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 Innovation & Competition Policy Tags & Topics

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 on this topic

Blog Post

Zsolt Darvas
DSC_0798
dsc_1000

The UK’s Brexit bill: what are the possible liabilities?

The EU-UK financial settlement will be a complex part of the Brexit negotiations. Here the authors estimate that at end-2018 the EU will have outstanding commitments and liabilities totalling €724bn. Most of these relate to spending after the UK’s likely departure date, but are tied to commitments made during the UK’s EU membership.

By: Zsolt Darvas, Konstantinos Efstathiou and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: March 30, 2017
Read article More on this topic

Blog Post

Zsolt Darvas
DSC_0798
dsc_1000

Brexit bill negotiators must answer these 12 questions

Is Brexit a divorce, or is the UK leaving a club? This is the first question to answer as negotatiors discuss the key aspects of the EU-UK financial settlement. The authors present various scenarios, and find that the UK could be expected to pay between €25.4 billion and €65.1 billion. But the final cost can only be calculated after extensive political negotiations.

By: Zsolt Darvas, Konstantinos Efstathiou and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: March 30, 2017
Read article Download PDF More on this topic

Working Paper

WP_2017_03 cover

Divorce settlement or leaving the club? A breakdown of the Brexit bill

To bring transparency to the debate on the Brexit bill and to foster a quick agreement, the authors of this Working Paper make a comprehensive attempt to quantify the various assets and liabilities that might factor in the financial settlement.

By: Zsolt Darvas, Konstantinos Efstathiou and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: March 30, 2017
Read article More by this author

Blog Post

Giuseppe Porcaro

29 charts that explain Brexit

From financial services to the creative industry, from trade to migration, this selection of charts maps out the troubled waters of Brexit, and provides a compass through blogs and publications Bruegel scholars have written on the topic.

By: Giuseppe Porcaro Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: March 28, 2017
Read article More on this topic More by this author

Blog Post

Scott Marcus

High expectations for 5G confront practical realities

The next wave of mobile network innovation is provoking great excitement in the industry. And indeed, there is substantial potential for improvement. However, the exact form of the technology and the appropriate policy support are still far from clear. And we should beware of over-ambitious promises about the impact and uptake of new network technologies.

By: J. Scott Marcus Topic: Innovation & Competition Policy Date: March 14, 2017
Read article More by this author

Parliamentary Testimony

House of Lords

Brexit: EU budget

On 25 January 2017 Zsolt Darvas appeared as a witness at the House of Lords Select Committee on the European Union, Financial Affairs Sub-Committee.

By: Zsolt Darvas Topic: European Macroeconomics & Governance, House of Lords, Testimonies Date: March 7, 2017
Read article More on this topic

Blog Post

Schoenmaker pic
Nicolas Véron

Brexit should drive integration of EU capital markets

Brexit offers EU-27 countries a chance to take some of London’s financial services activity. But there is also a risk of market fragmentation, which could lead to less effective supervision and higher borrowing costs. To get the most out of Brexit, the EU financial sector needs a beefed up ESMA.

By: Dirk Schoenmaker and Nicolas Véron Topic: Finance & Financial Regulation Date: February 24, 2017
Read article More on this topic

Blog Post

unnamed
Simone Tagliapietra

Brexit goes nuclear: The consequences of leaving Euratom

The UK Government has confirmed that it will withdraw from Euratom. But what does Euratom actually do? And what will happen when the UK leaves? The authors find major risks, potential costs and open questions.

By: Enrico Nano and Simone Tagliapietra Topic: Energy & Climate Date: February 21, 2017
Read article More on this topic

Blog Post

Zsolt Darvas
DSC_0798
dsc_1000

The Brexit bill: uncertainties in the estimate of EU pension and sickness insurance liabilities

Pension and sickness insurance liabilities for EU staff could be an especially contentious part of negotiations on an EU-UK financial settlement: the “Brexit bill”. This post looks behind the calculation of the alleged cost of pension benefits and concludes that it may be less than half of what it seems.

By: Zsolt Darvas, Konstantinos Efstathiou and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: February 17, 2017
Read article More on this topic

Blog Post

Zsolt Darvas
DSC_0798
dsc_1000

The UK’s Brexit bill: could EU assets partially offset liabilities?

The ‘Brexit bill’ is likely to be one of the most contentious aspects of the upcoming negotiations. But estimates so far focus largely on the EU costs and liabilities that the UK will have to buy its way out of. What about the EU’s assets? The UK will surely get a share of those, and they could total €153.7bn.

By: Zsolt Darvas, Konstantinos Efstathiou and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: February 14, 2017
Read article More on this topic

Blog Post

MariaDemertzis1 bw
unnamed

The impact of Brexit on UK tertiary education and R&D

In this blog post, we look at the impact of Brexit on UK’s education and research and development sectors in terms of students and staff, as well as funding.

By: Maria Demertzis and Enrico Nano Topic: European Macroeconomics & Governance Date: February 14, 2017
Read article Download PDF More on this topic

Policy Contribution

PC 17 04

Brexit and the European financial system

Brexit will lead to a partial migration of financial firms from London to the EU27. This Policy Contribution provides a comparison between London and four major cities that will host most of the new EU27 wholesale market: Frankfurt, Paris, Dublin and Amsterdam. It gives a detailed picture of the wholesale markets, the largest players in these markets and the underlying clearing infrastructure. It also provides data on professional services and innovation.

By: Uuriintuya Batsaikhan, Robert Kalcik and Dirk Schoenmaker Topic: Finance & Financial Regulation Date: February 9, 2017
Load more posts