MEMO/04/198

Brussels, 26 July 2004

International Roaming

What is international roaming?

International roaming is defined as the ability for a customer to automatically make
and receive voice calls, send and receive data, or access other mobile services
when travelling outside the geographical coverage area of its home network by
means of using the infrastructure of a “visited” network. A “roamer” can thus make
calls back to its home country, call a local number in the visited country or call a third
country. At the same time the roamer can send and receive text messages, faxes,
use GPRS-based services and have access to any other value-added text services.
International roaming thus provides subscribers with the possibility to use their
mobile phone outside their own country, where their home network operator has no
coverage. Subscribers normally have the possibility both to make (outgoing) and
receive (incoming) calls.
In order to provide their customers with the possibility of receiving and making calls
while roaming abroad, MNOs need to conclude international roaming agreements
with MNOs in the visited country. The technical and contractual conditions for
concluding and implementing international roaming agreements between GSM
operators have been standardised by the GSM Association.
Thus, when a MNO offers access to its network to another foreign MNO in order to
enable the latter’s subscribers to make and receive calls while abroad, it provides
wholesale international roaming services to the foreign MNO. The foreign MNO will
then charge, at the retail level, its own subscribers international roaming charges for
the usage of their phone abroad. Wholesale roaming charges have thus a direct
impact on the retail prices paid by consumers when roaming abroad.

Charging principles
Under the rules of the GSM Association, when a roaming subscriber uses the
services of a visited network, the roaming subscriber’s home network is responsible
for payment of all charges incurred for services used in accordance with the
published “Inter-Operator-Tariffs” (the so-called “IOTs”) of the visited network. Prior
to 1998, wholesale roaming charges were calculated on the basis of the so-called
“Normal Network Tariff” (NNT) of a visited MNO. The NNT was based on the
standard user tariff charged by MNOs at the retail level. In 1995 visited MNOs
started charging foreign MNOs a multiplier up to a maximum of 1.15 to the NTT.
This cap was supposed to reflect subscription charges that would otherwise have not
been reflected in the wholesale roaming charges for outgoing calls.
From 1998, a new wholesale roaming tariff was introduced by the GSM Association,
the “Inter-Operator Tariff” (“IOT”), which is the tariff the visited network levies on the
home network for the use of the visited network. The introduction of the IOT
dissociated wholesale roaming prices from the standard retail tariffs applied by the
visited network. Thus, the competitive conditions prevailing on the retail market were
no longer reflected on the wholesale market for international roaming.

Use of a phone abroad: network selection is essentially random

Up to date a GSM operator would have concluded roaming agreements with all
operators in another country in order to ensure to its customers the best possible
coverage outside his home network. In principle, the SIM card of a phone would
contain a list of “preferred” foreign networks in order to attempt to make a priority
selection among all available networks in a given country.
However, until very recently, the way in which a handset would chose a network
when it roamed was not straightforward. Although there were a number of
parameters involved, there had been no determinative rules as to which network was
chosen in any particular circumstance. In particular, if the signal of the preferred
network was for whichever reason lost and the mobile handset picked up the signal
of another network, it would remain on the latter without reverting back to the
preferred network. When the phone was switched on and off, the phone would look
again for its home network and then for the network it was last registered on. As a
result, in that situation, the roaming customer was not directed towards the preferred
network until his next roaming trip when the above initialisation sequence was
initiated again.
Although a roaming customer could try to manually select the preferred network and
thus override the automatic selection and registration performed by the SIM card,
there is little evidence to suggest that roaming customers in their majority, were (or
are still today) aware of or engaged in manual network selection.
Therefore, network selection has been up until very recently random. The fact that
foreign MNOs could not successfully direct all if not most of their outbound roaming
traffic onto any of the four UK networks also explains why in the past MNOs had no
real incentives to offer lower IOTs or discounts and generally compete on prices
A number of recent technological developments indicate that in the near future
foreign MNOs might be in a position to effectively direct a significant proportion of
their roaming traffic onto specific visited networks. Advanced SIM cards and new
network functions (deployment of Over-The-Air – OTA –platforms) in combination
with more intelligent handsets might soon enable a foreign MNO to “follow” closely
his roamers abroad and ensure that their phones are always registered with a given
preferred network. These recent technological developments are behind the
formation last year of two strategic mobile alliances among a number of MNOs
aiming to counteract the perceived threat of roaming traffic being directed towards
group companies such as the Vodafone group of companies.

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The Strategic alliances
On 11 December 2003, Telefonica (Spain), Telecom Italia (Italy), T-Mobile
International (Germany) and Orange (France) and all their respective affiliates,
including T-Mobile UK and Orange UK entered into a cooperation agreement for the
creation of a strategic alliance.
1
Under the brand name of “Freemove Alliance” , the alliance partners offer
tinternational roaming services -- in particular pan-European mobile services to
multinational customers.
The second competing strategic alliance was launched in October 2003 under the
brand name of “The Starmap Mobile Alliance”. It currently has nine members:
Amena (Spain), O2 (Germany, the UK and Ireland), One (Austria), Sonofon
(Denmark), Pannon GSM (Hungary), Sunrise (Switzerland), Telenor Mobil (Norway)
2
and Wind (Italy).
Both alliances aim to provide roaming subscribers seamless advanced mobile
services, including GPRS and MMS roaming, as well as access to familiar services
such as voice-mail and short-codes whilst travelling in other alliance countries.
Traffic direction is seen as a key technology in ensuring that roaming traffic would
effectively be directed onto the each alliance’s networks

The Commission’s review of the international roaming markets

Apart of the investigation of the UK wholesale international roaming market, the
Commission is currently also investigating the competitive conditions prevailing on
the German wholesale market for international roaming. In parallel the Commission
is also looking into the notifications made by the GSM Association with respect to the
Standard Terms for International Roaming Agreements (STIRA) in relation not only
to voice communications but also in relation to GPRS-based data communications
including SMS and MMS.
Given that wholesale international prices constitute a significant input for determining
the level of the retail roaming prices paid by users of mobile services, the
Commission will address complaints from consumers as to persistently very high
retail roaming charges primarily at wholesale level and only failing this at retail level.
The Commission expects that, as a result of these proceedings, more competition
will take place and that the overall roaming charges applied to consumers will soon
be lowered in the European Union to more competitive levels.
According to the 9th Annual Telecoms implementation report there were 305.6 million
mobile users in the EU as at 1 August 2003. The number of mobile subscribers has
increased and 81% of EU citizens now have a mobile telephone while in a number of
Member States the penetration rate is close to 90%. Europeans are travelling more
and more each year and mobile subscribers are using their phones abroad as
frequently as they do in their own home country. The high level however of the
international roaming prices contrasts sharply with the much lower tariffs applied for
domestic calls.

1
http://www.freemovealliance.net/
2
http://www.starmapmobile.com/

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Ex ante Regulation of the wholesale market for the provision
international roaming services
The Annex to the Commission Recommendation on relevant markets susceptible to
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ex ante Regulation recommends National Regulatory Authorities (NRAs) to analyse
pursuant to the new regulatory framework for electronic communications services
and networks the “wholesale national market for international roaming on public
mobile networks”.
Although the new regulatory framework entered into force in 25 July 2003, none of
the NRAs has so far carried out a market analysis of this market. The Commission’s
market definition with regard to the UK market is therefore without prejudice to the
market analysis that NRAs will carry out in the future.
This is true both for the question whether the wholesale market for the provision of
international roaming services should be defined as being network specific or as
encompassing all existing GSM networks, and as to the imposition of an appropriate
remedy on MNOs found to have Significant Market Power (SMP). Indeed, their
market analysis, contrary to the current proceedings will deal exclusively with the
future market situation.

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OJ L 114, p. 45 of 8.5.2003