COMMISSION STAFF WORKING PAPER EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT
Date: 2011-07-06
Institutions: European Commission
Subjects: consumer protection, interactive network, mobile phone, price regulations, single market, transmission network

EUROPEAN COMMISSION 

Brussels, 6.7.2011 
SEC(2011) 871 final 

COMMISSION STAFF WORKING PAPER 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

{COM(2011) 407 final} 
{SEC(2011) 870 final} 

 
 
 
 
  
 
COMMISSION STAFF WORKING PAPER 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document  
THE COMMISSION’S REVIEW OF THE FUNCTIONING OF REGULATION (EC) 
N° 544/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 18 
JUNE 2009 
ON 
ROAMING ON PUBLIC MOBILE TELEPHONE NETWORKS WITHIN THE 
COMMUNITY 

1. 

BACKGROUND  

This  impact  assessment  (IA)  report  examines  options  arising  from  the  review  of  the 
functioning  of  the  Roaming  Regulation1.  It  examines  whether  it  is  necessary  to  extend 
regulatory intervention beyond its expiry date of 30 June 2012 and the options for any such 
intervention. 

The  Commission  has  been  monitoring  developments  in  the  roaming  market  since  the 
amended  Roaming  Regulation  came  into  effect  on  1  July  2009.  Public  consultation  was 
launched on 8 December 2010 seeking views on the review of the Roaming Regulation. The 
Commission  adopted  an  Interim  Report  on  30  June  2010.  This  Report  found  that  the 
Regulation had been implemented well but that competition had not yet developed.  

2. 

PROBLEM DEFINITION  

Before  regulatory  intervention  roaming  prices  were  excessive  and  were  not  justified  by  the 
underlying  costs  of  providing  the  services.  The  current  and  previous  Roaming  Regulations 
aimed to eliminate the excessive prices and to stimulate competition. Price levels have fallen 
in the last few years, but this is mainly due to the effects of regulation of prices and not the 
result of emerging forces of competition. The margin between wholesale and retail prices in 
absolute terms has remained constant or has slightly declined. This means that the margin in 
relative  terms  has  risen.  Average  EU  tariffs  remain  close  to  the  price  caps  defined  by  the 
Regulation. These developments suggest that the roaming market is not yet competitive.  

Market and technological developments 

While  there  are  a  number  of  partial  substitutes  for  roaming  services,  these  should  be 
considered as a complement as they do not put competitive pressure on the roaming market. 
Development of new networks (e.g. LTE) allowing higher capacity and possibly leading to a 
more  intensive use of data  cannot be  expected  to bring  down retail prices in the absence of 
pro-competitive structural measures.  

Underlying causes 

1 

OJ L 171 of 29 June 2007 p 32-40 

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At  the  wholesale  level  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 
which  has  the  effect  of  limiting  competition.  At  the  retail  level,  there  are  little  or  no 
substitutes  to  roaming.  Another  cause  of  concern  in  the  retail  market  is  the  limited  demand 
elasticity for bundled roaming services. Users are not concerned about the price of roaming 
when  they  purchase  a  bundle  of  mobile  services  which  means  that  operators  are  not 
competing  on  the  basis  of  this  element  of  the  mobile  bundle.  There  is  also  a  lack  of 
transparency,  since  comparison  of  roaming  tariffs  within  bundles  of  mobile  services  is  a 
complex and time-consuming task.  

3. 

IS EU ACTION JUSTIFIED ON GROUNDS OF SUBSIDIARITY? 

Regulatory  intervention  at  EU  level  is  required  because  of  the  cross-border  nature  of  the 
international  roaming  market  the  NRAs  cannot  tackle  the  problem  of  high  prices  at  the 
national  level.  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,  an 
intervention  at  the  EU  level  is  preferable  as  this  would  better  take  into  account  the  general 
interest of all EU Member States. A European approach would avoid that Member States take 
divergent  approaches  for  dealing  with  the  problem  of  high  prices,  which  would  create 
obstacles to the Internal Market.  

On  the  basis  of  Article  114  of  the  Treaty2,  the  European  legislator  has  already  adopted  two 
Regulations in 2007 and 2009. 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 TEC3 as legal basis for the 2007 Regulation4. In the same 
judgment, the ECJ also considered and confirmed the subsidiarity and the proportionality of 
the European legislator’s action.  

4. 

OBJECTIVES 

One of the building blocks of EU 2020 strategy is the new Digital Agenda for Europe (DAE)5 
which  defines  a  number  of  the  ‘Key  Performance  Targets’  for  attaining  the  Digital  Single 
Market. In relation to roaming, the target is that ‘the difference between roaming and national 
tariffs  would  approach  to  zero  by  2015’6.  This  target  can  be  considered  to  be  met  if 
competition allows consumers to access roaming charges which are approaching competitive 
domestic level prices. In that context three general policy objectives can be identified: 

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The  first  relates  to  ensuring  the  development  of  a  single  coherent  regulatory 
framework, contributing to the development of the internal market. 

The  second  relates  to  stimulating  and  strengthening  sustainable  competition  in  the 
Digital Single Market.  

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 of 8 June 2010 
See http://ec.europa.eu/information_society/digital-agenda/index_en.htm. 
See Annex 2 of the Digital Agenda for Europe 

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• 

The  third  general  objective  is  to  promote  the  interest  of  citizens,  in  particular  by 
ensuring a high level of consumer protection in the EU. 

The  IA  also  defines  a  range  of  specific  and  operational  objectives  which  support  the  above 
general objectives. Policy options are assessed against their ability to achieve these objectives. 

5. 

POLICY OPTIONS 

This  IA  considers  a  variety  of  policy  options  for  addressing  the  issues  identified  in  the 
previous  section.  It  should  be  noted  that  structural  measures  aim  to  tackle  the  underlying 
causes of high roaming charges i.e. to stimulate greater competition. Structural measures can 
include  measures  to  facilitate  market  entry  or  measures  which  enhance  consumer  choice  by 
allowing them to purchase roaming as a separate service. Pure price capping does not improve 
competition  in  the  roaming  market  and,  while  protecting  consumers  for  a  certain  period  of 
time, leaves the underlying problems unresolved and would most likely have to be repeated 
after the next regulatory period. The policy options for consideration in this IA are:  

1. 

2. 

No regulation 

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): 

(a)  Continuation à l’identique with the same price caps; this scenario is considered 

as a 'baseline' scenario.  

(b)  Extension of the current model with adjusted annual price caps and with retail 
data  roaming  price  caps;  this  option  involves  a  steeper  glide  path  than  the 
current Regulation, leading to retail prices which are close to domestic prices. 

(c)  Roam-Like-Home/Roam-like-a-Local  with  fixed  mark-up;  this  is  a  form  of 
price  capping  whereby  a  regulated  mark-up  to  cover  roaming  wholesale  and 
retail costs is permitted to be added to domestic prices (either in the customer's 
home market or in the visited market). 

3. 

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

(a)  Decoupling - a structural measure at the retail level. Customers would be able 
to  purchase  roaming  services  from  another  operator  than  the  provider  of  the 
domestic services.  

(b)  granting access to mobile virtual network operators (MVNOs)7; Option relates 
to  the  introduction  of  a  structural  measure  at  the  wholesale  level,  allowing 
MVNO  roaming  access  to  specific  levels  of  wholesale  charges.  This  can 
operate as a 'stand-alone' option or in conjunction with 3(a) above.  

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And mobile network operators wishing to enter new markets 

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(c) 

the above (a and b) combined with safeguard price caps for a period of time. 
The  unbundling  measure  combined  with  MVNO  access  is  assumed  to 
introduce competitive pressure in the retail market. 

4. 

Spot market  

It  is  a  trading  mechanism  aimed  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.  This  option  could  lead  to  cost  oriented 
wholesale  prices  for  all  roaming  traffic  and  all  operators.  It  is  not  expected  that  the  drastic 
change in the roaming market structure would be beneficial to the European industry since it 
would be unsure 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. 
Establishing a spot market would not bring competition at retail level. 

6. 

ASSESSMENT OF IMPACTS 

All of the policy options are first subjected to a qualitative assessment against the objectives. 
A shortlist of options is then drawn up and each of these is subjected to a quantitative analysis 
using  an  economic  model  to  assess  the  effects  on  industry  profits,  consumer  surplus  and 
overall welfare. Cost benefit analysis is carried out on the short listed options.  

Qualitative analysis 

Option 1 No regulation 

In the case of expiry of the current Regulation, the lack of competition at the wholesale and 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. 

Option 2a Continuation with the current prices caps  

The  baseline  scenario  would  focus  on  preventing  excessive  retail  tariffs  while  ensuring 
transparency  of  roaming  charges  and  preventing  ‘bill  shock’  for  data  roaming  services. 
However  consumers  would  not  experience  the  benefits  of  lower  roaming  charges  which 
should arise as a result of declining costs and will continue to face the risk of excessive retail 
data roaming prices. 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.  

Option  2b  Extension  of  the  current  model  with  adjusted  price  caps  and  with  retail  data 
price caps 

This approach would  lead to an  automatic  reduction  of retail prices for voice, sms and  data 
roaming,  for  the  period  concerned,  at  levels  approaching  domestic  level  prices.  This  would 
ensure a high level of consumer protection. On the other hand, this approach does not promote 
competition  in  the  internal  market  and  does  not  therefore  address  the  underlying  structural 
problems. This approach does not allow a sustainable long term solution and is likely to have 
to be repeated after the expiry of the next regulatory period.  

Option 2c Roam-Like-Home/Roam-like-a-Local with fixed mark-up 

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While doing very little to promote competition in the provision of roaming services since they 
do not address underlying structural issues, these methods ensure that the benefits of domestic 
retail competition are automatically passed through to roaming users. While this would lead to 
lower prices than are typical at present for some consumer segments, overall the option has 
less  advantages  compared  to  Eurotariff  price  caps  (in  Option  2b  above)  as  regards  bringing 
roaming prices closer to domestic levels for all consumers.  

Option 3a: Decoupling 

It  is  expected  that  this  option  could  allow  the  problems  of  lack  of  competition  and  limited 
consumer  choice  to  be  tackled.  However  it  will  take  some  time  to  implement  this  solution 
which  suggests  that  the  continuation  of  safeguard  retail  price  caps  may  be  necessary. 
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).  

Option 3b: Access obligation at regulated prices for wholesale roaming 

This could boost competition by leading to the development of pan-European virtual networks 
and  could  enable  them  to  offer  the  same  roaming  tariff  plans  to  customers  in  different 
countries. It is expected that Option 3b would have a positive impact on competitive market 
conditions, at least at the wholesale level. However the chances of boosting competition are 
increased significantly if this option is combined with retail structural obligations (Option 3a).  

Option 3c: Decoupling/access obligation /safeguard price caps 

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.  Such  a  combination  would  enhance  competition  and  would  not  require 
stringent  retail  price  caps  to  get  lower  prices  for  the  consumers.  However,  given  that  this 
solution will take time to implement, it would be appropriate to keep safeguard retail caps for 
a  period  of  time,  set  at  a  sufficiently  high  level  to  leave  room  for  competition,  to  ensure  a 
safety-net  for  consumers  until  the  unbundling  measures  have  had  an  opportunity  to  become 
fully operational and effective. This solution would tackle the underlining roaming problems 
and  allow  a  sustainable  competitive  solution  to  the  roaming  without  the  need  for  long  term 
price regulation.  

Option 3d: Spot market  

This option does not enhance retail competition and, therefore, provides no guarantee that that 
roaming  prices  would  be  aligned  to  the  domestic  charges  of  the  different  Member  States. 
When stacked against the highly uncertain benefits of this approach, it is considered that this 
option is unlikely to meet the objectives in an effective or proportionate manner.  

Quantitative analysis 

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. 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 
quantities and revenues, consumer and producer surplus, and total social welfare.  

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Options  2b  and  3c  involve  the  application  and  removal  of  price  caps  at  different  times.  To 
simplify  the  comparison,  the  quantitative  effects  of  these  options  have  been  calculated  with 
regard to the respective retail caps, without taking into account the downward pricing effect 
arising from additional competition under option 3c.  

The significant negative impact of removing regulation (Option 1) can be clearly identified. 
This  is  primarily  due  to  the  current  lack  of  competition  at  both  the  wholesale  and  the  retail 
levels.  Options  2b  and  3c  involve  a  positive  and  comparable  gain  of  social  welfare.  These 
options have in common that consumers would benefit from a retail data price-cap, in addition 
to  the  existing  price-cap  for  the  rest  of  services.  Option  3c  is  expected  to  deliver  similar 
results  to  Option  2b  albeit  without  long  term  price  regulation.  It  should  be  mentioned  that 
Option  3c  is  based  on  a  less  strict  price-cap  approach,  leaving  space  for  market  forces  to 
determine prices. 

The general finding of low elasticity 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. 

Administrative costs 

Option 1, 2a and 2b would not result in significant incremental costs since these either involve 
no  regulation  or  the  continuation  of  the  status  quo  -  the  costs  of  compliance  and  the 
administrative costs are the same as those already being incurred. Option 3c will take time to 
implement since there is a  number of technical, security  and  routing issues to be dealt  with 
through  collaboration  of  the  Commission,  BEREC,  operators,  and  possibly  standardization 
bodies.  On  the  other  hand,  once  the  structural  solution  is  in  place  and  retail  price  caps  are 
lifted, the costs of monitoring and compliance are expected to decrease.  

7. 

COMPARISON OF OPTIONS 

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,  allowing  lower  prices  for  consumers,  while  keeping 
safeguard price caps for a certain period, in order to ensure a degree of consumer protection 
until  the  unbundling  measure  have  had  an  opportunity  to  become  fully  operational  and 
effective.  By  increasing  competition  this  option  would  lead  to  a  more  stable  regulatory 
intervention  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  apply  a  revised  Roaming  Regulation  implementing 
option  3c  for  a  period  of  ten  years  with  a  full  report  on  its  functioning  by  the  Commission 
every two years. 

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8. 

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.  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  considered  that  a  similar 
approach to the current regulation can be adopted. 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.  

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