ARCEP launches a public consultation on the market for international roaming and suggests three measures for a European-wide regulation

Paris, 15 December 2005

  • International roaming

Since a few years, every end-user is able to use his mobile phone abroad. In order to offer this seamless communication service to customers "roaming" away from their home country, mobile network operators buy wholesale international roaming products off one another. For instance, a German operator wishing to enable his customers to make calls from France (that is to say from a French network) must acquire these wholesale roaming minutes from this French operator.

  • A non competitive market

ARCEP considers that the retail prices that are billed for the use of a mobile phone abroad are particularly high. This is chiefly due to the high level of the prices of the corresponding wholesale products which, according to ARCEP’s calculations, stand at approximately three to four times relevant production costs.

Despite the increase in roaming traffic achieved over the past years, these wholesale prices have been generally maintained at their 2000 levels. At that time, roaming traffic was randomly shared out between receiving network operators, which is hardly conducive to competition. In 2003, things changed in that efficient traffic direction techniques (by which a foreign operator can send his customers onto a given network) seemed to be able to pave the way to fully-fledged competition between operators.

However it appears that these techniques have been mostly used in order to internalize wholesale roaming expenses within pan-european groups, and to set up bilateral, exclusive purchasing deals on a transnational scale within alliances functioning according to the same principle.

These integrations contribute to fencing off competition on the wholesale market to the fringe of traffic that doesn’t fall under the provisions of the internalization or the exclusivity, which enables operators to maintain high prices.

A European-wide situation

By definition, wholesale roaming prices set in a given country impact the retail prices of other countries. Thus, the actual roaming market situation stems from a European-wide interdependance of mobile operators, which has led NRAs to issue a common questionnaire on this market, and conduct a common preliminary analysis of his market within the boundaries of the European Group of Regulators (ERG). Any regulatory intervention on this market must thus be coordinated at EU level, which implies a strong commitment from the Commission.

Moreover, the fact that the GSM Association has exerted a strong influence on the current market structure, and that alliances and groups have set up common frameworks for roaming purchases, leads to the conclusion that there are few national specificities on this market. In this respect, a joint action of European regulators, under the Commission’s control, seems all the more legitimate.

Three Proposals

In the public consultation, available in English by mid-january, the Authority suggests three means of action :

- The first proposal consists in defining remedies within the framework of a market analysis which is included in the public consultation document. ARCEP observes an oligopoly devoid of competition that falls under a finding of "joint dominance". This is a novel, unprecedented case within the current market analysis framework. Thus this analysis will only succeed if the Commission upholds a comprehensive view of joint dominance that goes beyond tacit collusion.

- The Authority takes notice of the fact that the wholesale market has been extensively shaped by the GSM Association, as regards pricing issues, transparency and MVNO access, which isn’t effectively granted. Moreover, the constitution of alliance and group-based exclusive purchasing deals are conducive, according to the Authority, to parallel conduct on a pan-European scale, and in any case contribute to jeopardize price competition through a cumulative effect on supply. In this respect, it could seem reasonable that the Commission examine these practices under article 81.

- Lastly, in the absence of perspectives for sectorial regulation or competition law, the Authority deems that direct regulation through EU legislation, through a regulation comparable to that taken in the field of unbundling or international retail banking services, could be considered.