1. Long term competition in roaming markets : A challenger’s view

2. 2 Introduction In the short term, by setting retail and wholesale price caps roaming regulation mitigates the effects of a lack of competition but: Does the price structure imposed by the regulation reflect the mid-term evolution of roaming services ? Can remedies be designed to restore long term competition on both retail and wholesale markets ?

3. 3 Mid Term Price Structure The present regulation sets usage based prices (€ per min, per SMS, per Mbytes) which has two drawbacks : Usage based retail pricing does not encourage usage and lack transparency. Most users have difficulties to evaluate the true costs of a usage based tariff (Time increments, Mbytes..) It does not reflect the underlying cost structure of mobile networks and as such will restrain further price decrease on the wholesale market.

4. 4 Mid Term Price Structure Introducing wholesale access charges will become a necessity to allow further decreases of usage charges and will accommodate the different uses of mobile services : An access fee could be charged at the first usage of a customer on a visited network and then every 6/ 12/ 24 hours covering the access to this network Wholesale usage prices could decrease further towards incremental costs Retail prices for roaming would then evolve, as domestic prices have, towards flat fee rates that are more transparent and develop usage – For instance : X€ per 12 hours of data only traffic Y€ per 12 hours + domestic rates for voice / sms / e-mail

5. 5 Long Term Competition The wholesale market is only partially competitive : Exchange of traffic (Barter) has become the main stake of negotiations not price 4 major pan-European groups control 75-80% of the roaming traffic within Europe – Those large groups trade between themselves between 70-80% of their roaming traffic The retail market is insufficiently competitive : Low expectations on the consumer market (vs. handset price, domestic service price, domestic coverage…) Roaming offers cannot be used effectively by smaller challengers as a competitive leverage As a result large pan-European groups primarily target customers sensitive to roaming prices (e.g. MNCs, frequent travelers…)

6. 6 Long Term Competition An exhaustive assessment of the different market organizations and their ability to enhance competition should be performed Retail market Allowing customers (all customers or those without specific roaming offers) to choose freely their visited network  Retail prices defined by the visited network  Information on prices sent via a SMS by the visited network  No traffic steering for those customers Wholesale market Introduction of intermediaries or spot markets Forbidding group deals encompassing direct competitors on domestic markets Obligation to conclude roaming agreements at reasonable and non discriminatory conditions (in particular conditions applied to operators belonging to the same member state)

7. 7 Conclusion There is no obvious remedy to solve structural market failures but combining retail and/or wholesale markets reorganization with non discrimination and transparency measures may help relax price control obligations In any case, the capping scheme will have to be reassessed to accommodate mid term change in the pricing of mobile services