It is a general fact that any regulator in developed countries is supposed to act to find the right compromise between the stakeholders and a balanced set of norms for the general interest of our society.
This compromise is rarely easy to reach. On its side, The European Commission has been struggling over the past years to find this balance for the Telecom industry.
Should the Commission consider the Telecom industry as a plain utility sector and therefore increase competition and lower prices, or should it consider it as a central enabler to push the European economy thanks to virtualization and innovation?
On top of that, The European Community saw an opportunity to show their investment in creating a better situation for the citizens. Removing the telecom borders, commonly known as “roaming”, has been a clear opportunity for European bodies to improve their image.
But let’s have a look now at how the European Commission has managed the rest of the balance for the roaming regulation. In 2005, roaming rates were seen as a barrier to stimulate the European internal market and competition couldn’t reinforce this process.
Between 2007 and 2011, forcing down the rates of both wholesale and retail was first considered as the only available option. However, despite these efforts, in 2011 the European Commission’s analysis highlighted that creative Mobile Operators have managed to keep their excessive margins from an end-user point of view and that competition is necessary, even if the technical barrier is high.
The issue has been tackled in 2012 by the introduction of two new concepts: Alternative Roaming Provider (ARP) and Local Break Out (LBO). During 2013 the European Commission further crystalized the design of the two models, leading most of players to the conclusion that the ARP model cannot be commercially viable.
More specifically, the commercial impracticability of ARP lead to the proposal for “Regulation IV”, introduced in September 2013. This proposal seems like an awkward compromise between saving a political image and targeting the end of roaming premiums but not really knowing how. ARP and LBO models are there, but they are surrounded by such a level of regulation uncertainty that it ruins any business case.
In November 2013, the European Parliament Rapporteur announced that it cannot follow the Commission in a “Regulation IV” proposal and simply proposed an amendment to remove all roaming premiums for SMS, voice, data regulated roaming services by 2016 (still to be voted).
Two conclusions are clear: firstly, for the Telecom industry, ARP and LBO opportunities will be dead before they even started. Secondly, the European citizens will not pay more when they travel.
With this, the European Regulator has fulfilled two of its objectives: providing telecom services at lowest costs to the rest of the economy and bringing a highly positive political image of European bodies working for citizens…
But what for encouraging innovation? On the international mobile services front, there is so much work for the coming years: VoLTE roaming, RCS interworking, Next Generation Hotspots and Carrier WiFi Roaming, etc… MNOs need a sound business case to move early. On top of that, what is at stake goes far beyond EU 28 roaming. This is about European MNOs being able to compete against large American OTTs, about efficient use of 4G networks, etc.
How will the European Commission be able to reach a right balance here?
By Luc Vidal-Madjar, BICS | 13 december 2013