• Organisation for Economic Co-operation and Development (OECD)

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09 April 2010This report found international mobile roaming services (IMRS) prices to be unreasonably high, considering the underlying costs, and identified some of the causes for this price level.

This report aims to examine and suggest possible solutions and policy options that may address the problem of high IMRS charges. It assesses their viability and possible side effects.

Report Summary

The first report on international mobile roaming services (“International Mobile Roaming Charging in the OECD Area”, DSTI/ICCP/CISP(2009)8/FINAL1), provided information on market development and pricing of International Mobile Roaming Services (IMRS) in the OECD area. It found prices to be unreasonably high, considering the underlying costs, and identified some of the causes for high roaming prices. High wholesale charges, the fact that consumers do not seem to take into account roaming services when choosing a bundled mobile offer, lack of contestability and low consumer awareness of roaming prices and of substitutes were found to be among the reasons for this price level. This report is a follow-up that proposes solutions to the described problems, and assesses their viability and possible side effects.

The development of on-net offers by operators with large footprints is a desirable market-driven solution to the problem of high wholesale roaming charges. This response was referred to as “internalisation” in the first roaming report. Although trans-national footprints are needed in order to avoid wholesale charges, on-net offers based on the internalisation of wholesale costs and traffic steering to subsidiaries are a natural solution to launch reasonably priced and convenient retail roaming offers. However, the number of operators with large footprints remains low, and some on-net offers are likely to be focused on roaming in a particular region (e.g. Zain in East Africa). Due to competition dynamics at the retail level and the fact that roaming services are an element of the mobile services bundle, trans-national operators are likely to decide not to lower retail prices in order to retain high revenues from non priceelastic customers.

In the event of a marketplace dominated by few operators with large footprints, smaller operators may be put aside, due to their inability to internalise wholesale roaming costs. Bigger players may impose high wholesale charges and make them unable to launch competitive retail roaming offers. The natural response for smaller operators is to form alliances in order to get substantial wholesale rate reductions. Although such alliances have existed for some time and did not prove to be very successful in bringing down overall wholesale costs, they may be again a valid response in a new scenario with increased operator consolidation and the presence of a higher number of on-net offers. As a last resort, regulatory intervention may be warranted to allow for improved market contestability.

Another way forward to improve market contestability in roaming services was termed “localisation” in the first report. Global Mobile Virtual Network Operators (global MVNOs) are those operators that gain access to local airtime on local terms and conditions, thus avoiding wholesale roaming rates. Even though a number of global MVNOs have entered the market during the last few years, this option still remains not very widespread. It faces some important drawbacks, such as customers being reluctant to have two mobile service providers, lack of brand recognition, etc. They also face serious challenges to expand their customer base such as low bargaining power compared to “national” MVNOs, and relatively low volumes to justify investments. However, global MVNOs remain as an alternative to provide better market contestability and this report supports enhancing their visibility and consumer awareness. National regulatory frameworks as well should enable global MVNOs to develop by allowing access to airtime on local terms and conditions.