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Summary

On October 26, 2016, the Council of the EU, which groups together the governments of EU countries, reached a compromise on the wholesale roaming caps that should apply as of June 2017. However, the proposal is still likely to face obstacles before its approval, and shows the difficulties in taking account of the different interests at stake. The roaming caps that have been agreed are a compromise and are very likely to face further amendments before they are approved because a significant number of countries are pushing for lower rates, and the EU Parliament is likely to do the same.

Operators across northern and southern countries have contrasting interests

While the clock is ticking for EU legislators to finalize the wholesale roaming caps that will come into force in June 2017, the agreement reached by the Council of the EU on October 26, 2016 could only be the first step of a long process. The deal is a compromise between radically different stances among EU member states and is will probably still be subject to amendments.

In its current form, the agreement would result in a glidepath to reduce the wholesale price cap for a megabyte of data from €0.01 in June 2017 to €0.005 in June 2021. The way in which the agreement was reached is a clear testament to the difficulties faced when trying to combine diverging interests, where at least three factors come into play. These factors are the proportion of incoming and outgoing roamers of each country, the tendency of those customers to be more or less data hungry in their consumption habits, and the differences in retail prices across countries. The latter leads countries where prices for data are lower to aim for a lower wholesale roaming cap to minimize the loss occurred when they have to allow their customers to replicate their home use abroad. Also, the presence of large European operators such as Orange or Deutsche Telekom makes the respective governments mindful of the interests of their national champions.

Therefore, it is unsurprising that northern countries are strongly advocating for a lower cap. Not only do these countries have more outgoing roamers than incoming, but some of them also have the heaviest consumers of mobile data, with mobile operators offering generous monthly data allowances in their contracts (often around 30 or 50GB per month). This means that once retail roaming charges are entirely abolished, these countries will have a significant imbalance between the cost of outgoing roamers and the revenue from incoming roamers. Very few of these countries also have pan-European operators, which will be better placed to minimize the losses of the roam-like-at-home regime.

A higher cap would favor operators in southern countries, which will have more wholesale revenues than expenses caused by international roaming. Also, some of the countries such as France and Spain have in mind the interest of national champions such as Orange or Telefonica, which have a presence with their subsidiaries in several EU countries.

The effort to compromise through a glidepath could still be successful because 12 countries out of 28 are arguing that the actual cost of providing wholesale data roaming ranges between €0.0028 and €0.0067 and the cost is lower than €0.005 in 15 countries. Also, it is likely that the EU Parliament will push for lower caps to favor consumers; even though retail prices will fall to zero, higher wholesale caps may increase the risk of triggering the provisions that will allow operators to apply roaming surcharges if they prove they cannot recoup the costs. The battle seems to be far from over.

Appendix

Author

Luca Schiavoni, Senior Analyst, Regulation

luca.schiavoni@ovum.com

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