Helsinki University of Technology 1 Regulation of Roaming Services by Kristian Dahlgren T Research Seminar on Telecommunications Business, Spring 2006

Helsinki University of Technology2 Agenda Introduction to roaming Introduction to roaming Share of roaming traffic of operator revenue Share of roaming traffic of operator revenue Pricing practices of roaming Pricing practices of roaming Marketing practices of roaming Marketing practices of roaming Roaming contracts between operators Roaming contracts between operators Influence of international consolidation of operators Influence of international consolidation of operators Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming How to (de)regulate roaming in Europe more efficiently? How to (de)regulate roaming in Europe more efficiently? Conclusions Conclusions

Helsinki University of Technology3 Introduction to roaming What is roaming? What is roaming? The ability for a cellular customer to automatically make and receive voice calls, send and receive data, or access other services when traveling outside the geographical coverage area of the home network, by means of using a visited network. Different types of roaming: Different types of roaming: National roaming, international roaming or global roaming, inter-technology roaming, inter-regional roaming, GSM roaming, GPRS roaming, SMS roaming and MMS roaming

Helsinki University of Technology4 Introduction to roaming cont. The prices of roaming services in Europe have maintained their high levels. The prices of roaming services in Europe have maintained their high levels. The European Commission (EC) thinks that something needs to be done. The European Commission (EC) thinks that something needs to be done. Second phase of a public consultation on mobile roaming services has been launched by the EC. Second phase of a public consultation on mobile roaming services has been launched by the EC. The GSM Association (GSMA) is very skeptical about the need for regulation. The GSM Association (GSMA) is very skeptical about the need for regulation. Wrong decisions could jeopardize the status of the European mobile markets. Wrong decisions could jeopardize the status of the European mobile markets.

Helsinki University of Technology5 Agenda Introduction to roaming Introduction to roaming Share of roaming traffic of operator revenue Share of roaming traffic of operator revenue Pricing practices of roaming Pricing practices of roaming Marketing practices of roaming Marketing practices of roaming Roaming contracts between operators Roaming contracts between operators Influence of international consolidation of operators Influence of international consolidation of operators Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming How to (de)regulate roaming in Europe more efficiently? How to (de)regulate roaming in Europe more efficiently? Conclusions Conclusions

Helsinki University of Technology6 Share of roaming traffic of operator revenue Big business for the operators Big business for the operators More than 6 billion roaming calls were made in year More than 6 billion roaming calls were made in year Recent research from the Informa analyst group on Global Mobile Roaming estimates that the number of international roamers will more than quadruple between 2004 and Recent research from the Informa analyst group on Global Mobile Roaming estimates that the number of international roamers will more than quadruple between 2004 and In 2004 the number of international roamers were 210,000,000 and in 2010 it could be as much as 850,000,000. In 2004 the number of international roamers were 210,000,000 and in 2010 it could be as much as 850,000,000. Lower airline ticket prices are boosting peoples’ willingness to travel. Lower airline ticket prices are boosting peoples’ willingness to travel. People want to use their mobile phones when visiting foreign countries. People want to use their mobile phones when visiting foreign countries. Share of roaming traffic of operator revenue should increase. Share of roaming traffic of operator revenue should increase.

Helsinki University of Technology7 Agenda Introduction to roaming Introduction to roaming Share of roaming traffic of operator revenue Share of roaming traffic of operator revenue Pricing practices of roaming Pricing practices of roaming Marketing practices of roaming Marketing practices of roaming Roaming contracts between operators Roaming contracts between operators Influence of international consolidation of operators Influence of international consolidation of operators Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming How to (de)regulate roaming in Europe more efficiently? How to (de)regulate roaming in Europe more efficiently? Conclusions Conclusions

Helsinki University of Technology8 Pricing practices of roaming Pricing practices of roaming are still complex, but things are improving. Pricing practices of roaming are still complex, but things are improving. Many companies offer different kind of roaming solutions for operators. Many companies offer different kind of roaming solutions for operators. By centralizing all the financial aspects of roaming in a single place, operators can achieve competitive advantage and flexibility. By centralizing all the financial aspects of roaming in a single place, operators can achieve competitive advantage and flexibility. Roaming prices depend on three things: the home network, the visited network and the destination of the call. Roaming prices depend on three things: the home network, the visited network and the destination of the call. There are thousands of possible variants of international retail roaming charges in Europe alone. There are thousands of possible variants of international retail roaming charges in Europe alone.

Helsinki University of Technology9 Pricing practices of roaming cont. Consumers are demanding greater transparency in international retail roaming prices. Consumers are demanding greater transparency in international retail roaming prices. The level of service transparency varies depending on the roaming agreement between the home and the visited network operators. The level of service transparency varies depending on the roaming agreement between the home and the visited network operators. Many operators have already launched single-rate, zone- based roaming tariffs. Many operators have already launched single-rate, zone- based roaming tariffs. The purpose is to simplify operators’ offerings. The purpose is to simplify operators’ offerings. Some operators charge monthly fees, which reduce costs. Some operators charge monthly fees, which reduce costs. Some say that these new pricing practices do not bring anything new. Some say that these new pricing practices do not bring anything new. The finding of the best deal is left to the consumer. The finding of the best deal is left to the consumer.

Helsinki University of Technology10 Agenda Introduction to roaming Introduction to roaming Share of roaming traffic of operator revenue Share of roaming traffic of operator revenue Pricing practices of roaming Pricing practices of roaming Marketing practices of roaming Marketing practices of roaming Roaming contracts between operators Roaming contracts between operators Influence of international consolidation of operators Influence of international consolidation of operators Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming How to (de)regulate roaming in Europe more efficiently? How to (de)regulate roaming in Europe more efficiently? Conclusions Conclusions

Helsinki University of Technology11 Marketing practices of roaming Marketing practices of roaming services need improvements. Marketing practices of roaming services need improvements. Roaming customers very seldom know how much roaming costs. It is argued that only 10% know the price. Roaming customers very seldom know how much roaming costs. It is argued that only 10% know the price. Detailed information about the prices can be found from the operator websites. Detailed information about the prices can be found from the operator websites. Information about the pricing of roaming services is mostly received from the mail sent by the operators. Information about the pricing of roaming services is mostly received from the mail sent by the operators. In Finland Ficora and Consumer Agency would like to see the awareness of roaming prices among consumers increasing. In Finland Ficora and Consumer Agency would like to see the awareness of roaming prices among consumers increasing. More information about how to save in roaming charges is also needed. 33% do not try to save at all. More information about how to save in roaming charges is also needed. 33% do not try to save at all.

Helsinki University of Technology12 Marketing practices of roaming cont. Some roamers do not even think about different issues related to roaming. Some roamers do not even think about different issues related to roaming. It is not always clear what network should be chosen. It is not always clear what network should be chosen. 80% of roamers use the network, which is automatically selected by the mobile phone. 80% of roamers use the network, which is automatically selected by the mobile phone. People are satisfied to the functionality, but very unsatisfied to the price levels of using mobile phone abroad. People are satisfied to the functionality, but very unsatisfied to the price levels of using mobile phone abroad. Operators could increase their roaming revenues, if the issues mentioned would be solved. Operators could increase their roaming revenues, if the issues mentioned would be solved.

Helsinki University of Technology13 Agenda Introduction to roaming Introduction to roaming Share of roaming traffic of operator revenue Share of roaming traffic of operator revenue Pricing practices of roaming Pricing practices of roaming Marketing practices of roaming Marketing practices of roaming Roaming contracts between operators Roaming contracts between operators Influence of international consolidation of operators Influence of international consolidation of operators Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming How to (de)regulate roaming in Europe more efficiently? How to (de)regulate roaming in Europe more efficiently? Conclusions Conclusions

Helsinki University of Technology14 Roaming contracts between operators Operators have more than 20,000 roaming agreements. Operators have more than 20,000 roaming agreements. Elisa has roaming partners in 160 countries, with 300 operators. Elisa has roaming partners in 160 countries, with 300 operators. Finnet has partners in 120 countries, with 200 operators. Finnet has partners in 120 countries, with 200 operators. Sonera has partners in 172 countries, with 269 operators. Sonera has partners in 172 countries, with 269 operators. Operators can to some extent differentiate them from rivals by having extensive roaming agreements. Operators can to some extent differentiate them from rivals by having extensive roaming agreements. Operators are constantly finding new roaming partners and new roaming agreements are quite common. Operators are constantly finding new roaming partners and new roaming agreements are quite common. Roaming agreements are based on business issues. Roaming agreements are based on business issues.

Helsinki University of Technology15 Agenda Introduction to roaming Introduction to roaming Share of roaming traffic of operator revenue Share of roaming traffic of operator revenue Pricing practices of roaming Pricing practices of roaming Marketing practices of roaming Marketing practices of roaming Roaming contracts between operators Roaming contracts between operators Influence of international consolidation of operators Influence of international consolidation of operators Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming How to (de)regulate roaming in Europe more efficiently? How to (de)regulate roaming in Europe more efficiently? Conclusions Conclusions

Helsinki University of Technology16 Influence of international consolidation of operators Mergers and acquisitions (M&A) have been very common activities in the telecommunications industry. Mergers and acquisitions (M&A) have been very common activities in the telecommunications industry. Alliances, fusions and purchases are almost a weekly thing. Alliances, fusions and purchases are almost a weekly thing. 3G is an important reason for the increase of consolidation. 3G is an important reason for the increase of consolidation. Consolidation does not help the industry and operators automatically. Consolidation does not help the industry and operators automatically. Consolidation and integration need to be well managed. Consolidation and integration need to be well managed. There are discussions whether the increased consolidation could enable a global billing architecture. There are discussions whether the increased consolidation could enable a global billing architecture. Possible cost reductions could have an impact on roaming charges. Possible cost reductions could have an impact on roaming charges. Huge companies like Vodafone offer good coverage almost anywhere. Huge companies like Vodafone offer good coverage almost anywhere.

Helsinki University of Technology17 Agenda Introduction to roaming Introduction to roaming Share of roaming traffic of operator revenue Share of roaming traffic of operator revenue Pricing practices of roaming Pricing practices of roaming Marketing practices of roaming Marketing practices of roaming Roaming contracts between operators Roaming contracts between operators Influence of international consolidation of operators Influence of international consolidation of operators Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming How to (de)regulate roaming in Europe more efficiently? How to (de)regulate roaming in Europe more efficiently? Conclusions Conclusions

Helsinki University of Technology18 Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming These new services will have an impact to roaming. These new services will have an impact to roaming. MMS is becoming more and more popular. MMS is becoming more and more popular. MMS could shrink the share of traditional postcards. MMS could shrink the share of traditional postcards. People would use these new services more frequently when traveling, if the prices are better known. People would use these new services more frequently when traveling, if the prices are better known. It is important that the new services are easy to use. It is important that the new services are easy to use. Operators today mostly compete on value and quality in their core services and by offering innovative services in newer areas. Operators today mostly compete on value and quality in their core services and by offering innovative services in newer areas. Terminals are becoming more advanced. Terminals are becoming more advanced. Pricing practices and usability could be the bottlenecks. Pricing practices and usability could be the bottlenecks.

Helsinki University of Technology19 Agenda Introduction to roaming Introduction to roaming Share of roaming traffic of operator revenue Share of roaming traffic of operator revenue Pricing practices of roaming Pricing practices of roaming Marketing practices of roaming Marketing practices of roaming Roaming contracts between operators Roaming contracts between operators Influence of international consolidation of operators Influence of international consolidation of operators Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming Impact of MMS, Internet access and broadcasting (DVB-H) services to roaming How to (de)regulate roaming in Europe more efficiently? How to (de)regulate roaming in Europe more efficiently? Conclusions Conclusions

Helsinki University of Technology20 How to (de)regulate roaming in Europe more efficiently? The European Commission (EC) is planning to regulate international roaming in Europe. The European Commission (EC) is planning to regulate international roaming in Europe. The proposal has already met resistance from the GSMA. The proposal has already met resistance from the GSMA. The EC should avoid the unwanted consequences. The EC should avoid the unwanted consequences. Negative outcomes would have long term, negative effect on jobs, competitiveness and investment in the European telecommunications industry. Negative outcomes would have long term, negative effect on jobs, competitiveness and investment in the European telecommunications industry. The big question is that whether the increased competition is enough to drive the international roaming prices down or is some regulation by the EC needed and what is the right balance between regulation and deregulation. The big question is that whether the increased competition is enough to drive the international roaming prices down or is some regulation by the EC needed and what is the right balance between regulation and deregulation.

Helsinki University of Technology21 How to (de)regulate roaming in Europe more efficiently? cont. The EC’s viewpoint is aiming for greater consumer surplus. The EC’s viewpoint is aiming for greater consumer surplus. Operators’ investments would be dangerously harmed. Operators’ investments would be dangerously harmed. Investing in innovations is one important way to differentiate from rivals in the mobile market. Investing in innovations is one important way to differentiate from rivals in the mobile market. International roaming is not an exception. International roaming is not an exception. The continuous fierce battle in the European telecommuni- cations industry is forcing operators to be highly innovative and to offer new services and different price tariffs to consumers. The continuous fierce battle in the European telecommuni- cations industry is forcing operators to be highly innovative and to offer new services and different price tariffs to consumers. Operators are benefiting from the increased number of international travelers and mobile phone users, but face challenges as users find ways to reduce costs and the general cost of telephony is declining. Operators are benefiting from the increased number of international travelers and mobile phone users, but face challenges as users find ways to reduce costs and the general cost of telephony is declining.

Helsinki University of Technology22 Conclusions We are living exciting times. We are living exciting times. Consumers are demanding more and their awareness of the issues related to roaming is constantly improving. Consumers are demanding more and their awareness of the issues related to roaming is constantly improving. The EC is not happy with the current price levels of roaming. The EC is not happy with the current price levels of roaming. Retail roaming prices declined 8% last year. Retail roaming prices declined 8% last year. The European mobile market is highly competitive. The European mobile market is highly competitive. Regulation could seriously harm the entire business. Regulation could seriously harm the entire business. Thorough studies are needed before any regulation is accepted. Thorough studies are needed before any regulation is accepted. The importance of roaming is increasing. The importance of roaming is increasing. With right decisions and favorable developments, the future of roaming will be bright. With right decisions and favorable developments, the future of roaming will be bright.

Helsinki University of Technology23 Keep on roaming Thank You Time for the opponent Questions and discussions