
single market for electronic 
communications 

TOTAL OBJECTIVE 1 

- 
- 

- 
- 

-4 

0 

2 

-8 

OBJECTIVE 2: ENSURE AN OPTIMAL LEVEL OF GOVERNANCE 

ECONOMIC IMPACTS 

Reduced risk of negative cross-country 
externalities for specific parts of the 
European consumers 

TOTAL OBJECTIVE 2 

- 
- 

1 

-2 

-2 

0 

EN 

2 

-4 

0 

3 

0 

+ 

3 

3 

0 

3 

0 

+ 

3 

3 

0 

3 

0 

0 

0 

0 

0 

2 

0 

3 

0 

2 

3 

3 

0 

+1 

+ 

0 

0 

2 

5 

3 

0 

1 

1 

3 

0 

0 

+ 

0 

0 

79 

+ 
+ 

+ 
+ 

2 

+ 

2 

2 

2 

0 

0 

0 

0 

2 

0 

2 

4 

+ 

0 

0 

2 

8 

3 

0 

4 

+ 

0 

0 

0 

0 

0 

0 

3 

0 

EN 

 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
STIMULATING AND STRENGTHENING SUSTAINABLE COMPETITION IN THE DIGITAL SINGLE MARKET 

OBJECTIVE 3: ENSURE THAT COMPETITIVE MARKET CONDITIONS ARE STIMULATED AND THAT TECHNOLOGICAL DEVELOPMENTS ARE NOT HINDERED 

ECONOMIC IMPACTS 

Increased availability of wholesale 
roaming services at the same conditions 
for all operators (e.g. incl. small players 
and MVNOs) 

Reduced risk of price squeeze via the 
availability of cost based wholesale 
services to all operators 

- 

- 

- 

- 

- 

3 

-9 

0 

1 

0 

0 

1 

0 

0 

1 

0 

0 

1 

0 

+ 

2 

2 

+ 

2 

2 

3 

-6 

0 

1 

0 

0 

2 

0 

0 

2 

0 

0 

1 

0 

+ 

+ 

2 

4 

+ 

+ 

2 

4 

Reduced technical barriers for the 
provision of roaming services 

0 

3 

0 

0 

1 

0 

0 

1 

0 

0 

1 

0 

+ 

+ 

2

4 

0

1 

0 

+ 

2 

2 

+ 

+ 

+ 

+ 

- 

- 

0 

0 

1 

2 

3 

-6 

Increased probability that the most 
efficient technological solution for 
making calls abroad can develop 

+ 

+ 

1 

2 

0 

1 

0 

- 

1 

-1 

- 

2 

-2 

0 

1 

0 

+ 

2 

2 

+ 

2 

2 

0 

1 

0 

Increased development of retail services 
in addition to the regulated service 
provisions 

ENVIRONMENTAL IMPACTS 

- 

1 

-1 

0 

1 

0 

0 

1 

0 

+ 

1 

1 

+ 

+ 

2 

4 

+ 

2 

2 

+ 

+ 

2 

4 

+ 

1 

1 

EN 

80 

EN 

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Reduced need for additional specific 
equipment (terminals, cards,..) for being 
able to make calls in other EU Member 
States. 

TOTAL OBJECTIVE 3 

0 

0 

0 

0 

-14 

2 

0 

0 

0 

0 

0 

3 

-1 

0 

- 

2 

-1 

2 

6 

-2 

0 

0 

- 

0 

10 

2 

12 

-2 

0 

0 

0 

-3 

OBJECTIVE 4: STRENGTHEN THE COMPETITIVENESS OF EUROPEAN INDUSTRY  

ECONOMIC IMPACTS 

Increased availability of roaming 
services at competitive prices 

- 

- 

2 

-4 

0 

1 

0 

+ 

+ 

2 

4 

+ 

+ 

+ 

2 

6 

+ 

1 

1 

+ + 

1 

2 

Increased availability of pan-European 
mobile offers 

+ 

1 

1 

0 

1 

0 

0 

1 

0 

0 

1 

0 

+ 

2 

2 

 + 

1 

1 

+ 

+ 

+ 

TOTAL OBJECTIVE 4 
PROMOTING THE INTEREST OF CONSUMERS AND ENSURING A HIGH LEVEL OF CONSUMER PROTECTION FOR ALL EU CONSUMERS 

-3 

3 

4 

0 

6 

3 

5 

1 

1 

++ 

0 

0 

2 

4 

0 

0 

0 

0 

OBJECTIVE 5: ENSURE USER CHOICE AND TRANSPARENCY 

ECONOMIC IMPACTS 

Increased control by the user of its 
international roaming expenditure 

- 

- 

- 

2 

-6 

0 

3 

0 

+ 

3 

3 

0 

3 

0 

+ 

1 

1 

0 

1 

0 

+ 

2 

2 

0 

3 

0 

Increased choice regarding the 
applicable roaming tariff plan 

- 

2 

-2 

0 

1 

0 

0 

1 

0 

+ 

1 

1 

+ 

+ 

2 

4 

+ 

+ 

1 

2 

+ 

+ 

2 

4 

+ 

1 

1 

Increased probability that users will find 
in an easy way the best possible roaming 
tariff plan 

0 

2 

0 

0 

1 

0 

0 

1 

0 

0 

1 

0 

+ 

1 

1 

0 

1 

0 

++ 

2 

4 

+ 

1 

1 

EN 

81 

EN 

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
TOTAL OBJECTIVE 5 

-8 

0 

3 

1 

6 

2 

10 

2 

OBJECTIVE 6: ENSURE THAT PRICES ARE AT LEVELS REFLECTING UNDERLYING COSTS (AS THEY WOULD RESULT FROM COMPETITIVE MARKET FORCES) 

ECONOMIC IMPACTS 

Reduced difference between international 
roaming and domestic retail charges 

Increased transfer of price reductions at the 
wholesale level to the retail level 

TOTAL OBJECTIVE 6 

- 

- 

- 

- 

- 

2 

-4 

+ 

0 

0 

2 

-6 

0 

-10 

0 

1 

0 

+ 

+ 

+ 

+ 

2 

4 

+ 

2 

2 

+ 

1 

1 

+ 

1 

1 

2 

8 

4 

+ 

2 

4 

2 

+ 

1 

2 

1 

+ 

1 

1 

2 

+ 

+ 

+ 

+ 

2 

4 

+ 

1 

1 

2 

8 

4 

+ 

1 

1 

2 

OBJECTIVE 7: ENSURE THAT ALL CATEGORIES OF CONSUMERS CAN BENEFIT FROM PRICES REFLECTING UNDERLYING COSTS 

ECONOMIC IMPACTS 

Reduced risk that roaming prices would 
increase materially for some specific 
customer segments (cf. ‘no losers 
policy’) 

SOCIAL IMPACTS 

Social inclusion: Increased affordability 
of roaming services for all social groups 

- 

- 

- 

- 

- 

3 

-6 

0 

2 

0 

+ 

1 

1 

0 

1 

0 

0 

1 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

TOTAL OBJECTIVE 7 

TOTAL  

-12 

-57 

2 

-6 

0 

2 

0 

0 

0 

+ 

2 

3 

20 

2 

0 

1 

0 

11 

0 

0 

0 

0 

1 

0 

22 

1 

0 

19 

0 

+ 

1 

1 

44 

1 

0

0 

1 

0 

1 

EN 

82 

EN 

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
The  assessment  of  all  of  the  impacts  under  each  of  the  options  is  done  by  analysing  the 
magnitude of the expected impact, as well as the likelihood that the impact will actually occur 
as a result of the proposed policy option.  

The  notation  used  to  express  the  magnitude  (compared  to  the  baseline  scenario)  is  the 
following: 

- - - 

very negative impact 

- - 

negative impact 

- 

0 

+ 

slightly negative impact 

no impact 

slightly positive impact 

+ + 

positive impact 

+ + +  very positive impact 

The likelihood will be expressed as follows: 

0 

1 

2 

3 

no likelihood 

low likelihood 

medium likelihood 

high likelihood 

These scores give an additional weight to the score expressing the magnitude of the impact. 
As such and in contrast to the score for the magnitude, the value given for the likelihood is an 
absolute score, i.e. not relative to the score of the baseline scenario. 

EN 

83 

   EN 

 
ANNEX III 

Quantitative Economic Analysis 

STEP  1:  Determination  of  the  relevant  parameters  for  the  Status  Quo  of  the 
International Roaming market 

In a first step, the relevant traffic and total revenue data by service of each Member State have 
been identified88: 
–  Traffic data 

• 

• 

• 

• 

Volume of retail voice calls made (m min, 2009); 

Volume of retail voice calls received (m min, 2009); 

Volume of retail SMS sent (m, 2009); 

Volume of retail data usage (m MB, 2009). 

–  Revenue data 

• 

• 

• 

• 

Total revenue for retail voice calls made (m €, 2009); 

Total revenue for retail voice calls received (m €, 2009); 

Total revenue for retail SMS sent (m €, 2009); 

Total revenue for retail data usage (m €, 2009). 

These  data  provided  the  inputs  for  the  calculation  of  average  revenue  per  Minute/SMS/MB 
(Average Unitary Revenue, AUR) for each country and every service: 

–  Revenue data 

• 

• 

• 

• 

Average revenue for retail voice calls made (€/min, 2009) 

Average revenue for retail voice calls received (€/min, 2009) 

Average revenue for retail SMS sent (€, 2009) 

Average revenue for retail data usage (€/MB, 2009) 

For  each  individual  Member  State  and  for  each  service  the  volumes  and  average  unitary 
revenue for 2009 are: 

88 

BEREC information for 2009 has been employed, which is the latest full calendar year available. 

EN 

84 

   EN 

 
                                                 
MEMBER 
STATE 

RETAIL SERVICES 

Retail voice calls 
made 

Volume 
(m min) 

AUR 
(€/min) 

AT 
BE 
BG 
CY 
CZ 
DK 
EE 
FI 
FR 
DE 
GR 
HU 
IE 
IT 
LV 
LT 
LU 
MT 
NL 
PL 
PT 
RO 
SK 
SI 
ES 
SE 
GB 
TOTAL 

-  
256,9  
18,0  
22,0  
39,4  
-  
37,6  
76,4  
453,0  
834,0  
54,4  
50,7  
-  
364,0  
11,1 
13,4  
-  
4,0  
388,0  
171,5  
79,3  
59,3  
51,7  
21,5  
271,6  
-  
811,4  
4.089,4 

-  
0,46  
0,61  
0,55  
0,53  
-  
0,53  
0,49  
0,47  
0,49  
0,51  
0,50  
-  
0,49  
0,47 
0,51  
-  
0,58  
0,48  
0,49  
0,47  
0,48  
0,51  
0,54  
0,50  
-  
0,37  
0,46 

AUR 
(€/min) 

Retail voice calls 
received 
Volume 
(m 
min) 
-  
-  
0,21  
173,6  
0,24  
34,8  
0,20  
17,7  
0,20  
63,9  
-  
-  
0,12  
63,1  
0,21  
60,7  
0,21  
312,0  
0,20  
700,4  
0,24  
59,4  
0,22  
71,6  
-  
-  
0,20  
370,4  
0,10 
26,5 
0,21  
23,2  
-  
-  
0,29  
2,6  
0,21  
287,6  
0,21  
216,8  
0,18  
117,7  
0,21  
106,0  
0,21  
64,1  
0,23  
28,1  
0,20  
319,7  
-  
-  
504,2  
0,14  
3.624,3  0,19 

Retail SMS 

Retail data 

Volume 
(m) 

AUR (€) 

Volume 
(m MB) 

AUR 
(€/MB)

-  
-  
0,19  
194,1  
0,17  
13,0  
0,15  
19,5  
0,18  
121,4  
-  
-  
0,18  
14,9  
0,17  
47,5  
0,16  
240,5  
0,20  
375,7  
0,18  
22,8  
0,19  
51,3  
-  
-  
0,16  
278,7  
0,13 
19,2 
0,15  
31,2  
-  
-  
0,17  
5,6  
0,20  
246,4  
0,17  
248,8  
0,20  
47,2  
0,16  
52,7  
0,19  
48,2  
0,17  
22,5  
0,18  
74,4  
-  
-  
699,4  
0,13  
2.874,9  0,17 

-  
13,9  
0,4  
0,5  
3,5  
-  
0,4  
4,4  
30,2  
60,7  
1,7  
2,8  
-  
24,8  
0,4 
0,5  
-  
0,3  
28,8  
5,2  
5,4  
3,4  
1,8  
0,7  
26,8  
-  
60,0  
276,4 

-  
3,37  
5,27  
1,31  
3,97  
-  
3,89  
3,11  
4,63  
2,25  
5,12  
2,88  
-  
3,37  
3,59 
3,67  
-  
1,95  
2,09  
3,69  
2,65  
2,97  
3,80  
4,97  
3,24  
-  
1,23  
1,71 

Table 12: Overview of the volumes and average unitary revenue by Member State for 
each retail service in the reference year 2009 (Based on BEREC information)  

EN 

85 

   EN 

 
 
 
MEMBER 
STATE 

WHOLESALE SERVICES 

Wholesale voice calls 
made 
Volume 
(m min) 
-  
225,0  
38,0  
29,4  
84,4  
-  
18,0  
42,7  
684,2  
558,1  
150,1  
98,0  
-  
429,6  
22,7 
11,2  
-  
18,2  
222,3  
128,5  
142,3  
64,4  
42,5  
20,1  
645,5  
-  
414,4  
4.089,4 

AUR 
(€/min) 
-  
0,28  
0,21  
0,28  
0,30  
-  
0,32  
0,30  
0,25  
0,27  
0,29  
0,21  
-  
0,26  
0,25 
0,30  
-  
0,31  
0,24  
0,24  
0,21  
0,27  
0,27  
0,28  
0,20  
-  
0,24  
0,25 

Wholesale SMS 

Wholesale Data 

Volume 
(m) 
-  
158,2  
26,7  
20,7  
59,3  
-  
12,7  
30,0  
481,0  
392,3  
105,5  
68,9  
-  
302,0  
16,0 
7,9  
-  
12,8  
156,3  
90,3  
100,0  
45,3  
29,9  
14,1  
453,8  
-  
291,3  
2.874,9 

AUR (€) 

-  
0,07  
0,05  
0,05  
0,09  
-  
0,10  
0,08  
0,07  
0,07  
0,07  
0,07  
-  
0,08  
0,10 
0,08  
-  
0,10  
0,08  
0,08  
0,06  
0,08  
0,09  
0,10  
0,07  
-  
0,07  
0,08 

Volume 
(m MB) 
-  
15,2  
2,6  
2,0  
5,7  
-  
1,2  
2,9  
46,2  
37,7  
10,1  
6,6  
-  
29,0  
1,5 
0,8  
-  
1,2  
15,0  
8,7  
9,6  
4,4  
2,9  
1,4  
43,6  
-  
28,0  
276,4 

AUR 
(€/MB) 
-  
0,73  
1,04  
1,24  
1,19  
-  
1,55  
0,88  
0,70  
0,59  
1,15  
0,69  
-  
0,55  
0,94 
0,75  
-  
1,28  
0,55  
1,06  
0,43  
0,64  
1,06  
1,58  
0,54  
-  
0,43  
0,67 

AT 
BE 
BG 
CY 
CZ 
DK 
EE 
FI 
FR 
DE 
GR 
HU 
IE 
IT 
LV 
LT 
LU 
MT 
NL 
PL 
PT 
RO 
SK 
SI 
ES 
SE 
GB 
TOTAL 

Table 13: Overview of the volumes and average unitary revenue by Member State for 
each wholesale service in the reference year 2009 (Based on BEREC information) 

Based  on  the  lack  of  reliability  of  the  figures  for  these  five  countries,  it  has  been  deemed 
necessary to exclude them from the impact assessment, at 13,98 % of the overall traffic (retail 
voice) and 13,91 % of the total roaming revenues (including retail and wholesale). 

The  inputs  presented  above  will  be  used  to  parameterize  the  demand  functions  at  national 
level. 

STEP 2: Estimation of the demand parameters 

EN 

86 

   EN 

 
 
 
 
In a second step, the demand parameters are estimated in order to define a demand function 
for each Member State. The final purpose of the resulting demand function is to quantify the 
amount of roaming services demanded according to the willingness of the consumers to pay 
for these services. 

The  linear  demand  system89  that  has  been  used  follows  the  standard  mathematical  demand 
expression  q  =  A  –  Bp,  but  applied  to  multiple  goods  or  services,  where  A  expresses  the 
intercepts and B the slopes, i.e. the effect of prices on demand.  

On  the  basis  of  the  volumes  and  average  unitary  revenues  presented  in  the  step  1,  a  linear 
demand system has been implemented at the level of each Member State. This demand system 
has  been  used  as  a  local  approximation  to  the  actual  demand  system  in  order  to  determine 
changes in traffic volumes following a variation in prices of the relevant services. 

On  the  one  hand,  the  (own-  and  cross-)  elasticities  for  all  relevant  services  have  been 
estimated, using a system of instrumental variable fixed-effects panel models90, at EU level. 
On  the  other  hand,  the  intercepts  and  slopes  defining  the  demand  functions  are  obtained  at 
Member State level. 

Own- and Cross-Price elasticity 

In  order  to  perform  quantitative  estimates  of  the  welfare  effects  of  changing  the  existing 
Roaming Regulation in the Economic Model, an econometric estimation of EU-wide demand 
elasticities  for  the  four  services  “roaming  calls  made”,  “roaming  calls  received”,  “roaming 
SMS”  and  “data  roaming”  has  been  performed.  In  order  to  be  consistent  with  welfare 
calculations, a system of four demand equations, each for one of the services just mentioned, 
has been estimated, with cross-equation constraints that guaranteed Slutsky symmetry at the 
sample mean. 

The estimated demand elasticities are the following: 

ECONOMETRIC ESTIMATES 

Price of calls 

Price of calls 

Price of 

Price of 

made 

received 

SMS 

Demand for calls made 

-0.27 

Demand for calls 

-0.24 

data 

0.05 

-0.09 

89 

90 

Using  a  linear  demand  function  responds  to  a  conservative  approach.  Changes  in  consumer  surplus 
under a linear demand function are smaller than those under a constant-elasticity one, where the latter 
are again smaller than in a system in which the elasticity increases in the range of lower prices.  
In econometrics, the concept of panel data refers to multi-dimensional data. Panel data usually contains 
observations  on  multiple  phenomena  observed  over  multiple  time  periods  for  the  same  firms  and/or 
individuals.  The  panel  employed  for  the  econometric  analysis  with  regards  to  the  relevant  roaming 
services contains 13 quarters (2007Q2 to 2010 Q2) over the 27 Member States. 

EN 

87 

   EN 

 
 
 
 
 
 
 
                                                 
received 

Demand for SMS 

-0.24 

Demand for data 

0.21 

-0.13 

-1.23 

According to economic theory, the variation in price of a good has the following impact on an 
operators’ revenues for the same good: 

d/dp (p*q) = q*(1 - eps),  

where eps is the (absolute value of the) demand elasticity 

This has the following consequences: 

• 

• 

• 

If eps < 1 (as is the case in most of the estimates), a lower price implies a decrease in 
revenues, since there is no contrary effect from higher quantities. 

If eps > 1 a lower price actually increases revenues, since the increase in quantities 
over-compensate the effect of the price reduction 

If we just consider 0 < eps < 1, a lower value for eps implies that a decrease in price 
leads to a stronger reduction in revenues. 

Given the elasticities that have been estimated for voice calls and SMS, lower price caps will 
decrease revenues. For data a price cap will increase revenues (but not profits). 

Demand function: Intercept and slopes 

The  demand  parameters  A  and  B  considered  in  the  linear  demand  system  for  each  country 
result from the following calculations: 

STEP 3: Determination of the relevant prices by service for each regulatory option 

In a third step, based on the configuration of each regulatory option, the relevant prices over 
the  relevant  period  (2012-2014)  are  determined.  In  general  terms,  the  applicable  price  by 
service  for  each  scenario  is  chosen  as  the  minimum  between  the  present  price  cap  (if 
applicable)  and  the  price  (freely)  driven  by  market  forces,  as  predicted  by  an  underlying 
roaming market model. 

For  each  individual  Member  State,  for  each  service  and  for  each  regulatory  option,  the 
average unitary revenue has been estimated, leading to the following (average) values at EU 
level for each year of the relevant period: 

REGULATORY OPTION 

RETAIL AUR 

WHOLESALE AUR 

EN 

88 

   EN 

 
 
 
 
 
 
 
2012 

Retail 
voice calls 
made 
(€/min) 

Retail 
voice calls 
received 
(€/min) 

Retail 
SMS (€) 

Retail 
data 
(€/MB) 

Wholesal
e voice 
calls 
made 
(€/min) 

Wholesal
e SMS (€) 

Wholesal
e Data 
(€/MB) 

OPTION 1 - NO REGULATION 

1,87 

0,46 

0,72 

3,31 

1,42 

0,54 

1,18 

OPTION 2.a - PRICE-CAP - 
"CONTINUATION À 
L'IDENTIQUE" (Baseline 
scenario) 

OPTION 2.b - PRICE-CAP INCL. 
RETAIL DATA  

OPTION 3.c STRUCTURAL 
SOLUTION  
with safeguard caps 

0,35 

0,11 

0,11 

2,65 

0,18 

0,04 

0,49 

0,24 

0,10 

0,05 

0,51 

0,14 

0,03 

0,30 

0,32 

0,11 

0,10 

0,90 

0,14 

0,03 

0,30 

Table  14:  Overview  of  the  average  unitary  revenue  at  EU  level  by  service  for  each 
regulatory option corresponding to the year 2012  

REGULATORY OPTION 

RETAIL AUR 

WHOLESALE AUR 

2013 

Retail 
voice calls 
made 
(€/min)  

Retail 
voice calls 
received 
(€/min)  

Retail 
SMS (€)  

Retail 
data 
(€/MB)  

Wholesale 
voice calls 
made 
(€/min)  

Wholesal
e SMS (€)  

Wholesal
e Data 
(€/MB)  

OPTION 1 - NO REGULATION 

1,87 

0,46 

0,72 

3,31 

1,42 

0,54 

1,18 

OPTION 2.a - PRICE-CAP - 
"CONTINUATION À 
L'IDENTIQUE" (Baseline 
scenario) 

OPTION 2.b - PRICE-CAP INCL. 
RETAIL DATA  

OPTION 3.c STRUCTURAL 
SOLUTION  
with safeguard caps 

0,35 

0,11 

0,11 

2,65 

0,18 

0,04 

0,49 

0,17 

0,09 

0,05 

0,34 

0,10 

0,03 

0,20 

0,28 

0,10 

0,09 

0,70 

0,10 

0,03 

0,20 

Table  15:  Overview  of  the  average  unitary  revenue  at  EU  level  by  service  for  each 

regulatory option corresponding to the year 2013  

REGULATORY OPTION 

RETAIL AUR 

WHOLESALE AUR 

2014 

Retail 
voice calls 
made 
(€/min)  

Retail 
voice calls 
received 
(€/min)  

Retail 
SMS (€)  

Retail 
data 
(€/MB)  

Wholesale 
voice calls 
made 
(€/min)  

Wholesal
e SMS (€)  

Wholesal
e Data 
(€/MB)  

OPTION 1 - NO REGULATION 

1,87 

0,46 

0,72 

3,31 

1,42 

0,54 

1,18 

EN 

89 

   EN 

 
OPTION 2.a - PRICE-CAP - 
"CONTINUATION À 
L'IDENTIQUE" (Baseline 
scenario) 

OPTION 2.b - PRICE-CAP INCL. 
RETAIL DATA  

OPTION 3.c STRUCTURAL 
SOLUTION  
with safeguard caps 

0,35 

0,11 

0,11 

2,65 

0,18 

0,04 

0,49 

0,10 

0,08 

0,03 

0,17 

0,06 

0,02 

0,10 

0,24 

0,10 

0,08 

0,50 

0,06 

0,02 

0,10 

Table  16:  Overview  of  the  average  unitary  revenue  at  EU  level  by  service  for  each 
regulatory option corresponding to the year 2014 

Prices driven by market forces – Determination of unregulated retail and wholesale prices 

Unregulated retail prices are determined in a country-wise Nash equilibrium as a function of 
given regulated or unregulated wholesale prices. Unregulated wholesale prices are determined 
taking into account the derived demand resulting from home networks’ retail pricing.91.  

STEP  4:  Estimation  of  the  quantities  (traffic  volume)  by  service  for  each  regulatory 
option 

In a fourth step, with the aim of estimating the quantities (traffic volume) for each regulatory 
option, it is assumed that the demand will follow the expressions determined in step 2. 

For  each  individual  Member  State,  for  each  service  and  for  each  regulatory  option,  the 
quantities (demand) have been estimated, leading to the following (total) values at EU level 
for each year of the relevant period: 

REGULATORY 
OPTION 

2012 

OPTION 1 - NO 
REGULATION 

OPTION 2.a - 
PRICE-CAP - 
"CONTINUATION 
À L'IDENTIQUE" 
(Baseline scenario) 
OPTION 2.b - 
PRICE-CAP INCL. 
RETAIL DATA  
OPTION 3.c 
STRUCTURAL 
SOLUTION  
with safeguard caps 

RETAIL AUR 

WHOLESALE AUR 

Retail 
voice calls 
made (m 
min) 

Retail voice 
calls 
received (m 
min) 

Retail 
SMS (m) 

Retail data 
(m MB) 

Wholesale 
voice calls 
made (m 
min) 

Wholesale 
SMS (m) 

Wholesale 
Data (m 
MB) 

824,79 

2.331,19 

616,33 

314,32 

824,79 

616,33 

314,32 

4.352,10 

3.990,69 

3.099,85 

277,37 

4.352,10 

3.099,85 

277,37 

4.444,15 

4.309,00 

3.358,20 

526,81 

4.444,15 

3.358,20 

526,81 

4.289,25 

4.208,45 

3.142,91 

474,68 

4.289,25 

3.142,91 

474,68 

91 

Technically speaking, in the case where both wholesale and retail prices are unregulated we consider a 
subgame-perfect equilibrium where networks choose wholesale prices in a first step and retail prices in 
a second step, after having observed (foreign networks’) wholesale prices. 

EN 

90 

   EN 

 
                                                 
Table  17:  Overview  of  the  traffic  volume  at  EU  level  by  service  for  each  regulatory 
option corresponding to the year 2012  

REGULATORY 
OPTION 

RETAIL AUR 

WHOLESALE AUR 

2013 

Retail voice 
calls made 
(m min) 

Retail voice 
calls received 
(m min) 

Retail SMS 
(m) 

Retail 
data (m 
MB) 

Wholesale 
voice calls 
made (m 
min) 

Wholesale 
SMS (m) 

Wholesale 
Data (m 
MB) 

OPTION 1 - NO 
REGULATION 

OPTION 2.a - PRICE-
CAP - 
"CONTINUATION À 
L'IDENTIQUE" 
(Baseline scenario) 

OPTION 2.b - PRICE-
CAP INCL. RETAIL 
DATA  

OPTION 3.c 
STRUCTURAL 
SOLUTION  
with safeguard caps 

824,79 

2.331,19 

616,33 

314,32 

824,79 

616,33 

314,32 

4.352,10 

3.990,69 

3.099,85 

277,37  4.352,10  3.099,85 

277,37 

4.596,59 

4.379,46 

3.358,20 

546,15  4.596,59  3.358,20 

546,15 

4.366,21 

4.282,48 

3.185,97 

502,49  4.366,21  3.185,97 

502,49 

Table  18:  Overview  of  the  traffic  volume  at  EU  level  by  service  for  each  regulatory 
option corresponding to the year 2013  

REGULATORY 
OPTION 

RETAIL AUR 

WHOLESALE AUR 

2014 

Retail voice 
calls made 
(€/min)  

Retail voice 
calls received 
(€/min)  

Retail SMS 
(€)  

Retail data 
(€/MB)  

Wholesal
e voice 
calls 
made 
(€/min)  

Wholesale 
SMS (€)  

Wholesale 
Data 
(€/MB)  

OPTION 1 - NO 
REGULATION 

OPTION 2.a - PRICE-
CAP - 
"CONTINUATION À 
L'IDENTIQUE" 
(Baseline scenario) 

OPTION 2.b - PRICE-
CAP INCL. RETAIL 
DATA  

OPTION 3.c 
STRUCTURAL 
SOLUTION  
with safeguard caps 

824,74 

2.344,05 

616,33 

314,74 

824,74 

616,33 

314,74 

4.352,10 

3.990,69 

3.099,85 

277,37 

4.352,10  3.099,85 

277,37 

4.749,03 

4.449,95 

3.444,32 

565,48 

4.749,03  3.444,32 

565,48 

4.443,16 

4.310,39 

3.229,02 

528,36 

4.443,16  3.229,02 

528,36 

Table  19:  Overview  of  the  traffic  volume  at  EU  level  by  service  for  each  regulatory 
option corresponding to the year 2014 

STEP 5: Estimation of the revenues and costs by service for each regulatory option over 
the relevant period 

In a fifth step the revenues and costs are estimated as the multiplication of the quantities by 
service and the applicable average unitary revenue and cost. 

EN 

91 

   EN 

 
For  each  individual  Member  State,  for  each  service  and  for  each  regulatory  option,  the 
revenues  and  costs  have  been  estimated  for  each  year  of  the  relevant  period.  Accumulated 
over the period, they lead to the following (total) values at EU level: 

REGULATORY OPTION 

ACUMULATED REVENUES 

2012-2014 

Retail voice 
calls made (m €)

Retail voice calls 
received (m €)  

Retail SMS (m 
€)  

Retail data (m 
€)  

OPTION 1 - NO REGULATION 

4.628  

3.228  

1.330  

3.125  

OPTION 2.a - PRICE-CAP - "CONTINUATION À 
L'IDENTIQUE" (Baseline scenario) 

4.570  

1.316  

1.023  

2.205  

OPTION 2.b - PRICE-CAP INCL. RETAIL DATA 

2.323  

1.181  

OPTION 3.c STRUCTURAL SOLUTION  
with safeguard caps 

3.661  

1.322  

439  

859  

550  

1.043  

Table  20:  Overview  of  the  EU  accumulated  (over  the  relevant  period  2012-2014) 
revenues by service for each regulatory option 

REGULATORY OPTION 

ACUMULATED COST 

2012-2014 

Retail voice calls 
made (m min) 

Retail voice calls 
received (m min)

Retail SMS (m) 

Retail data (m 
MB) 

OPTION 1 - NO REGULATION 

OPTION 2.a - PRICE-CAP - "CONTINUATION À 
L'IDENTIQUE" (Baseline scenario) 

3.651  

3.058  

552  

946  

OPTION 2.b - PRICE-CAP INCL. RETAIL DATA 

2.114  

1.037  

OPTION 3.c STRUCTURAL SOLUTION  
with safeguard caps 

2.014  

1.011  

1.045  

1.134  

635  

558  

525  

426  

357  

326  

Table 21: Overview of the EU accumulated (over the relevant period 2012-2014) costs by 
service for each regulatory option 

STEP 6: Estimation of the industry profits (or producer surplus), consumer surplus and 
social welfare for each regulatory option over the relevant period 

In  a  sixth  step  the  profits  on  the  industry,  the  consumer  surplus  and  the  social  welfare  are 
estimated: 

• 

industry  profits/losses  are  determined  as  the  difference  between  the  total  revenues 
and the costs incurred consumer surplus due to the consumption of all four services 
is determined through the calculation of the indirect utility 

EN 

92 

   EN 

 
 
By summing industry profits and consumer surplus, the absolute social welfare is estimated 
for  each  Member  State  and  for  each  regulatory  option.  For  the  purpose  of  this  impact 
assessment,  while  ensuring  economic  correctness,  the  absolute  values  of  the  social  welfare 
will be “normalized” through the baseline scenario92. 

Since the services considered (voice calls made and received, SMS and data) are substitutes or 
complements to each other, it would be economically incorrect to present separate consumer 
surplus  estimates  for  each  single  service.  Thus  the  social  welfare  results  (variation)  are 
presented on a country-basis: 

• 

• 

• 

Industry profits 

Consumer surplus 

Total welfare 

Apart from the welfare (and surplus) for the baseline scenario and each regulatory option, the 
rest of the outputs of the model are the following: 

• 

• 

• 

• 

Retail and wholesale prices 

Retail and wholesale volumes 

Operator profits 

Consumer surplus 

The above results are presented in aggregated form per service at EU level93 in the following 
table. 

EU TOTAL 
ACCUMULATED 

Voice calls made 

Prices (€/min)  
Quantities (m min) 
Revenues (m €)  
Costs (m €)  
Profits (m €)  

OPTION 2.b - PRICE-CAP INCL. 
RETAIL DATA  

OPTION 3.c STRUCTURAL 
SOLUTION  
with safeguard caps 

OPTION 2.b. 

0,17 
13.789,77 
2.322,92 
2.114,19 
208,73 

OPTION 3.c 

0,28 
13.098,62 
3.661,46 
2.013,65 
1.647,81 

92 

93 

Economically speaking, there is no accurate way to calculate the absolute welfare numbers based on the 
available data. However, the variation (or gain) in social welfare of a regulatory option in comparison 
with  a  baseline  scenario  is  an  alternative  appropriate  and  much  more  robust  decision-making  tool. 
Essentially, by considering only variations between scenarios, the "arbitrary" or "non-estimable" part of 
consumer surplus cancels. 
Member  States  and  relevant  services  can  be  considered  separately  for  the  presentation  of  prices  and 
volumes  at  retail  and  wholesale  level,  whereas  only  Member  States  can  be  considered  for  the 
determination of producer and consumer surplus 

EN 

93 

   EN 

 
  
  
  
 
                                                 
Voice calls received 

Prices (€/min)  
Quantities (m min) 
Revenues (m €)  
Costs (m €)  
Profits (m €)  

SMS 

Prices (€/SMS)  
Quantities (m SMS) 
Revenues (m €)  
Costs (m €)  
Profits (m €)  

Data 

Prices (€/MByte)  
Quantities (m MByte) 
Revenues (m €)  
Costs (m €)  
Profits (m €)  

Consumer surplus (m €)  
Total profits (m €)  
Welfare (m €)  

OPTION 2.b. 

0,09 
13.138,41 
1.181,03 
1.036,96 
144,07 

OPTION 3.c 

0,10 
12.801,33 
1.321,88 
1.010,55 
311,33 

OPTION 2.b. 

OPTION 3.c 

0,04 
10.160,72 
439,15 
557,93 
-118,78 

0,09 
9.557,90 
859,35 
524,94 
334,41 

OPTION 2.b. 

OPTION 3.c 

0,34 
1.638,44 
550,49 
356,59 
193,91 

OPTION 2.b. 

6.323,50 
-4.901,99 
1.421,51 

0,69 
1.505,53 
1.043,13 
325,85 
717,29 

OPTION 3.c 
3.656,7394 
-2.373,19 
1.283,54 

Table 22: Overview of the model outputs at EU and service level, accumulated (over the 
relevant period 2012-2014) for each regulatory option 

Assessment of the economic impact under each option 

To  put  the  figures  presented  above  into  perspective,  the  estimated  producer  and  consumer 
surplus95, as well as the resulting social welfare, are compared to the total retail turnover of 
the roaming segment corresponding to the year 200996.  

94 

95 
96 

The  consumer  welfare  impacts  calculated  for  this  option  constitute  a  conservative  minimum  and  the 
actual  welfare benefits  are  likely  be higher  (taking  into  account  the  benefits  of  increased  competition 
which will arise from this option). 
Producer and consumer surplus variation of each regulatory option against the baseline scenario 
Figures as of 2009 BEREC data employed in the economic model.  

EN 

94 

   EN 

 
  
  
  
 
  
  
  
 
  
  
  
 
  
                                                 
ANNEX IV – ECONOMIC MODEL 

Description of the Economic Model for the determination of the economic impact (Social 
Welfare) of each regulatory option  

This  section  provides  a  general  description  of  the  architecture  and  main  assumptions 
employed  in  the  economic  model  that  determines  the  social  welfare  for  each  regulatory 
option. The results of the economic model have been presented in section 5 of this document. 

General architecture of the Techno-Economic Model 

Model structure 

The model structure is outlined in the following diagram: 

Figure 6: Overall structure of the economic model 

Given  the  available  data,  the  general  structure  of  the  model  has  been  maintained  from  the 
formerly proposed. In particular, with the available per-country data on roaming volumes and 
revenues we have been able determine changes in prices, consumption and financial in- and 
outflows on a per-country basis. We have not been able, though, to determine pair-wise flows 
between countries or operators due to the absence of sufficiently disaggregated data. 

As concerns modelling inputs (the red boxes in), we have the following further comments: 

(2) 

Institutional  settings:  “Roaming  hubs”,  networks  that  function  as  intermediaries 
between  multiple  roaming  partners,  are  the  only  significant  new  development.  The 
introduction of these Roaming Hubs makes it unnecessary for hub client networks to 
negotiate and conclude multiple bilateral roaming agreements. Even so, it is not clear 

EN 

95 

   EN 

 
 
as of yet whether apart from increased efficiency especially for small operators these 
hubs will change competitive conditions at either retail or wholesale level.  

(3) 

(4) 

(5) 

Customer choice behavior: The WIK final report indicates clearly that the majority 
of roaming customers gives little attention to roaming when they chose their contract, 
and  that  they  also  do  not  search  actively  for  substitutes.  This  observation  has  been 
used  as  a  model  input,  that  is,  we  have  explicitly  modeled  this  fact  and  its 
implications for roaming price setting. 

Technological  developments:  We  have  maintained  the  model  assumptions  at  the 
current  technological  framework  (including  traffic  redirection).  Dual-SIM  phones 
and  other  options  involving  active  search  by  customers  but  which  would  be  made 
possible through changes in technology or implementation, especially in the visited 
country, have been discarded in the WIK report. 

Service  substitutes:  Substitutes  away  from  voice  /  SMS  /  data  roaming  have  been 
discounted  in  the  WIK  report.  Therefore  we  have  concentrated  on  the  potential 
substitution between voice calls, SMS and data roaming (non-zero cross elasticity). 

(6) 

The other parts of the structure are affected by data availability as discussed below. 

Modelling methodology 

The economic model estimates the effects at Member State level and then the EU total effect 
is calculated as the aggregate of the country values.  

Our  roaming  market  model  follows  the  modeling tradition of Laffont  Rey Tirole  (1998a/b), 
simplified where possible to reduce the additional complexity created by the introduction of 
roaming services into the modeling framework, and be adapted to a setting with: 

• 

• 

• 

All 27 countries, in order to capture cross-national impacts; 

Multiple mobile network operators in each country; 

Sensitivity  analysis  concerning  customer  choice  behavior  and  roaming  network 
selection. 

The  model  has  been  calibrated  with  data  about  demand,  traffic  flows,  institutional  and 
technical  details,  based  on  BEREC  data  and  other  information  that  we  have  received.  The 
calibration  of  demand  is  based  on  an  econometric  estimation  of  EU-wide  own-  and  cross-
elasticities  of  demand  for  voice  calls  made  and  received,  SMS  and  data.  Since  there  is  no 
country-specific  cost data,  we  have  used a common  set  of  cost  parameters for all countries. 
Qualitative information about institutional details, the existing regulation and technology has 
also been taken into account. 

The  output  of  the  roaming  market  model  is  both  conceptual  and  provides  quantitative 
indications  of  how  roaming  retail  pricing  could  evolve  in  different  regulatory  settings.  We 
have  obtained  results  on  in-  and  outflows  per  country  (while  the  available  data  provide  no 
information on flows between country pairs). 

Treatment/Differentiation of services (i.e. voice, sms, data) 

EN 

96 

   EN 

 
SMS and data services have been included in the quantitative assessment alongside voice calls 
made  and  received.  We  have  determined  the  quantity,  price  and  welfare  effects  of  the 
different  regulatory  options  for  each  service  in  each  country.  Moreover,  substitution 
relationships  between  these  three  types  of  services  have  explicitly  been  taken  into  account. 
We have estimated econometrically a set of EU-wide own- and cross- demand elasticities for 
voice calls made and received, SMS and data. These are four own-elasticities and (essentially) 
six  cross-elasticities,  four  of  which  have  been  found  not  to  be  significantly  different  from 
zero. 

Modelling assumptions  

We describe in this section the main assumptions of the model, related to its parameterization 
(i.e. status quo, pricing and costing), time period and demand.  

In accordance with the availability of  country data,  modelling assumptions have been  made 
either at EU level or at Member State level.  

Assumptions at EU level 

EU-specific parameters that are taken into consideration can be classified into the following 
main categories: 

– 

– 

– 

DEMAND,  function  parameterized  on  the  basis  of  a  common  EU  own-  and 
cross-elasticity estimation 

PRICING  when  homogeneous  across  EU  Member  States,  depending  on  the 
regulatory  option  estimated  on  the  basis  of  the  price  caps  and  other  relevant 
factors such as the market equilibrium  

COSTING  when  homogeneous  across  EU  Member  States, all services except 
for  incoming  calls  (calls  received),  determined  as  indicated  in  the  Annex  VI 
“Breakdown of Roaming services” 

We  describe  below  the  main  assumptions  and  data  constraints  behind  these  three  different 
parameter categories determined at EU level. 

1. 

Demand 

Due to the small number of observations per country (13 quarters) it is not possible to reliably 
estimate  the  set  of  own-  and  cross-price  elasticities,  which  involves  10  parameters  to  be 
estimated,  at  the  country  level.  Therefore  we  have  opted  to  econometrically  estimate  a 
common set of elasticities for all Member States, controlling for country effects.  

2. 

Pricing 

In  the  options  which  include  retail  or  wholesale  price  caps  the  same  cap  is  used  for  all  EU 
countries.  Furthermore,  due  to  the  complexity  and  uncertainty  in  capturing  wholesale 
arrangements, the setting of market-determined wholesale prices has been captured by an EU-
wide parameter. Market-determined retail prices, though, will differ between countries. 

EN 

97 

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3. 

Costing 

A  set  of  EU-wide  wholesale  and  retail  network  and  commercial  cost  values  has  been  used. 
Total  retail  cost,  including  wholesale  payments,  on  the  other  hand,  may  differ  between 
countries due to differences in foreign wholesale prices. 

Assumptions at Member State level 

The  economic  model  distinguishes, 
terms,  27  “Roaming  Economies” 
in  general 
corresponding  to  and  calibrated  separately  for  each  EU  Member  State.  In  other  words,  the 
differences  across  countries  in  market  outcomes  (retail  /  wholesale  traffic  and  prices)  and 
roaming balances are taken into consideration to the maximum extent permitted by the quality 
and granularity of the data. 

Country-specific  parameters  that  are  taken  into  consideration  can  be  classified  into  the 
following main categories: 

– 

– 

– 

– 

STATUS  QUO  at  retail  and  wholesale  level  (as  of  2009,  latest  full  calendar  year 
available) 

• 

• 

Traffic data; volume per service 

Revenue data; Average Revenue Per Minute/SMS/MB 

DEMAND  function  parameterized  on  the  basis  of  country  specific  intercepts  and 
slopes 

PRICING  when  heterogeneous  across  EU  Member  States,  depending  on  the 
regulatory option estimated on the basis of the price caps and other relevant factors 
such as the market equilibrium  

COSTING  when  heterogeneous  across  EU  Member  States,  such  as  the  cost  of 
incoming  calls  (calls  received),  the  MTR  level  is  determined  according  to  the 
estimated  glide-path  from  current  national  situation  to  a  EU  convergent  value  of 
2cEUR in 2014. 

We  describe  below  the  main  assumptions  and  data  constraints  behind  these  four  different 
parameter categories determined at Member State level. 

1. 

Status quo 

The  calibration  of  the  economic  model  has  been  based  on  country-specific  volumes  and 
revenues  of  2009,  the  last  full  year  available,  both  at  the  wholesale  and  retail  levels.  These 
volumes and revenues are available separately for roaming voice calls made, roaming voice 
calls received, SMS and data. 

Due  to  the  lack  of  data  on  pairwise  traffic  flows  between  countries,  we  had  to  adopt  the 
assumption that wholesale volumes in each country correspond to a fixed service-dependent 
share of the corresponding EU-level predicted retail volume. This service-dependent share has 
been set equal to the corresponding shares in 2009. 

EN 

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Since BEREC has not collected any data on the wholesale volumes of received roaming calls, 
whose wholesale price is the “normal” MTR, we have made the forward-looking assumption 
that MTRs are equal to the cost of mobile termination involved, as indeed follows from the 
EC  Recommendation  on  MTRs.  This  assumption  implies  that  the  corresponding  wholesale 
profits  are  zero,  so  that  not  knowing  the  volumes  has  no  further  impact  on  the  welfare 
estimates. 

2. 

Demand 

Each  country  is  characterized  by  a  set  of  aggregate  linear  multi-product  demand  functions, 
which has been calibrated based on a set of demand elasticities that is common at EU level 
and country-specific volumes and revenues for 2009. 

3. 

Pricing 

Market-determined roaming retail prices, as predicted by the economic model, are calculated 
separately for each country based on the country-specific demand system and country-specific 
total retail cost. If price caps are in force, the market price is assumed to be the minimum of 
the price cap and the market-determined price. 

4. 

Costing 

While  network  and  commercial  wholesale  and  retail  costs  are  assumed  to  be  at  a  common 
level  across  the  EU,  the  wholesale  component  of  total  retail  cost  is  country-specific.  This 
applies  as  much  to  the  IOT  for  voice  calls  made,  the  MTR  of  voice  calls  received,  and  the 
wholesale  prices  for  SMS  and  data.  More  precisely,  for  each  service  and  country,  the 
corresponding wholesale component of retail cost is assumed to equal to the weighted average 
of  the  wholesale  prices  in  the  other  countries,  where  the  weights  are  the  wholesale  traffic 
shares mentioned above (rescaled as only to apply to foreign countries). 

Inputs of the Economic model 

General Demand Inputs: 

The data employed in the calibration of the techno-economic model are the following, all per 
country for the year 2009 and obtained from ERG and BEREC: 

• 

• 

• 

• 

Retail volumes and revenues of voice calls made 

Retail volumes and revenues of voice calls received 

Retail volumes and revenues of SMS 

Retail volumes and revenues of data roaming 

•  Wholesale volumes and revenues of voice calls made 

•  Wholesale volumes and revenues of SMS 

•  Wholesale volumes and revenues of data roaming 

Further data, including the whole data series for retail volumes and revenues, has been used in 
the econometrical estimation of the set of demand elasticities. 

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Other Inputs: 

The  rest  of  the  main  inputs  used  for  estimating  economic  impact  of  the  different  roaming 
regulatory options are presented bellow. 

Main model inputs

Demand own- and cross elasticities
Source: Estimations based on BEREC and EUROSTAT data

Elasticity data
Call made
Call received
SMS
Data

Market efficiency parameters

Option 1

Option 4

Option 5

Attentiveness
Traffic concentration

Attentiveness
Traffic concentration

Attentiveness
Traffic concentration

Cost data

Call made

Call received

SMS

Data

-0,27

0,21

-0,24

-0,13

-0,24

0,05
-0,09

-1,23

1 July 2012
0,15
0,50

1 July 2012
0,33

1 July 2013
0,15
0,50

1 July 2013
0,47

1 July 2014
0,15
0,50

1 July 2014
0,60

0<="gamma"<=1, 
1/81 <= omega <=

Increase of attenti

1 July 2012
0,24

1 July 2013
0,31

1 July 2014
0,38

Wholesale access 

Euro per minute

1 July 2012

1 July 2013

1 July 2014

Unit

Retail voice calls made
Retail voice calls received
Retail SMS
Retail data
Wholesale voice calls made
Wholesale SMS
Wholesale Data

Mobile termination rates
MTR (€/min, 2009 average)

2010
2011
2012
2013
2014

MTR (€/min, forward-looking)

EU (wA)

0,06
0,05
0,04
0,03
0,03
0,02
0,02  

0,0542
0,0534
0,0283
0,0200
0,0542
0,0081
0,0800

0,0542
0,0534
0,0283
0,0200
0,0542
0,0081
0,0800

0,0542 €/min
0,0534 €/min
0,0283 €/message
0,0200 €/MByte
0,0542 €/min
0,0081 €/message
0,0800 €/MByte

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ANNEX V 

THEORY FRAMEWORK FOR THE DETERMINATION OF UNREGULATED RETAIL 

AND WHOLESALE ROAMING PRICES 

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Econometric analysis for the determination of the own- and cross-elasticity of roaming 
services 

– 

Econometric estimation of demand elasticities 

In  order  to  perform  quantitative  estimates  of  the  welfare  effects  of  changing  the  existing 
Roaming Regulation in the Economic Model, an econometric estimation of EU-wide demand 
elasticities  for  the  four  services  “roaming  calls  made”,  “roaming  calls  received”,  “roaming 
SMS” and “data roaming” was performed. In order to be consistent with welfare calculations, 
a  system  of  four  demand  equations,  each  for  one  of  the  services  just  mentioned,  was 
estimated,  with  cross-equation  constraints  that  guaranteed  Slutsky  symmetry  at  the  sample 
mean. 

The data used are the following, with the origin mentioned in parentheses: 

• 

• 

• 

Aggregate quarterly actual retail demand volumes97 (calls made and received, 
SMS, data) by country, 2007Q2 – 2010Q2 (BEREC) 

Aggregate  quarterly  retail  revenues  (calls  made  and  received,  SMS,  data)  by 
country, 2007Q2 – 2010Q2 (BEREC) 

Aggregate  quarterly  wholesale  revenues  (calls  made,  SMS,  data)  by  country, 
2007Q2 – 2010Q2 (BEREC) 

•  Mobile subscribers by country, 2007Q2 – 2010Q2 (BEREC) 

•  Mobile termination rates, 2007 – 2010 (ERG, BEREC) 

• 

• 

• 

Onset  of  regulation  at  retail  level  (calls  made  and  received,  SMS)  (Roaming 
Regulations) 

GDP per capita, 2007Q2 – 2010Q2 (EUROSTAT) 

Arriving airline passengers, 2007Q2 – 2010Q2 (EUROSTAT) 

The data series therefore is a panel of 27 countries over 13 periods, which constitutes a small 
and relatively short panel. Account has been taken of the panel nature of the data by including 
country fixed effects. The estimations were performed in Stata using the “reg3” command. 

In  each  equation,  the  corresponding  logarithm  of  demand  volume  per  subscriber  was 
regressed on a set of explanatory variables, which included: 

• 

• 

The logarithms of average revenues for calls made, calls received, SMS, data; 
these  are  a  proxy  for  retail  prices,  and  the  resulting  coefficients  provide  the 
elasticity estimates. 

GDP  per  capita  and  arriving  airline  passengers,  in  order  to  control  for  the 
economic cycle and travel demand variations. 

97 

Actual rather than billed units have been used in order to improve the accuracy of the estimates and the 
economic model. This has also been indicated in the Impact Assessment of 2008. 

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• 

• 

Seasonal quarter dummies, in order to control for seasonal variation. 

Country dummies, in order to control for country fixed effects. 

Since in the unregulated market equilibrium price and demand are jointly determined, special 
care  had  to  be  taken  to  deal  with  the  resulting  endogeneity  of  the  proxy  for  retail  prices 
(average  revenues),  which  would  otherwise  have  produced  econometrically  inconsistent 
estimates. At the same time, the onset of retail price regulation, which occurred first for calls 
made and received and later for SMS, had to be correctly modelled.  

Thus  in  our  estimation  we  have  used  an  instrumental  variable  method,  with  the  following 
instruments: 

• 

• 

• 

Foreign wholesale revenue per unit (call minute received, SMS, MB of data); 
this  defines  the  underlying  wholesale  cost  component  and  is  therefore  an 
excellent instrument for the retail prices of calls made, SMS and data. 

Average foreign mobile termination rate; this defines the underlying wholesale 
cost component and is therefore an excellent instrument for the retail price of 
calls received. 

Retail  prices  themselves  after  a  retail  cap  was  imposed,  implemented  as 
interactions  with  the  corresponding  regulation  dummies;  since  these  retail 
prices  remained  at  the  cap  during  the  sample  period  they  can  be  considered 
exogenous  while  regulated,  and  including  them  as  instruments  during  the 
regulated period increases the efficiency of the estimation. 

– 

Interpretation of estimated demand elasticities 

The estimated demand elasticities are the following: 

ECONOMETRIC ESTIMATES 

Price of calls made Price of calls received Price of SMS Price of data

-0.27 

-0.24 

0.21 

-0.13 

-0.24 

0.05 

-0.09 

-1.23 

Source: own calculations (all values significant at a 5% confidence level) 

The own-demand elasticities, i.e. those that measure the effect the change in the demand of a 
service after a change in its own price, are found on the diagonal. The cross-price elasticities, 
which measure the effect of prices of other services on demand, are reported in the rest of the 

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table. Only estimates which are statistically different from zero at a 5% confidence level are 
reported here and have been used in the Economic Model.98 

The own-price elasticity estimates for calls made (-0.27) and calls received (-0.24) are at the 
low end of the expected range (-0.2 to -0.5). This implies that the demand for voice calls, both 
made  and  received,  is  rather  inelastic  at  the  prices  observed.  This  may  be  explained  by 
customers only making or receiving calls if some specific need arises. These estimates are in 
accordance  with  those  predicted  in  the  WIK-Consult,  “Study  on  the  Options  for  addressing 
Competition Problems in the EU Roaming Market” (December 2010), section 4.2.2, but are 
smaller than the “pessimistic” values considered in the 2008 Impact Assessment (-0.55). 

A similar result holds for the own-demand elasticity of SMS, which is also found to be quite 
low  at  -0.24.  Again  this  implies  that  customer  send  SMS  while  roaming  only  if  they  have 
some urgent need to communicate. On the other hand, as expected the own-price elasticity of 
data roaming is in the elastic range, though not very far, at -1.23. That is, data usage is rather 
sensitive  to  retail  prices;  if  the  latter  were  to  fall  a  significant  increase  in  demand  might 
follow. 

As  concerns  cross-price  effects,  the  elasticity  estimates  indicate  that  there  is  a  small  but 
statistically  significant  substitution  between  making  voice  calls  and  using  data.  This  effect 
may have arisen due to the increasing usage of mobile email or VOIP communications, which 
are  both  substitutes  to  voice  calls,  but  from  the  sample  data  we  cannot  identify  the  exact 
cause.  Furthermore,  calls  received  and  data  roaming  have  also  been  found  to  be  weak  but 
statistically significant demand complements, i.e. usage of both services tends to increase if 
the price of either service falls. 

On the other hand, there is no statistically significant substitution between voice calls made 
and  received,  or  between  SMS  and  the  three  other  services  considered.  Note  that  the  2008 
Impact Assessment, which used guessed values rather than econometric estimates, considered 
different scenarios for own-price elasticities, but assumed that all cross-price elasticities were 
zero in all of these scenarios. 

Overall the estimated elasticity values fall in the expected range and indicate that demand and 
welfare  analysis  for  “roaming  calls  made”,  “roaming  calls  received”,  “roaming  SMS”  and 
“data roaming” need to take into account that these are not independent services. 

98 

The  strongest  of  the  remaining  estimates  was  significant  only  at  a  16%  significance  level,  while  the 
others were highly insignificant. 

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ANNEX VI 

BREAKDOWN OF ROAMING SERVICES 

For  each  of  the  three  roaming  services,  the  following  paragraphs  present  a  schematic 
overview of the traffic routing and network components used as well as the production cost 
related  to  these  network  components.  Further  estimates  regarding  the  underlying  costs  can 
also be found in the BEREC report “International Mobile Roaming Regulation” of December 
2010. 

VOICE ROAMING 

THE ROAMING CUSTOMER IS MAKING A CALL 

The illustration below presents how a call originated from a roaming customer is routed and 
how these routes can be broken down in different components: 

Possible scenario's for a roaming customer making a call (voice roaming) 

HOME COUNTRY 

HOME NETWORK OPERATOR 

OTHER OPERATOR  
(FIXED OR MOBILE)  
IN HOME COUNTRY 

THIRD COUNTRY 

VISITED COUNTRY 

VISITED NETWORK 
OPERATOR 

BTS 

OTHER OPERATOR  
(FIXED OR MOBILE)  
IN VISITED COUNTRY 

OPERATOR (FIXED OR MOBILE)
IN THIRD COUNTRY 

Roaming customer of  
home network operator 

Usage of network components: 

Call originating on the visited network 
Transit to the destination country (if other than visited country) 
Call termination on the called network (mobile or fixed) 

For the traffic routing, the assumption was take that direct routing between networks is always possible.  Only 
the signalling is systematically passed through to the home network. 

The  costs  are  based  on  the  BEREC  Report  “International  Mobile  Roaming  Regulation” 
(December 2010). The wholesale and retail wholesale tariffs relate to the caps applicable at 
the end of the current regulatory period.  

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Network components used by a 
roaming customer making a call

Production cost incl. overhead 
(in cEUR)

Wholesale payment flows

Retail tariff

Source: BEREC

in cEUR
per min

in cEUR
per min

The home network operator 
pays an IOT to the visited 
network operator to cover the 
costs of the originating and 
terminating leg, incl. transit if 
applicable, as well as costs for 
signalling to the respective 
(mobile or fixe) operators.

Part of the IOT is than 
transfered by the visited 
network operator for covering 
the transit and terminating 
costs.

Call Originating on the visited 
network
(Proxy used = national MTR)

Transit to the destination 
network (if applicable)

Call termination on the called  
network (mobile or fixe)

Sales and common costs

Total production costs

Total cost for home network operator

Margin on retail roaming tariff (in cEUR per min)

Mark-up on wholesale tariff

3,18

-

1,54

13%

5,42

THE ROAMING CUSTOMER IS RECEIVING A CALL 

18

35

18

17

94,4%

At the wholesale level, the home country operator will receive a mobile terminating fee from 
the  operator  on  whose  network  the  call  was  originated.  The  operator  in  the  visited  country 
then receives an (international) terminating fee from the home operator. 

At the retail level, the calling party pays for the call originating leg. The customer receiving 
the call furthermore pays the home operator for recovering the difference between the mobile 
termination  fee  the  home  operator  has  received  and  the  fee  it  paid  to  the  visited  operator, 
including a contribution to the sales and common costs. 

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SMS Roaming  

THE ROAMING CUSTOMER IS SENDING AN SMS 

Possible scenario's for a roaming customer sending an SMS (SMS roaming) 

HOME COUNTRY 

SMSC 

HOME NETWORK  
OPERATOR 

OTHER OPERATOR  
(FIXED OR MOBILE)  
IN HOME COUNTRY 

THIRD COUNTRY 

OPERATOR (FIXED OR MOBILE) 
IN THIRD COUNTRY 

VISITED COUNTRY 

VISITED NETWORK  
OPERATOR 

OTHER OPERATOR  
(FIXED OR MOBILE)  
IN VISITED COUNTRY 

Roaming customer of  
home network operator 

SMS Center 

Usage of network components: 

Call originating on the visited network 
Transit to the home network operator (and the destination country 
if other than home country) 

Reception and handling of SMS 
Call termination on the called network (mobile or fixed) 

For the traffic routing, the assumption was take that all SMS are first directed to the SMS Center of the home 
network operator. 

Production costs 
incl. overhead
(in cEUR)

Source: BEREC

Wholesale payment flows

Retail 
tariff

in cEUR 
per SMS

in cEUR 
per SMS

The home network 
operator pays an IOT to the 
visited network operator 

4,0

0,71 - 2,32

Network components used by a roaming 
customer for sending an SMS

SMS Originating on the visited network 
(*)

International transit to the home network  
(if applicable)  
I.e. until POI

Reception and handling of SMS

Transit to the destination network (if 
applicable)

SMS termination on the destination 
network

Sales and common costs

Total production cost 

13%

0,81 - 2,67

Total costs for home network operator

Margin on retail roaming tariff for sending SMS (in cEUR)

Mark-up on wholesale tariff

11

7,0

175,0%

(*) To the cost of this network component, a cost will also be allocated for compensating the fact that no costs can be 
recuperated by the visited country when the roamer is receiving an SMS

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Again, the costs are based on the BEREC Report “International Mobile Roaming Regulation” 
(December 2010). The wholesale and retail wholesale tariffs relate to the caps applicable at 
the end of the current regulatory period.  

THE ROAMING CUSTOMER IS RECEIVING AN SMS 

The  costs  related  to  a  roaming  customer  receiving  an  SMS  only  consist  of  a  cost  for 
terminating  on  the  visited  network.  No  recuperation  of  this  cost  by  the  visited  network 
operator  is  foreseen  (cf.  inclusion  of  a  terminating  cost  in  the  originating  cost  component 
when sending an SMS).As the SMSs are routed directly to the visited network, no costs are 
incurred by the home network. No settlements are made between operators. 

DATA ROAMING  

Sending or downloading data via the usage of the Internet does not involve a termination to 
another  end-user.  By  consequence,  no  distinction  needs  to  be  made  between  the  production 
cost of both sending and receiving data. 

Network usage by a roaming customer downloading and sending data (data roaming) 

Download 

Upload 

GRX 

VISITED COUNTRY 

VISITED NETWORK  
OPERATOR 

GGSN 

Roaming customer of home network 
operator 

Gateway GPRS Support Node (GGSN)

GPRS Roaming Exchange (GRX)

HOME COUNTRY 

HOME NETWORK  
OPERATOR 

GRX 

GGSN 

POI 

HOME NETWORKS INTERNET 
SERVICE PROVIDER (ISP) 

INTERNET 

Usage of network components: 

Data traffic on the visited network 
International transit by GRX provider
Traffic handling on the home network 

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Production costs
incl. overhead 
(in cEUR)
Source: BEREC

Wholesale payment flows

Retail 
tariff

in cEUR 
per MB

in cEUR 
per MB

Network components used by a roaming 
customer for receiving and sending data

Data traffic on the visited network 

International transit up to the GRX provider 
nearest to the home network
Share for the visited network operator

International transit up to the GRX provider 
nearest to the home network
Share for the home network operator

7,03 - 13,05

Handling of data traffic on the home 
network (via GGSN)

Provision of access to the Internet (ISP)

Sales and common costs

Total production cost 

Total costs for home network operator

13%

8,08 - 14,99

Margin on retail roaming tariff for sending / receiving 1 MB (in cEUR)

Mark-up on wholesale tariff

The home network operator 
pays an IOT to the visited 
network operator 

36,40

The home operator pays the 
GRX provider for the home 
network's share of the 
international transit

Internal costs of home 
network operator

Homer operator makes 
payment to the ISP

137,00

36,40

100,60

276%

The assumptions taken for the wholesale cost (36,40cEUR) and for the retail tariff (1,37EUR) 
correspond to the average EU tariffs applicable in Q2 2010. 

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