Blog Post

Mobile roaming, Brexit, and unintended consequences

The intermediate and long-term consequences of the UK “Brexit” referendum of 23 June 2016 are numerous and far-reaching. There has been much discussion of the impact on financial services, but very little to date on the likely implications for telecommunications regulation.

By: Date: June 28, 2016 Topic: Innovation & Competition Policy

The impacts of Brexit on mobile roaming are by no means large in overall economic terms, but they provide an example of the breadth of ripple effects that can be expected after the UK referendum result, and also of the degree to which the end results are difficult to predict with certainty.

The overall approach to regulation of telecommunications within the UK will not necessarily change much. The Regulatory Framework for Electronic Communications (RFEC) that the European Union enacted in 2002 was largely based on procompetitive UK ideas in the first place.

Certain international aspects are, however, likely to change. The most obvious examples are (1) the relationship of the UK and its national regulatory authority (NRA) Ofcom to its European counterparts; (2) the wholesale payments that UK network operators make to their European counterparts for interconnection; and (3) wholesale and retail arrangements between the UK and the European Union. Our focus here is on roaming.

If the UK were to become a member of the European Economic Area (EEA) (comprised of all EU Member States plus Norway, Liechtenstein, and Iceland), the applicability of the European regulatory framework  for electronic communications would be clear.

Joining the EEA could be expected to oblige the UK to accept most of the burdens of EU membership (including freedom of movement), with fewer of the privileges than the UK currently enjoys. In the discussion that follows, we assume that a UK membership in the EEA will not happen, but it cannot be categorically ruled out.

The UK might still selectively conclude bilateral agreements with the EU (and also with its member states). The implications for telecommunications regulation would depend on exactly which agreements were concluded.

Since Switzerland is in precisely this position (having rejected membership in the EEA in a referendum in 1992), it is perhaps useful to draw a few comparisons.

The Swiss choose to voluntarily participate in the EU’s Board of European Regulators of Electronic Communications (BEREC). In this role, they also participate voluntarily in BEREC’s collection of statistics on international mobile roaming; however, they are not subject to the various EU Roaming Regulations, and consequently do not benefit from them.

The prices that consumers pay for roaming reflect wholesale international payments between the mobile network operators, since the actual service has to be provided in the visited country. Among EU/EEA members, these payments at wholesale level are subject to price caps. Since Switzerland is neither an EU nor an EEA member, Swiss mobile operators are not entitled to the benefits of these price caps. If the EU were to offer these advantageous wholesale arrangements to a third country such as Switzerland or the UK in the absence of a comprehensive free trade agreement, it would likely raise WTO concerns.

Since the higher prices that Swiss mobile operators pay are a real cost, their retail prices are also higher than for mobile network operators in EU/EEA countries, as is visible in the figure below. The high price of roaming in the EU has been a constant source of irritation for Swiss consumers, and has frequently been featured in the Swiss press. One can argue that their retail prices in Switzerland are elevated more than the wholesale charges would strictly require; be that as it may, it is clear that the prices of Swiss mobile network operators cannot be the same as those of mobile network operators in EU/EEA countries.

As long as Swiss mobile network operators (MNOs) pay more at wholesale level for roaming in the EU/EEA than MNOs in EU/EEA Member States, retail prices in Switzerland for EU/EEA roaming can be expected to remain higher than those in EU/EEA Member States. It appears that the UK will shortly find itself in the same position.

Figure 1. Average retail price per MB of roaming data.[1]

Source: BEREC (2016)

JSM 28 6 Fig1

The EU is expecting to migrate over the next year to so-called Roam Like at Home (RLAH) arrangements over the next year, where international roaming prices will be the same as domestic prices. If this indeed comes into play, roaming prices will be even lower than they are today; however, the basic linkages between wholesale charges and retail prices will remain.

To the extent that UK mobile network operators such as Vodafone and O2 (Telefónica) have international affiliates, they have some ability to internalise these wholesale costs. It is nonetheless the case that no MNO covers all EU/EEA Member States; moreover, the ability of MNOs to steer traffic onto their preferred network in the Visited Country is good, but not perfect. The cost of the roaming service will in the end be somewhat higher for UK mobile network operators than for EU/EEA mobile network operators.

Taking all of this into account, it is a safe bet that UK residents with UK mobile subscriptions will pay more for use of the mobile services when roaming in EU/EEA countries than will EU/EEA residents.

[1] Based on both prepaid and postpaid usage in Q2 2015.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

View comments
Read article

Blog Post

India’s trade ties with the UK and EU

As EU and Indian leaders meet in Delhi, we look at the figures on trade. The UK’s place in the relationship warrants special attention. EU-India trade has more than tripled since 2000, but UK-India trade is largely static. The shift is especially noticeable for EU exports to India, where the UK share has dropped from 29% to 10%.

By: Maria Demertzis and Alexander Roth Topic: European Macroeconomics & Governance, Global Economics & Governance Date: October 6, 2017
Read article More on this topic

Blog Post

Can roaming be saved after Brexit?

The referendum where UK voters chose to exit the European Union has many unanticipated consequences. One that is gaining visibility in the UK just now is the impact of Brexit on mobile roaming arrangements. How might the UK maintain roaming arrangements with the EU in the event of a hard Brexit?

By: J. Scott Marcus and Robert G. Clarke Topic: Innovation & Competition Policy Date: September 21, 2017
Read article Download PDF More by this author

Policy Contribution

Dutch Senate

Europe’s fourfold union: Updating the 2012 vision

The depiction of the euro area/European Union (EU) as a ‘fourfold union’ emerged in the first half of 2012 at the height of the euro-area crisis. In the past half-decade, Europe’s financial union has been significantly strengthened but remains incomplete and is challenged by Brexit. No consensus has been found on fiscal union and economic union has not made material progress, but political union might have advanced further than many observers realize.

By: Nicolas Véron Topic: Dutch Senate, European Macroeconomics & Governance, Finance & Financial Regulation, Testimonies Date: September 21, 2017
Read article Download PDF More on this topic

External Publication

Review of EU-third country cooperation on policies falling within the ITRE domain in relation to Brexit

What is the possible future relationship between the EU and the UK in light of Brexit? The report provides a critical assessment of the implications of existing models of cooperation between third countries and the European Union on energy, electronic communications, research policy and small business policy.

By: J. Scott Marcus, Georgios Petropoulos, André Sapir, Simone Tagliapietra, Alessio Terzi, Reinhilde Veugelers and Georg Zachmann Topic: European Macroeconomics & Governance Date: July 5, 2017
Read article More on this topic

Blog Post

Can EU actors keep using common law after Brexit?

English common law is the choice of law for financial contracts, even for parties in EU members with civil law systems. This creates a lucrative legal sector in the UK, but Brexit could make UK court decisions difficult to enforce in the EU. Parties will be able to continue using English common law after Brexit, but how will these contracts be enforced? Some continental courts are preparing to make judicial decisions on common law cases in the English language.

By: Uuriintuya Batsaikhan and Dirk Schoenmaker Topic: European Macroeconomics & Governance Date: June 22, 2017
Read article More by this author

Parliamentary Testimony

House of Commons

Exiting the European Union Committee

On 19 April 2017 Zsolt Darvas appeared as a witness at the Exiting the European Union Committee, the House of Commons, United Kingdom.

By: Zsolt Darvas Topic: European Macroeconomics & Governance, House of Commons, Testimonies Date: June 20, 2017
Read article More on this topic More by this author

Blog Post

Brexit and the future of the Irish border

The future of the Irish land border has been thrown into uncertainty by Brexit. The UK's confirmation that it will leave the EU's single market and customs union implies that customs checks will be needed. However, there is little desire for hard controls from any of the parties involved. This is especially true for Theresa May's potential partner, the DUP. Creative solutions are needed to reach a solution.

By: Filippo Biondi Topic: European Macroeconomics & Governance Date: June 19, 2017
Read about event More on this topic

Past Event

Past Event

Substance requirements for financial firms moving out from the UK

In the run-up to Brexit, UK-based financial firms are considering how to organize their operations across the future divide between the UK and EU27. This event will discuss the regulatory requirements on how self-sustaining the operations in the EU should be, and implications for the single market and third countries.

Speakers: Gerry Cross, Simon Gleeson and Nicolas Véron Topic: Finance & Financial Regulation Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 2, 2017
Read article More by this author

Blog Post

Pharmaceutical industry at risk from Brexit

Pharmaceuticals are a hugely important industry for the EU and the UK. The sector creates thousands of jobs, billions of euros in exports, and is Europe’s most research-intense industry. But will Brexit mean for pharma? Border delays, disruption to R&D and regulatory divergence all pose hazards.

By: Jianwei Xu Topic: European Macroeconomics & Governance Date: May 31, 2017
Read article More on this topic

Blog Post

UK economic performance post-Brexit

What’s at stake: Almost a year after the UK voted to leave the European Union, its economic performance has showed mixed results. The risks of a Brexit-induced recession do not seem to be materialising. On the contrary, up until the end of 2016 the UK saw a continuation of strong consumer spending and strong output in consumer-focused activities. However, the UK economy is showing signs of slowing down in the first quarter of 2017, with weak growth in the services sector and business investments. In addition, strong consumption growth started to cool down as individuals’ purchasing power declines due to a weaker exchange rate. This leads to a question whether it is the beginning of the Brexit slowdown. We review the contributions made on this topic in the last year.

By: Uuriintuya Batsaikhan and Justine Feliu Topic: European Macroeconomics & Governance Date: May 15, 2017
Read article More on this topic More by this author

Blog Post

International arbitration is the way to settle the UK’s Brexit bill

The UK-EU financial settlement risks becoming a toxic stumbling block in Brexit negotiations. But there are actually much more important issues to discuss. To diffuse the issue, both sides should agree to independent international arbitration.

By: André Sapir Topic: European Macroeconomics & Governance Date: May 11, 2017
Read article More on this topic More by this author

Opinion

Brexit will change millions of lives. Our leaders must do more than posture

From the land border with Ireland to expats’ pension rights, there is much to negotiate.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: May 8, 2017
Load more posts