Research Notes

13 things the EU forgot to say about the new “Roam Like at Home” regulation starting June 15th and its impact to 500 million Europeans

Let’s acknowledge that the EU is in the midst of an historic crisis and an increasing number of Europeans are skeptical about European integration and EU leadership in Brussels. Over recent years, panic has spread among politicians, especially among the most ardent EU supporters, who cannot relate to criticism of what is happening in the EU. Simply put, the EU system is desperate for stories and policies that will make the EU look good in Europeans’ eyes. EU officials believe roaming will make the Union popular again, or at least remind voters that Brussels is good for something.

The project to offer “Roam Like at Home” from June 15 is probably the biggest media stunt in the history of the EU and a risky gamble that may well backfire. This note describes that the EU system is not telling the truth about “Roam Like at Home” and its potential impact to 500 million Europeans. This note also documents how EU officials have imposed gag orders against mobile operators, industry experts, and the press in the information they can share with the public. Strand Consult’s goal is to create full transparency to the public about what happens behind closed doors in the EU, including the correspondence, documents and notes Strand Consult has received from EU officials.

Transparency is essential for democracy, and taxpayer-funded EU bureaucrats have a duty to answer questions about EU policy and decisions. Strand Consult insists that the material information about the extensive new roaming regulation – the bad news, not just the good news pronouncements, needs to be revealed. The regulation will create real changes to the price of mobile communications as experienced by 500 million Europeans. In short, the new regulation is a gift for well-to-do Europeans on travel or holiday, an expense that will be borne by the poor single mother with three children who will experienced a higher mobile bill.

Over the years Strand Consult has written a number of notes on the EU’s roaming policy, We predicted what would happen by harmonizing prices across the EU without accounting for that the underlying costs. While technology allows mobile service to feel seamless, mobile traffic and conditions vary considerably from country to country, as each nation is subject to its own set of laws, frequencies, contract life and conditions, operating costs etc. Moreover the profitability of operators varies,  especially between mobile network operators and MNVOs.

The EU claims that the regulation will be “cost-neutral.” This euphemism means that operators must “suck it up”, that is they need to figure out how to cover the roaming cost of a new user on its network without adding a fee to the said user. To comply with the regulation starting 15 June, mobile operators will raise the national prices, which is already underway in a number countries.

13 things the EU forgot to say about “Roam Like at Home” to 500 million Europeans.
Strand Consult has read both what the EU has published publicly about roaming and its private secret documents, and can describe what is going to happen and who the winners and losers will be.

  1. To minimize the negative impact of the roaming price control, operators have started to offer two types of price plans, one with regulated EU roaming and one without.  The non-roaming product can only be used in the country where it is sold, and the service shuts off upon leaving the country in which it is purchased. It will be called “domestic only tariff plans”, the cheaper alternative, and denoted with the national flag. The roaming product will be noted with the EU flag (circle of stars on a blue background) and will be the more expensive product that complies with the EU “Roam Like at Home” regime.
  2. Consumers need to choose in advance whether they want service within their home country, or whether they want a plan with roaming.  In practice, a lot of consumers will likely go for the cheaper service. The classic roaming “pay as you go” products which have become popular and largely obviated the need for EU’s regulation, will disappear on June 15. 
  3. Many Europeans are cost-conscious, have low-incomes, and travel little. With the popular classic “pay as you go” product going away, the new framework falls hardest on disadvantaged people, raising the price of roaming artificially. Strand Consult believes that over 100 million Europeans will lose the ability to roam facility on June 15 as the new packages will be above their budgets.
  4. Take Denmark as an example. Danes travel out of Denmark 12 days a year. Buying the new roaming product, one pays for roaming 365 days a year, despite the fact that she is in Denmark 353 days a year. In pursuit of making the EU more popular, the EU has shifted focus away from the traffic people spend 353 days a year and focus instead on the 12 days a year they travel.
  5. The EU has declared that the rules will be “cost-neutral” for operators and even developed financial projections to prove it.  But Strand Consult has observed that the market behavior in Denmark, Sweden, Ireland, and England does not cohere to the EU models. Instead prices have already increased in anticipation of the new regulation.  In practice, customers who roam create costs which the EU prohibits mobile operators from covering by a surcharge on the user. So to recover cost, operators will raise national prices across the board, meaning that even those who don’t travel will now probably pay more.  The regulation does allow operators to request permission from national regulators to charge roaming fees (essentially keeping the earlier regime to add a surcharge to the offnet traffic). Finnish operators have opted for this as should a number of MVNOs.
  6. There is no doubt that some Europeans will be better off, namely well-to-do professionals and EU bureaucrats who travel a lot. They may even find service less costly than before. Mobile operators do not discriminate their customers based on gender, age, job and income, but the new regulation creates a de facto form of discrmination which inevitably hits people who don’t travel much, typically the single mother with three children.
  7. The rules will be implemented differently across the EU. In some countries where there are relatively higher prices, they will be implemented as they EU hopes, and price differences might not seem so stark. However in countries with low national prices and large data packages (e.g. Denmark, Finland), implementation will mean rising national prices, all things being equal. In the long term, this will help to harmonize end-user prices, but it will have a negative impact on earnings in industry. Consumers will quickly find out how to save  money by choosing “domestic only tariff plans” where operators do not have a roaming risk. 
  8. There is a difference between the terms and conditions for marketing and selling mobile telephony in the EU. Contract periods vary from 6 to 24 months.  Six months is the maximum contract life in Denmark, but other countries have contracts lasting 24 months. The length of a contract can impact a mobile operator’s profitability significantly. Contract life is just one of many parameters which drives an operator’s profitability. However in the new roaming regime, the only parameter which operators can use to adjust the price is the level of  subsidy for the handset. 
  9. The EU has developed a complex price control model for the regulation which consists of annual wholesale pricing caps, the price of which falls each successive year, coupled with a rising ceiling for the amount of data in the package.  In practice the amount that the wholesale price covers decreases as the amount of data increases, widening the gap each successive year. This dynamic is a ticking financial bomb for the industry.  Moreover it appears that the EU has based its model only on network operators and has not accounted for MVNOs which have entirely different cost and pricing models. The roaming regulation appears to be in conflict with the goals to promote service based competition by MVNOs. See Strand Consult’s note “EU mobile roaming policy is a bomb under the MVNO industry” 
  10. Beginning in 2018 geoblocking restrictions will be removed from video content. Needless to say, if consumers can take their Netflix subscriptions with them on vacation, they will stream on the free roaming package even more. This is yet another feature for which the EU has not accounted for and which will also negatively impact operators’ business models. The new EU rules that remove geoblocking are yet another financial bomb planted in mobile operators’ future and will likely explode when geoblocking is removed.
  11. As with many EU telecom regulations, Brussels makes the rules, but the national regulator implements them. In practice national regulators will have to oversee a period of rising prices which may conflict with their respective national goals and objectives for making communications more efficient or less costly. Of course operators can simply keep prices the same and absorb the new costs while they experience a decrease in operating margin. National regulators understand that EU roaming rules can have a major impact on the mobile operators’ earnings and thus their willingness to invest in 5G networks.
  12. Prior to the entry of the new rules, consumers had three options – to travel with their phone but not to use the services that consume roaming fees, to use the roaming feature that came with a surcharge, or to buy a “pay as you go” roaming package. After the new rules enter into force, consumers will have two product choices, service with roaming or without. It’s no longer possible to buy roaming as needed. In practice the EU has limited the opportunities EU citizens have and thus they have made the market less dynamic.
  13. EU Member of Parliament Jens Rohde, among other politicians, played a key role in advocating for the regulation and pinned re-election hopes on to its passage and implementation.  However these politicians find themselves in the crossfire of warnings and reports from mobile operators and consumer organizations of the coming price increases. Not only do these politicians know nothing of economics, their determination to deliver the roaming package, even when the numbers don’t work, display their recklessness and unscrupulous desire for power.

The roaming regulation is a result of the EU government’s panic and desperation to improve their miserable image. Following the Brexit vote, Strand Consult published this note, “How will a BREXIT impact telecom regulation in Europe?” which details how the UK’s leaving the EU will impact the telecom industry. Strand Consult’s predictions have proved true in the EU compensates for BREXIT with roaming.

The EU is fighting against Strand Consult’s efforts to create transparency.
Strand Consult is known for its effort to create transparency from telecom policymakers. This comes in part from being based in Denmark, one of the world’s least corrupt countries and where trust and transparency are the foundation of society. The EU does not have the same transparency standard as Denmark, especially when it comes to its roaming policy.

Over the last six weeks, there has been a fierce debate in the Danish media about the consequences of the roaming regulation for consumers. Strand Consult has participated actively in this debate and helped to create the transparency that the EU is fighting against.

Initially, Strand Consult sent a number of emails to EU officials with critical questions related to harms hidden within the roaming regulation, a regime that will impact 500 million Europeans. We learned that the EU would hold two private video conference meetings to discuss the regulation, one with industry and another for selected people from the press. The meetings were “for background only” and participants were not authorized to share information from the meetings.  Attending the meetings required that participants keep a gentlemen’s agreement on the “gag order.” This differs from an embargo, information which is shared in confidence but which can be revealed after a certain date.

The meetings were conducted at the European Commission’s office in Denmark and was hosted by the EU’s press officer for Denmark Jens Ring and experts from Brussels assigned to the Digital Single Market portfolio. Strand Consult refused to agree to the gag order, and as such, was denied entrance to the meetings.

After massive press coverage of the negative consequences for Denmark, the EU experts in Brussels created two Word documents to explain why they believed the regulation would not harm Danish mobile operators and consumers. Strand Consult obtained these documents and reviewed them in detail. The calculations by the EU are based on erroneous assumptions and optimistic expectations. To obtain these documents, contact Strand Consult here.

John Strand, CEO of Strand Consult, spoke with EU press representatives Jens Ring in Copenhagen and Inga Höglund in Brusssels. Strand explained to Höglund that his goal is to create transparency about what’s happening in the EU and that he did not agree to uphold a gag order. He insisted that as an EU citizen, he has the freedom to learn about the regulation’s formulation and its potential impact to 500 million Europeans as well as the freedom to share what he learns.

Inga Höglund became angry that John Strand insisted to get the information without a gag order. She rejected his request to create transparency. John Strand stated further that Höglund, as a taxpayer-financed official, should support transparency. Their debate  ensued, and then Höglund hung up the phone on John Strand.

Shortly thereafter John Strand received an email from Stina Soewarta, Head of European Commission, Representation in Denmark stating,

“I understand that you have called our colleagues in Brussels and have been very rude to her. As you know, we have offered you a video conference with the experts where you could ask your questions, but I understand that you are no longer interested because the conversation would be to background. It is quite common for us to speak in to background in the Commission. These are the general rules, and it has nothing to do with freedom of expression.”

John Strand has repeatedly asked EU officials whether it is normal to couch important background information within gag orders. Strand Consult has also asked the officials to provide a copy of the “general rules” to which Soewarta says governs the communications between the EU, press, and industry. While one can understand that a private person or entity would not want to disclose certain information, there is a different standard for a public officials employed by the state, particularly for a policy that has an impact to 500 million Europeans. Strand Consult believes transparency is important. Gag orders do not belong in the conversation to launch extensive regulation that affect every European with a mobile phone.

Strand Consult expects that the debate in Denmark over the last six weeks will spread to the rest of the EU as consumers realize the consequences of the new rules. EU officials have been harshly criticized and have not taken  feedback well. That the EU decided to make gag order background sessions available is likely in response to the growing negative debate in Denmark.

Strand Consult hopes that the press will be critical of what is happening in the EU with regard to roaming and the way in which officials handle critical voices.

The fact is that the EU’s new roaming rules are a very important element when it comes to improving the bad image that the EU has among many citizens. Seen from the perspective of an industry researcher, it is sad that the telecom industry has once again become the victims of the EU government’s half-baked schemes to win votes.
Unfortunately roaming is indicative of the many flawed, feel good-look good policies that the EU employs along with net neutrality, WIFI4EU and the fight against consolidation. It is evident that EU is bankrupt of salient policy ideas and the courage to take difficult steps to exit a decade long financial crisis. See Strand Consult’s note, Europe is a Disconnected Continent: The next crisis hitting the EU will probably be digital and long and expensive for society.

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