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Emerald Group Publishing Limited
Copyright © 2011, Emerald Group Publishing Limited
Mobile Roaming Summit, 25-27 October 2010, London
Article Type: Conference report From: info, Volume 13, Issue 2
The 18th Annual Mobile Roaming Summit, organised in London by Informa, was aimed primarily at roaming managers working for Mobile Network Operators (MNOs) (www.roamingconference.com/). It was also attended by suppliers to the roaming industry: systems houses (e.g. Gemalto and Syniverse), roaming clearing houses (e.g. EDCH and Mach), roaming hubs (e.g., BICS) and some consultants.
A conference now seems old fashioned, so to support and to market the event to prospective attendees, Informa uses a group on the LinkedIn.com platform (www.linkedin.com/groups?most Popular=&gid=1317317). This allows discussions of roaming issues both before and after the event. While it lacks the opportunities for personal meetings on the side of the event, it allows people to ask questions and to make direct contact, without the expense of travel to and the three days spent at a London hotel. The Summit did not seem to generate many tweets; it was not a Facebook and Twitter sort of crowd.
Informa publishes an annual report on roaming, based on extensive surveys of the MNOs, providing the only set of consistent numbers for the development of the market. Its fourth such report, at prices starting from €3,000, provides historical market data and five-year forecasts (https://commerce.informatm.com/ reports/main/global-mobile-roaming- 4th-edition.html). It is intended to help roaming managers understand market developments and to assist them in forecasting and, presumably, increasing their own revenues.
Global roaming revenues from consumers and business users are forecast to grow, over the next five years, at 5 percent and 17 percent CAGR respectively (see Figure 1). Voice would remain the dominant source of revenues, despite the rapid increases in data use in domestic markets and regulation of roaming prices. Roaming data revenues were forecast to grow at 28 percent annually, while voice would grow at only 12 percent, the former being accelerated by the use of smartphones.
One of the central problems in roaming has been the very high price of mobile broadband. While prices for domestic use have tumbled, with operators encouraging customers to use smartphones, “dongles” and Mi-Fi, in order to access the internet, the flat rate usage tariff stops at the national border. Even with the growing enthusiasm of operators – not shared by users – for “fair use” policies and download caps, the difference between home and abroad is remarkable. The National Business Review characterised the prices of data roaming to Australia from the three New Zealand MNOs as: expensive, nose bleed expensive and heart stoppingly expensive (National Business Review, 2010).
Wholesale charges were originally set for GPRS roaming in the late 1990s, presuming very limited use, with tiny data increments and very high unit charges. Why domestic prices and price structures have changed but not the equivalent wholesale roaming charges remains unexplained.
Roaming managers were all too aware of the periodic “bill shock” outrages in the press, caused by customers returning from holidays to find invoices that amounted to the cost of a family car or a lifetime’s conventional use of their mobile phone. However, viewing this purely as an issue of “educating” customers about the tariff difference seems naïve, since the problem is one of the tariff structures created by the operators and not an underlying problem of real additional costs.
T-Mobile UK (now part of the strangely named Everything Everywhere) presented its pricing strategy for mobile broadband roaming, a model well received by other MNOs. It sells mobile broadband roaming as a “booster” (www.t-mobile.co.uk/services/ boosters/eurobroadband/). Once this expires the service is shut off and customers have to buy another one, thus eliminating the possibility of bill shock. The boosters are for relatively small amounts of data:
3 MB for £1 for 24 hours (€0.387 per MB).
20 MB for £5 for 7 days (€0.290 per MB).
50 MB for £10 for 30 days (€0.232 per MB).
200 MB for £40 for 30 days (€0.232 per MB).
The prices in brackets are calculations of the cost in Euro per Megabyte, at an exchange rate of £1=€1.16. Presumably some data goes unused and are lost, due to the time limitations, thus average experienced rates will be somewhat higher. These prices compare very favourably with a wholesale cap rate of €0.80 per MB. They are also vastly superior to offers such as Avea, the third mobile operator in Turkey, which sells a 3 MB pack for €15 (€5 per MB) and a 10 MB pack for €45 (€4.50 per MB) for its customers roaming in Europe, Russia and the USA.
It was clear that roaming managers could be persuaded and that a combination of adverse publicity, better understanding of customer behaviour, pressure to increase roaming revenues and threats of regulation might eventually drive wholesale unit prices down, even as “low” as 5 cents per Megabyte, though that would still be substantially above domestic retail rates. An alternative wholesale model to paying per Megabyte would be a flat fee, say €1 million per year for unlimited data roaming, alternatively this could be set to zero, a form of “bill and keep” tariff. One commercial constraint on the wholesale price was a very real fear of arbitrage on the domestic market – that a foreign operator could engage in direct competition using a very low or zero rate for data roaming. Where traffic was relatively balanced, in volume or in commercial significance, then a zero rate might be feasible, though where it was imbalanced then a monthly or annual fee might seem more reasonable. The challenge is how to reach such a new model. Ironically, it could be something where regulation might be of assistance, if only as a threat.
One of the means proposed to remedy the roaming problem has been trans-national mobile virtual network operators (MVNOs) (OECD, 2009). Transatel, one such MVNO, was present at the conference and outspoken, surprisingly so since after a decade of operations it has still only attracted some ten thousand subscribers, admittedly at an ARPU of more than €90 (www.transatel.com/). Its technical solution is to put an International Mobile Subscriber Identity (IMSI) for each of several operators on a single SIM card, so that customers appear to be a domestic customer in a number of countries. The catch has been that in many countries Transatel cannot make deals with operators – markets that regulators have held to be competitive! Cubic Telecom is another MVNO, better known through its MaxRoam retail brand and its partnership with Ryanair (www.cubictelecom.com/). Cubic supports customers with on-line tools to view and to manage spending.
It was abundantly clear that the MVNO model is no more than a niche market and often a small one. In particular, it has failed to penetrate the enterprise mobility market. This is well understood by the MNOs who, consequently, do not see MVNOs as a threat and thus are not reducing their prices to compete.
There was a pre-conference workshop for a smaller group, those interested in the regulation of roaming charges, focusing inevitably on Europe. While there was discussion of other parts of the world, these had not been making the same progress, largely for lack of a legal basis. Perhaps progress is a misleading term, since many of the operators consider regulation to be regressive or punitive and certainly pernicious.
There was a consensus that the EU regulatory train had more than enough momentum and that a third roaming regulation was now historically inevitable, the only question being the precise shape it might take. Commissioner Kroes had a Pauline conversion to roaming regulation at her confirmation hearing before the European Parliament and now argued for the elimination of outdated roaming charges. The European Commission, the national regulators and the operators had neither a sensible alternative, nor an exit strategy from more regulation. Thus, price regulation would continue with retail price regulation for data being possible and retail margins for voice perhaps being reduced, while all the caps would be pushed further down.
A counter argument that the operators have against the Roaming Regulation has been the inelasticity of demand in the face of significant price reductions. The operators argued that prices had not dropped below the caps because of the absence of inelasticity, being adamant that if they were to cut prices further they would simply lose more revenues, with no compensating rise in traffic volumes. Certainly, the apparent failure of customers to respond by increasing their use of roaming makes the original calculations of the impact on the operators of the Roaming Regulation very inaccurate.
One argument, but it did not seem entirely serious, was that a further reduction in rates would cause use to rise. There was no evidence to support this, nor any suggestion as to just how low the prices had to go to achieve this effect.
An obvious constraint is the lumpiness of travel patterns – the destinations and the numbers of people travelling do not change very much and certainly not as a result of reductions in roaming rates. Thus many of the savings were on routes seldom travelled.
In 2009, much of the Mobile Summit had been concerned with hubbing, an alternative to the usual bilateral roaming agreements between operators. This model has never been tested in competition law, the operators having kept the arrangements very quiet and very technical. There are almost no data available so that it is impossible to say if hubbing is pro- or anti-competitive. It is certainly made to appear a purely technical measure, in which prices are not negotiated and in which no wholesaling is carried on. One model for an MNO is to negotiate major destinations bilaterally, leaving others to be handled through a hub. These offer the undiscounted IOTs, allowing operators to extend their foreign footprint, but requiring them to negotiate prices bilaterally if they want discounts. It is a form of outsourcing, a third party setting up the roaming arrangements, conducting the tests and, perhaps, taking financial liability, saving money for the operator. While there had been talk of the various hubs peering with each other this has not happened, possibly for technical reasons.
With the EU looking for a means to intervene to open markets, then modifications to the hubbing system would be an obvious place to consider.
Some months before the Roaming Summit, a company called Qroam launched a form of spot market (www.qroam.com/):
Qroam is an online transaction and auction platform for your roaming traffic. The basic idea of this online transaction and auction platform is helping mobile operators and MVNOs to increase their roaming margins by decreasing their outbound roaming cost, increase their inbound roaming revenue and save the operational expenses on resources and travel. Qroam Transaction and Auction Platform allows mobile operators and MVNOs to a cost-efficient management of roaming agreements and relationships.
Again, there are no data to show what effect, if any, this is having on the market.
One complaint of roaming managers was of the poor quality encountered by roamers on foreign networks. This is surprising, since these are supposedly competitive markets for the supply of domestic mobile services, in which quality ought to be at a premium. It was unclear why the same networks that had adequate quality for domestic purposes were held to be of insufficient quality for roaming.
It seems likely that further roaming summits can be held for several years, addressing the transition to LTE roaming and the shape of future regulatory interventions.
Notes1. Declaration of interest: I chaired the first day on regulatory topics.
National Business Review (2010), “Telecom pulls killer Aussie roaming deal out of a hat”, National Business Review, 10 November, available at: www.nbr.co.nz/article/telecom-faced-with-med-investigation-unveils-1mb-aussie-roaming- deal-132939?goback=.gmp_1317317.gde_1317317_member_34732571
OECD (2009), International Mobile Roaming Charging in the OECD Area, Organization for Economic Co-operation and Development, Paris