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What the European institutions will not say about the disguised end of roaming surcharges: the end of mobile competition and the rise of mobile tariffs
BREAKING NEWS: DURING THE NIGHT THE TRILOGUE AGREED UPON EURO 7,7 EURO/GIGA TO FALL UP TO 2,5 EURO/GIGA IN THE NEXT YEARS. I REGRETTABLY CONFIRM THE VIEWS EXPRESSED IN MY BELOW POST
In the night of January 31, 2017 representatives of European Parliament, Council and Commission are set to agree on the maximum levels (so-called “wholesale roaming caps”) mobile operators can charge each other for access to their networks in order to allow customers to use services when traveling abroad without paying roaming surcharges (so called roaming like at home).
While everybody agrees that the end of roaming surcharges will be beneficial for all consumers, it is sad to see that the selected mechanism will affect competition and allow a rapid increase of mobile tariffs everywhere in Europe. This is due to the high level of wholesale roaming caps that will be agreed tonight, which is expected to be between 7 and 8,50 Euro per Gigabyte (and with a weak glide path). Since most of retail tariffs in Europe offer one Gigabyte for 1 or 2 euro, it is evident that most operators will not be able to recover their costs when providing roaming to their customers. In order to prevent losses, they should be increasing domestic retail offers, or even stopping providing roaming services. Others may invoke a sustainability mechanism allowing them to continue to apply roaming surcharges in order to be able to pay the wholesale roaming caps.
Big mobile operators will be less affected by the level of wholesale roaming surcharges, thanks to the ability to compensate reciprocally the roaming traffic in the frame of established bilateral agreements (someone call them cartels). However, thanks to the struggles and pains by small and competitive mobile and MVNO operators, big mobile ones will have less competitive pressure and may start to increase price back, as it is already happening by the way.
Even worst: because of a complex mechanism provide by arts. 4.2. and 4.3. of Regulation 2016/2286 (the implementing rules enacted by the European commission last December to regulate in details this matter), the highest the level of wholesale caps, the fewer the roaming traffic exempted by surcharges that users my benefit in case they have an unlimited Internet plan or a pre-paid sim card.
The European institutions are aware of this poisoned effect of the “end of roaming”, however they have not been able to agree on lower wholesale caps due to various reasons.
The European Commission, in lack of credibility, needs to officially declare the end of roaming at all costs, no matter for the side effects. President Juncker took a personal political initiative on this matter in order to be able to set an historical precedent and imposed the end of roaming by way of legislation, although the offices of the Commission (especially the one sin DG Connect) were well aware of the side effects of this result and have been working in order to minimise them. Nevertheless, the political pressure prevailed over reality and basic economics.
The Council, i.e. the governments, is splitted but, at the end, is caught by some Member States (France and Germany) who want to protect their mobile market and oligopoly therein while others (the Mediterranean countries) are willing to continue to monetize some cash brought by summer tourists.
The Parliament has been much more fighting and one should recognize that the rapporteur, the Finnish Miapetra Kumpula-Natri, has been trying to propose more competitive wholesale caps (starting at 4 Euro per Gigabyte in 2017 and down to one Euro in 2020) together with the shadow rapporteurs of the other political parties. The EPP issued a crystal clear press release making clear that wholesale caps should be below retail tariffs, not above.
However, even these commendable efforts have been vain due the intransigence of Council and Commission.
Various Member States, Italy in primis, will have to revise their legislation about conditions and duration of obligations upon ISPs and telecoms to keep record of Internet traffic and telephony conversations. The telecom industry will seek opportunities to diminish such obligations, which normally require huge capex investments in data retention equipments and exhausting communications with public prosecutors. Finally, civil rights organizations will attack in courts existing data retention legislations on the assumption that they are in contrast with the European jurisprudence. All this will happen in a scenario where national governments tend, in contrast with the above, to reinforce internal surveillance for antiterrorism- reasons, rather than relaxing the public security regime.
The above are the main effects of today’s CJEU ruling on a joint-case concerning the legitimacy of data retention laws in EU Member States.
This court decision follows the previous 2014 ruling about the annulment of the European Data Retention Directive. In that case, the CJEU just pointed out the relation between fundamental rights, data protection and retention of personal data by ISP and telecom operators, with the final result that the directive was annulled. The same principles are now applied directly in the context of national legislations on data retention, without major changes.
To tell the true, following the 2014 ruling most of European countries started a review of respective legislations in the matter of data retention, however with the prevailing result to keep alive the existing legislations (save for some minor adaptations). In some countries, however, the local constitutional courts rendered rulings annulling their data retention legislation. Few countries remained completely inactive, amongst them Italy. Today’s ruling will make even more difficult this wait and see strategy.
The main conclusions of todays’ ruling are:
· Member States may not impose a general obligation to retain data on providers of electronic communication services
· Data retention is admissible under EU law only in instances where it is targeted, limited to what is strictly necessary, and subject to conditions (e.g. prior review by an independent authority, localization of data, etc).
The reasoning of the CJEU is streamlined hereinbelow:
· EU law precludes national legislation prescribing general and indiscriminate retention of data.
· Data retention constitute a serious interference with citizens fundamental rights and as such can only be utilised in the fight against serious crime.
· Legislation prescribing a general and indiscriminate retention of data does not require there to be any relationship between the data which must be retained and a threat to public security.
· Such national legislation therefore exceeds the limits of what is strictly necessary and cannot be considered to be justified within a democratic society, as required by the directive, read in the light of the Charter.
· The EU acquis does not however preclude national data retention laws, provided that the retention of data is: (i) Limited to what is strictly necessary (in terms of categories of data retained, persons targeted, retention period, etc); (ii) Defined in clear and precise national legislation; (iii) Constrained by meaningful procedural safeguards; (iv) Based on objective evidence.
· Concerning access to data, Member States must introduce objective criteria in order to define the circumstances and conditions under which the competent national authorities are to be granted access to the data.
· It is essential that access to retained data should, except in cases of urgency, be subject to prior review carried out by a court or an independent authority.
· National data retention legislation must make provision for that data to be retained within the EU owing to its sensitivity.
The resignation of Matteo Renzi following the defeat at the Constitutional Referendum of December 4th, 2016, creates the question as how Italy will ever fill the gap with other developed nations in the matter of digital services and ultra-broadband networks.
Whether you like him or not, there is no doubt that Matteo Renzi has been the first Italian premier showing a concrete interest vis-à-vis Internet and digital infrastructures, putting them at the core of the governmental policy. Before him, Italian governments have been merely dealing with television and broadcasting regulation, while the development of the digital sector was never a priority. The only serious concern of previous governments in the area of telecoms was the ownership of Telecom Italia, whether the company will become a subsidiary of whom. But no Italian premier ever took action or made pressure to force Telecom Italia to invest in high-speed networks. As a result, the traditional Italian telephony company has been relying, longer than other European incumbents, on the old-fashioned and depreciated copper telephony network rather than installing new fibers networks in massive way. No need for that.
With Matteo Renzi, the situation changed dramatically. It might be for a matter of age or personal experiences, the former mayor of Florence never liked very much Telecom Italia and its bills. Renzi launched an ambitious ultra-broadband plan to fill the gap in the vaste provincial and rural areas of Italy (the European Commission cleared the plan last June). Telecom Italia was offered to benefit of that plan and also to buy Metroweb, a company (controlled by Cassa Depositi e Prestiti) installing and offering ultra-broadband networks in big Italian cities. However, government and Telecom Italia did not find a common agreement on important conditions: while Renzi was aiming at strongly modernizing and re-shaping the Italian telecom market, Telecom Italia preferred to keep alive the copper network as much as possible and did not want to hear about structural separation of its network (a possible outcome when combining its network assets with Metroweb). Telecom Italia was probably thinking to be winning at the very end, thanks to the traditional instability and weakness of Italian governments, but it was wrong.
The stallo situation was “sparigliata” (broken) by the entry into the market of Enel, the Italian energy utility which launched a plan for ultra-broadband investments and offered to buy Metroweb. In the meanwhile, the Italian government granted a State-owned company, Infratel, the task to install ultra-broadband networks in rural areas. The emergence of new network operators changed dramatically the landscape: Telecom Italia ended up with “melina” and started to seriously invest in fibers.
Beside that, Renzi’s governments has been strongly intervening in the digital sector with various legislations in the matter of net neutrality, online platforms, sharing economy; they finally appointed as Digitalist Chief Diego Piacentini, a seconded senior executive of Amazon, to coordinate and make progress the digital agenda in Italy. The choice of Matteo Renzi’s about Diego Piacentini was challenged by someone because of potential conflicts of interests: nevertheless, no one could object the professional level of the Chief Digitalis and the need to coordinate the various Italian agencies competent for digital.
One would wonder whether the above was just a transitory acceleration and now Italy will fall back into traditional inertia. The main winner of the Constitutional Referendum, the 5-Stars Movement, has been traditionally relying on the Internet rather then other medias. However, despite some individual positions, it is not clear whether this political party has a concrete and coherent industrial policy for ultra-broadband and the digital sector in general. Irrespective whether they will become a force of government, the 5-Stars Movement and its leader, the comedian Beppe Grillo, should start to think about and say something to the people.
UPDATE: on November 29, 2016 the ITRE committee of the European Parliament endorsed the proposal of MEP Kampala-Natri, with even lower prices for data.
Roaming surcharges will be definitively and completely abolished by mid-2017, according to a new proposal to be announced today by the European Commission, subject to an agreement to be found with Member States. The latter fear that full-end of roaming surcharges will allow any mobile operator to commercialize SIM cards everywhere in Europe (so-called “permanent roaming”) and they are reluctant to that, unless specific measures are established to avoid such cross-border competition. Remarkably, the Commission itself was also trying to avoid permanent roaming until yesterday, but then a corto-circuito happened amongst the wise minds of the Berlaymont (see below).
The end of roaming surcharges may sound good for European citizens, but the proposal at stake may be so disruptive for the European mobile market that many mobile operators (especially small mobile operators and MVNOs) may not be able to continue to provide roaming services abroad because they may incur unrecoverable losses (as explained below). As a consequence of that, most of these operators may be forced to stop providing roaming abroad, or they may decide to increase domestic retail tariffs. As said, most affected operators may be small mobile operators or MVNOs, that is to say the players that traditionally have been providing consumers with most competitive and innovative offers. It is a strange contrappasso that such operators may have to leave the market because of a regulation about the end international roaming, even if they never made profits with such surcharges (unlike big and dominant mobile operators).
The reason for this paradox is that mobile operators have to buy access from foreign networks when providing roaming services to their subscribers traveling abroad (so-called wholesale roaming access). However, such wholesale roaming tariffs are normally much higher than real costs and are in particular higher (by multiples) than domestic wholesale tariffs (the ones paid to provide domestic services in case of MVNO not having a mobile network). This lack of alignment between domestic and roaming wholesale costs becomes disruptive once roaming surcharges disappear by virtue of law and mobile operators have to guarantee the same retail tariff to their customers, irrespective if they are in the home country or abroad.
The only possibility to avoid this disaster would be to align domestic and roaming wholesale costs. The latter are currently capped by Regulation 531/2012, however the current caps are enormously higher than market reality. This is particularly relevant for data/internet data cap, since the current regulated wholesale roaming cap is Euro 50 for a Gigabyte. Last June the European Commission proposed to reduce such price to Euro 8,5 per Gigabyte– a price which however is still much higher than what consumers normally pay for domestic mobile services.
The Commission’s proposal is currently debated between the Parliament and Council. The Assembly’s rapporteur Miapetra Kumpula-Natri (a Finnish socialist MEP) yesterday September 20, 2016 tabled a proposal (still not available online) which honestly goes in the direction of fixing the problem, since she proposes 5 Euro per Gigabyte with a glide path bringing the roaming wholesale cap to 1 euro per Gigabyte in 2021, with a review starting in 2019. If this proposal will be agreed by others MEPs and by the Council, the end of roaming in Europe will not affect competition and consumers will get a double benefit: end of roaming surcharges and still a vibrant competitive mobile market. Kudos to Miapetra if she succeeds.
To explain the full story, one should recall that at beginning of September the European Commission proposed to oblige mobile operators to provide customers with “just” a minimum free-roaming traffic (so called “fair usage”) amounting to 90 days a year. This limitation was due to the high level of wholesale roaming cap (the mentioned 50 Euro, to be reduced to 8,5, per Gigabyte). Nevertheless, this proposal basically covered the needs of 99% of the European citizens, given that, according to official statistics, Europeans travel abroad 12 days a year on average. Thus, the excluded people (that 1% of European people traveling abroad more than 3 months a year) were basically businessmen, rock stars, fashion models and circus staff. Nevertheless, some politicians and consumers organizations complained for the 90 days fair use rules, probably more for a matter of principle than for real understanding of the matter.
The competent EU Commissioners, Ansip and Oettinger, have been defending the ratio of the fair use rule despite populist critics. However, on September 9 the Commission suddenly withdrew the proposal and only later we learned that the action was required by President Juncker. Speculations suggested that he was fearing to get some embarrassment during the imminent State of the Union speech in Strasbourg, or maybe he thought that by doing so he could get a personal political recognition for the end of roaming, despite of the work done by his colleagues Ansip and Oettinger so far. Whatever the political explanation may be, Juncker promised a system enabling EU citizens/consumers to “travel around in Europe […] and feel at home everywhere in Europe thanks to the new roaming rules”. Basically, Juncker was promising permanent roaming, despite the fact the the European Commission have been working hard for months in order to avoid such result.
Remarkably, Juncker also affirmed that Erasums students, who may be abroad for a semester, would not get advantage of the 90-days fair use. Probably he did not know that Erasmus students do not suffer for roaming surcharges, because they are used to get a Sim Card in the country where they go to study for various reasons: being called/call new friends at local tariffs; having a customer relationship with a local mobile operator (to manage subscriptions, charging credit, getting a new Sim Card in case of lost or disfunction; accessing the customer care); benefiting of number portability; and so on. Regrettably, nobody informed Mr. Juncker about that.
The EU Court of Justice has issued its final ruling in the well-expected McFadden case regading the liability of a provider of public WiFi. Accoding to the European judges, the operator of a shop who offers a Wi-Fi network free of charge to the public is not liable for copyright infringements committed by users of that network.
The judgment makes commons sense, otherwise it would be impossibile to provide public wifi throughout Europe, no-one would feel able to take the risk. Nevertheless, the court says that a password (in order to identify the user) may be required by way of injunction in order to secure the network and balance the interest of copyright holders. The concrete impact of the latter requirement shall be still evaluated: the court is not saying that any Wi-Fi network must be secured, however this protection may be required on a case-by-case basis by way of judicial injunction or administrative order. Thus, it will be interesting to see how this CJEU ruling will be interpreted, in light of the recent declaration of President Juncker whereby the “main centers of public lifes” of towns and villages should be covered with public WiFi by 2020 (although most of the industry believes it to be more a “boutade” rather than something serious). Fact is, the more protection and identification instruments are imposed (also considering the features of the technology used), the less public WiFi can realistically develop. Therefore, should the protection requirement become common practice or even a legislative requirement, the expansion of free public WiFi will be at risk, contrary to Juncker’s declarations.
To remind that facts of the case:
- Mc Fadden was running in Germany a lighting and sound system shop in which he offers access to a Wi-Fi network to the general public free of charge in order to draw the attention of potential customers to his goods and services;
- After his network was used by third-parties to commit copyright infringements, an important copyright holder (Sony Music) sued McFadden in front of a German court claiming his indirect liability for the infringement for having failed to secure his network.
According to the CJEU:
- making a Wi-Fi network available to the general public free of charge in order to draw the attention of potential customers to the goods and services of a shop constitutes an ‘information society service’ under the E-Commerce directive (2000/31/EC);
- where the three conditions for Article 12 of the E-Commerce directive (mere conduit exception) are satisfied, a service provider such as Mc Fadden, who providers access to a communication network, may not be held liable;
- consequently, the copyright holder is not entitled to claim compensation on the ground that the network was used by third parties to infringe its rights.
- However, the E-Commerce directive does not preclude the copyright holder from seeking before a national authority or court to have such a service provider ordered to end, or prevent, any infringement of copyright committed by its customers.
- In that context, an injunction ordering the internet connection to be secured by means of a password is a fair balance of rights at play.
- Finally, as per Article 15 of the E-Commerce directive McFadden cannot be obliged to monitor all communications on his networks in search of copyright infringement, nor can termination of connections be considered a proportionate injunctive relief.
What’s the opposite for modernization? Regression? Turning back the clock? Whatever the word may be, the copyright reform (here the leak) which is going likely to be proposed on September 15 by the European Commission does not seem a modernization at all. The main purpose of this initiative seems, despite the ambitions showed in the past, just to countervail the growing power of main OTTs and social platforms vis-à-vis publishers and content industry by empowering the latters with some special negotiation powers. It is very doubtful that this purpose will be ever achieved and the collateral damages may be higher than expected.
The feared provisions on ancillary copyright will grant to publishers a 20-years right about their news and content. In countries like Germany and Spain where a similar attempt was already done, Google (the real objective of these legislative initiatives) reacted by de-indexing the publishers’ news, which then preferred to waive the rights in order not to be obscurated from the search. This means that there we have a problem of competition, not regulation. Now, the proposal by Commissioner Oettinger aims at avoiding such an humiliation but, again, Google will not be obliged to negotiate and could be able to get granted the publication right for free. By contrast, other Internet operators, start-up, emerging social platforms and blogs will face the uncertainty. They may be required to pay the publishers without having the same capability of Google of monetizing the news and without the same negotiation power vis-à-vis the publishers (in Italian: cornuti e mazziati).
It will be interesting to see how publishers may think to use their new weapon against Facebook, a platform which is becoming much more powerful than Google news in aggregating and making availble news.
Beside that, the European Commission is seeking to force hosting sites (Youtube and others) to monitor user-uploads for similarity to works where media companies claim copyright, and empower those companies to prevent the upload from working. Again, also in this case the Commission is granting a specific industry sector (the content and media industry) a tool to balance the negotiation battle with OTTs and big platforms, but it is not clear whether this system will ever work and what could be the collateral damage. To make an example, while Google & Co may negotiate whatever with the content industry while granting the minimum, other operators will not be able to do it. The same issue applies when dealing with sophisticated identification systems: Google/Youtube can put in place such systems, others probably not.
Meanwhile, photographers are left at risk of being sued for copyright infringement by architects when they take a photo with a building in the background; the Commission has passed up the opportunity to introduce a so-called “panorama” exception to fix this problem.
Taken together, these issues point to a legislative proposal which contains little progressive measures for digital citizens and providers of innovative online services. It is regrettable to remember that when announcing its much-lauded Digital Single Market strategy in 2015, the European Commission committed to empower the Internet as an engine of European economic growth. But in today’s copyright “modernisation” proposal, the Commission has instead rocked the legal foundations of Europe’s digital economy – namely the intermediary liability safe harbours of the E-Commerce Directive – and has put a chill on information society innovation.
One may hope that European Parliament and the EU Council will attentively scrutinise and amend the legislative proposal in the coming months.
A detailed analysis of the leaked reform can be found here.
PS: amongst so much darkness, a light of hope. The proposed directive sets fort the right for artists to be duly informed by publishers about the commercial results of their licensed works and, in case of unexpected and extraordinary success, to get an additional compensation. This is a remarkable improvement for young and unknown artists like me 🙂
It’s today’s news that the European Commission has withdrawn, upon request of the President’s office, the proposed measure implementing the roaming phasing-out prescribed by the EU Regulation 2015/2120 which amended the Roaming Regulation 531/2012. The draft measure imposed a minimum obligation of 90 days (per year) to abolish roaming surcharges. Beyond that limit, mobile operators may (it’s their discretion) confirm to abolish roaming surcharges or continue to apply them, although within some caps (4 cents for voice calls and 0,85 cents for Megabyte). This minimum obligation, called also as “fair usage” have attracted criticism by politicians and consumers claiming that the end of roaming surcharges is not achieved yet in Europe.
Before going into details, one should make a few substantial precisions:
– the legal fair usage provision is set by in the Roaming Regulation 531/2012 (art. 6b) as amended by Regulation 2120/2015, thus the withdrawn measure (a subordinated legislative act) is just implementing a principle contained in the primary legislation;
– the Commission has always stated that roaming surcharges would have never been completely abolished, because the Commission itself wanted to avoid the so-called “permanent roaming”, that is to say a situation whereby consumers may roam abroad indefinitely, with the result that he/she could buy a sim card in a country and use it abroad without limitation of traffic of time. In such a scenario, a consumer could therefore choose, as mobile provider, any mobile operator in the EU, not just the ones of his country of residence. This option is considered by the EU, believe it or not, an abuse (see art. 3, par. 6, of Regulation 531/2012, as amended by Regulation 2120/2015);
– Commission and Parliament were very well aware of the above. Therefore, it is a bit curious that now they are complaining or regretting. My impression is that this matter may be used to get political visibility, despite the facts that correct decisions could have been taken earlier. The intervention of the Junker Cabinet is not accidental: the head of cabinet of the president is Martin Selmayr who, while serving Commissioner Reding in the mandate 2004-2008, proposed the end of roaming and builded his career on it;
– It is true, however, that in the past some EU Commissioners (especially Nellie Kroes, the predecessors of the current Digital Agenda Commissioner) and politicians have been publicly emphasizing so much their contribution to the roaming reform that they generated also the impression in the public opinion that the roaming surcharges would finish soon and completely. It was nor false neither completely true , but this is politics, folk!
The most puzzling part of this story is that people may think that the end of roaming is just a matter of political will and common sense, that roaming surcharges could finish by just agreeing and writing down a ban. The reality is different, it is not a matter of shaking hands: roaming surcharges exist because of market structures (and costs), therefore what the legislator can and should do is intervening upon such market structures in order to prevent the conditions for roaming surcharges to exist.
To be more clear: if mobile services have to be priced at the same tariffs without distinction at home (domestic services) and abroad (roaming services), also the underlining costs should be aligned. In fact, if the cost of productions of one minute of domestic voice is 1 Eurocent, in order to maintain that price abroad (as roaming services) also the costs abroad should be more or less the same. The “cost abroad” is the so called “wholesale roaming access”, that is to say the tariff the mobile operators pay when buy access to foreign mobile networks to permit their customers to roam over there. This is unavoidable, because no mobile operator, neither a large corporation like Vodafone, own 28 mobile networks throughout Europe.
But what happens instead? The reality is that domestic and roaming access costs are currently non-aligned, with roaming costs to be sometimes 10 or 15 times multiples of domestic costs! Under such conditions, it is not possible to abolish roaming surcharges: how could a mobile operator replicate abroad a domestic offer when the costs abroad are 10 or 15 tome higher? It would go under-costs.
Why this tremendous costs discrepancy exists? This is an historical sinn of dominant mobile operators (mainly Telefonica, DT, Telecom Italia, Orange and Vodafone, but not only) which have been using roaming access costs as a barrier against foreign operators trying to attack their domestic markets. If roaming access costs would be lower, a small mobile or MVNO operator from abroad could sell Sim Cards to the domestic market competing with local offers. This scenario is called “permanent roaming”: in other words, a customers could buy a Sim Card form whoever mobile operator in the EU and roam everywhere throughout the 28-countries Union. Big mobile operators want to avoid this scenario because they prefer to defend isolated and separated domestic mobile markets, where “competition” is limited by only 3 or 4 mobile operators holding the networks (due to scarcity of spectrum).
What is doing the European Commission against this? It’s a bit schizophrenic, to tell the true. One one side, the Commission is supporting the end of roaming surcharges, but on the other side it does not take the right measure to align domestic and roaming wholesale costs. In fact, in June 2016 the European Commission tabled a proposal for reducing wholesale costs which is clear insufficient to achieve the scope. To make an example, the roaming wholesale cap for Internet is 0,85 Eurocent per Megabyte, a figure which is much higher than retail domestic prices. Also the wholesale costs for voice (4 Eurocent) is disproportionated. This disgraced proposal is now in the hands of Parliament and Council which have the opportunity to take the right technical decision, i.e. lowering the wholesale roaming costs down to the level of domestic ones, rather than continuing with populist declarations and initiatives.