Commercial analysis: With plans to end roaming charges across the EU in 2017 the European Commission has issued proposals to limit the possibility for abuse by operators and customers. But will they satisfy all parties? Cathal Flynn, a telecoms and regulatory lawyer at Bird & Bird, considers some of the issues.

Original news

Commission discusses rules to avoid abuse of roaming charges, LNB News 21/09/2016 67

A revised draft of the rules needed to avoid abuses of the end of roaming charges in time for June 2017 has been published by the European Commission. The Commission’s College of Commissioners has also discussed draft rules enabling travellers using SIM cards of a Member State in which they live to use their mobile device in any other EU country, as they would at home.

What is the background and what are the key points to note in the EU's new approach to roaming charges?

In 2016 the EU legislator decided to abolish roaming charges completely by June 2017. Under this arrangement, the European Commission was charged with developing an implementing act to facilitate the transition from roaming to no roaming in the EU. The principle agreed upon in 2015 was that EU end-users would be able to ‘Roam Like At Home’ (RLAH), meaning that they can go anywhere in the EU as a visitor and pay the same charges that apply when using their mobiles in their home country.

The Commission was specifically charged with developing proposals aimed at ensuring the fair use and sustainability of the RLAH principle and preventing abuse and permanent roaming. If you imagine that, under RLAH, you will be able to use your mobile anywhere in the EU for the same costs as you can at home, and if you consider the significant differences in the cost of mobile services across the EU, there is an obvious risk of abuse here. For example, a UK citizen could travel to Lithuania and obtain a SIM card there with a usage plan that is likely to be significantly cheaper than a comparable offering in the UK. That UK citizen could then use the Lithuanian SIM/usage plan back in the UK on a permanent, and ultimately cheaper, basis thereby saving significant costs.

On 9 September 2016, the Commission published a draft implementing act that proposed to cap surcharge free roaming under the RLAH principle to a fixed period (90 days) each year, after which time the end-user would have to pay a roaming surcharge for use of the international roaming service. The European Parliament and some consumer rights groups objected to the Commission’s proposals claiming that the establishment of a fixed period limit in this manner did not amount to the abolition of roaming. They also accused the Commission of using an arbitrary time period and argued that the 9 September 2016 proposals created the risk of abuse by operators who could use this mechanism as a way of re-introducing surcharges by stealth.

This prompted the Commission to introduce a second set of proposals on 21 September 2016. These revised proposals replace the time period based cap on surcharge free roaming with the concept of normal residence and links to the country where the roaming provider is established. In this regard, the Commission’s proposals refer to ‘frequent and substantial presence’ in the roaming provider’s Member State. Going back to the example from earlier, the Commission’s current proposals now prevent the UK citizen from using the Lithuanian SIM card/usage plan in the UK unless the UK citizen could establish a frequent and substantial presence in Lithuania as verified by the Lithuanian roaming provider. If, for example, the Lithuanian operator sees that its SIM card has never/very rarely been used in Lithuania, for example, but has been used largely or exclusively in the UK, it can, under the Commission’s new proposals, take ‘proportionate’ measures to address this situation. These measures include, for example, the application of a roaming surcharge where a risk of abuse is established.

There have been some further developments on this following 21 September 2016. The Body of European Regulators for Electronic Communications (BEREC), which is an umbrella group of EU telecoms regulators and acts in an advisory capacity to the Commission, commented on the Commission’s proposals in mid-October 2016. According to BEREC, the Commission’s proposals create ‘observable risks’ of distortion of competition and investment incentives in domestic and visited markets that could hurt smaller operators. Some industry representatives, including the European Telecommunications Network Organisation (ETNO) and the GSM Association (GSMA) have also expressed concern at the Commission’s proposals, including the application of the RLAH principle in respect of unlimited and very large domestic offers. These organisations have also noted the possibility of a challenge to the Commission’s proposals if adopted in their current form.

Are there any remaining contentious issues? Is there anything that is unclear or that could have unintended consequences?

There is a question as to whether the Commission’s proposals are workable in practice. Most importantly, there is a considerable degree of ambiguity as to the concept of ‘frequent and substantial presence’ and how this will be interpreted/applied at the national level.

Another issue that is quite important here relates to the wholesale charges that the operators have to pay each other for the roaming service. Therefore, and even in the absence of retail roaming surcharges, we are still left with a transfer of payments issue at the wholesale rate, and, most importantly, whether this will be symmetric or asymmetric between any two service providers (ie, the domestic roaming provider and the provider in the visited country). This may be less of a problem for some countries where there is a symmetric exchange of roaming customers eg, some of the Scandinavian or Benelux countries where large numbers of people from each of the three countries concerned frequently engage in crossborder travel and work in the neighbouring countries. However, this is likely to be a bigger issue between the northern and southern European Member States, where there are large and asymmetric levels of travellers (and specifically tourists) moving from north to south each year.

The current proposals could also present a problem for small operators who only operate in one market. Depending on the level of the fees payable at the wholesale level, these operators could be at a disadvantage vis-à-vis their larger competitors (eg, Three, Vodafone, T-Mobile and Orange) who should be able to draw on synergies from their multicountry footprint when providing international roaming from June 2017 onwards. There is therefore some concern that current proposals could result in a competitive imbalance or distortion.

In fact, BEREC has highlighted that this could have the unintended consequence of reinforcing the recent tendency towards more consolidation in mobile markets. It is, however, difficult to accurately gauge the seriousness of these risks as we must remember that limited numbers of end-users actually avail of the international roaming service, and even less do so on a regular basis.

What should lawyers in this area take note of?

There is uncertainty as to how the concept of ‘frequent and substantial presence’ should be understood and applied. There are also concerns that, as the service providers themselves will be have the opportunity to police fair use and sustainability, there is some potential for abuse.

The Commission’s proposals also allow for a dispute resolution framework so, if a roamer believes that their roaming provider has abused the situation, they can avail of dispute resolution procedures in the home market to remedy any such abuse. There may therefore be opportunities for work in this area.

Also, and as noted earlier, ETNO and the GSMA have raised the possibility of a challenge to the Commission’s proposals if adopted in their current form.

What are the trends in this area? Do you have any predictions for the future?

As noted above, while roaming charges will disappear in mid-2017, roaming providers will still be required to continue providing corresponding technical and commercial arrangements at the wholesale level. The Commission is currently engaged in a comprehensive review of the wholesale roaming market with a view to further reducing the wholesale price caps that will apply on this market following the withdrawal of the retail charges. There has been some disagreement on the outcome of this review, however, particularly between the northern European Member States and their southern European counterparts. Both sets of Member States essentially have competing interests, as demonstrated in recent exchanges in the European Parliament. While the northern European countries want low(er) wholesale rates from June 2017 onwards when their citizens are holidaying in southern Europe, the southern European countries have resisted significant reductions in the wholesale charges that would undermine their ability to make the network investment needed to handle large numbers of tourists during the summer months.

On 26 October 2016, the EU Member States agreed a preliminary compromise on lowering the caps for wholesale roaming charges which contemplates the establishment of a five-year glide path.

This article was first published on Lexis®PSL and Lexis®Library on 3November 2016.