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 More by this author

Blog Post

What 2019 could bring: A look inside the crystal ball

Economic performance prospects in Europe, the US and Asia in 2019. We start off by reviewing commentaries and predictions about the euro zone, which many commentators expect to perform below potential as uncertainties continue to dampen a still robust recovery.

By: Michael Baltensperger Topic: European Macroeconomics & Governance, Global Economics & Governance Date: January 14, 2019
Read article More on this topic More by this author

Blog Post

EU budget implications of a no-deal Brexit

A no-deal Brexit would mean the UK’s contributions to the EU budget fall to zero as of March 30th 2019. The author here calculates an estimate of the budget shortfall that would have to be covered in this case, and how the burden would fall across different member states.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: January 14, 2019
Read article Download PDF More on this topic More by this author

Policy Contribution

The implications of no-deal Brexit: is the European Union prepared?

The author, based on a note written for the Bundestag EU Committee, is exploring the possible consequences of a no-deal Brexit for the EU, assessing preparations on the EU side and providing guidance on the optimal strategy for the EU, depending on the choices made by the United Kingdom.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: January 14, 2019
Read article Download PDF More by this author

Parliamentary Testimony

German Bundestag

The implications of no-deal Brexit: is the EU prepared?

Hearing on Brexit in the EU Committee of Bundestag on 14 January 2019, exploring the possible consequences of a no-deal Brexit for the EU and assessing preparations on the EU side.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance, German Bundestag, Testimonies Date: January 14, 2019
Read article More on this topic More by this author

Blog Post

Brexit: Now for something completely different?

The life of Brexit. After a week of ECJ rulings, delayed votes, Theresa May’s errands across Europe and the vote of no confidence, we review the latest economists’ opinions to try to make sense of what has changed and what hasn’t.

By: Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: December 17, 2018
Read article More on this topic

Opinion

How a second referendum could be the best way to overcome Brexit impasse

A new vote based on the revocation (or not) of Article 50 would give the UK government a clear signal to proceed in one direction or another, and thus trim down the number of options being touted – most of which are unworkable as things stand.

By: Maria Demertzis and Nicola Viegi Topic: European Macroeconomics & Governance Date: December 14, 2018
Read article More on this topic More by this author

Blog Post

The Brexit withdrawal agreement

On November 14th the UK government cabinet approved the draft text of the withdrawal agreement, the deal reached between EU and UK negotiators. The decision was followed the next day by the resignations of several members of Parliament. We review the first reactions in the blogosphere.

By: Silvia Merler Topic: European Macroeconomics & Governance Date: November 19, 2018
Read article More on this topic More by this author

Podcast

Podcast

Director’s Cut: Options yet open for a Brexit deal

Robin Niblett, director of Chatham House institute, joins Bruegel deputy director Maria Demertzis for an assessment of what progress can be reasonably expected from the final months of the Brexit negotiations.

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: November 7, 2018
Read article More on this topic More by this author

Blog Post

Post-Brexit transfers of personal data: The clock is ticking

The UK government would like to keep EU-UK data transfers largely the same following the country's separation from the EU. But talks have yet to even commence on a future data-sharing relationship, and a landmark European Court of Human Rights ruling in September bodes poorly for the UK's future status under the EU’s General Data Protection Regulation.

By: J. Scott Marcus Topic: European Macroeconomics & Governance Date: November 7, 2018
Read article More on this topic More by this author

Blog Post

Digesting the Salzburg Summit

As the moment of truth for Brexit negotiations is approaching, with the October European Council around the corner, we review opinions on the outcome and meaning of the Salzburg summit.

By: Silvia Merler Topic: European Macroeconomics & Governance Date: October 1, 2018
Read article More on this topic More by this author

Podcast

Podcast

Backstage: Brexit consequences for EU’s ICT policy

Bruegel senior fellow Scott Marcus welcomes former European Regulators Group chairman Kip Meek to explore the consequences of Brexit for ICT policy-making in Europe.

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: September 25, 2018
Read article More by this author

Parliamentary Testimony

European Parliament

Brexit and industry & space policy

Testimony before the European Parliament's Committee on Industry, Research and Energy (ITRE).

By: Reinhilde Veugelers Topic: European Parliament, Innovation & Competition Policy, Testimonies Date: September 25, 2018
Load more posts