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Summary

On February 1, 2017, the European Parliament, EU Council, and European Commission (EC) finally reached a compromise on the reduction of wholesale roaming rates. This was the final hurdle that the EU had to overcome before retail roaming charges can be abolished from June 15, 2017. This follows the adoption of the corresponding retail fair use policy by the EC back in December 2016.

Low wholesale price caps are set to benefit northern European member states more than their southern counterparts

Under the formal agreement still to be voted on, the wholesale charge per gigabyte of data will be capped at €7.75 from June 2017 and then follow a glidepath that reduces the cap to €6.00 from January 1, 2018; €4.50 from January 1, 2019; €3.50 in January 1, 2020; €3 from January 1, 2021; and €2.5 from January 1, 2022. This progressive decrease in wholesale data charge caps should reflect the anticipated decrease in the cost of providing roaming and data services in the coming years. It is expected that data consumption will continue to rise, which should allow operators to benefit from greater economies of scale.

Due to the wide differences in domestic prices and consumption patterns across the EU, there has been some disagreement over a suitable level for the wholesale roaming charge caps. While it is important that they are not set too high, making roaming services financially unviable for some operators since they cannot recoup the costs from users, it is also crucial that they are not set too low to disadvantage the hosting operators, which require the fees to invest in improving network capacity to handle the additional traffic. Ultimately, the decision was taken by the three EU institutions to set charges higher than those proposed by parliament (which suggested a glidepath falling from €4.00 in 2017 to €1 in 2021) but lower than the EU Council's recommended glidepath of €10.00 in 2017, falling to €5.00 by 2021, and also lower than the EC's proposed fixed cap of €8.50 for the same period. The various glidepaths are shown in Figure 1.

The new wholesale price caps, which equate to an average rate of €4.43 over the period, will greatly benefit customers, who will be able to consume more data while roaming than they would have been able to under the original proposal from the EC, which set the rates much higher. This is because a data usage cap will be applied for roamers based on the amount of data that can be purchased by the value of the customer's monthly contract at the wholesale roaming data price cap.

The fairly low average rate will also be particularly welcomed by northern European countries, which have previously suggested a cap close to €4.00 per gigabyte since their citizens are more likely to be traveling abroad and roaming on an alternative operator's network. However, southern European countries are less likely to be satisfied with this decision. Operators in these countries tend to receive large numbers of roamers on their networks over the summer so have previously called for the cap to be as high as €10.00 per gigabyte.

In addition, the deal establishes a new wholesale cap for calls that is set to decrease from the current level of €0.05 to €0.032 from June 15, 2017. This is lower than the price caps proposed by the EC of €0.04 and the EU Council of €0.0353 but slightly higher than the European Parliament's cap of €0.03. Maximum wholesale SMS charge will follow the EC's suggestion of €0.01 per message, decreasing from current levels of €0.02. All the rates will be reviewed every two years, with the first one due by the end of 2019. These new wholesale charges still need to be formally approved by the Industry Committee, the parliament as a whole, and national ministers before it can enter into force.

Appendix

Further reading

"Scrapping roaming fees in Europe brings complexities over wholesale price caps," TE0007-001098 (December 2016)

"The battle on wholesale roaming caps in the EU is not yet over," TE0007-001089 (October 2016)

"EC proposes new safeguards for operators to prevent abuse of international roaming," TE0007-001067 (September 2016)

"EC withdraws fair use policy aimed at preventing permanent roaming," TE0007-001058 (September 2016)

Author

Sarah McBride, Analyst, Regulation

sarah.mcbride@ovum.com

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