Research Notes

National roaming regulation negatively impacts telecom investment and competition, shows a new international study by Strand Consult

Dear Colleague,

The key challenge with mandated national roaming is that it is not necessarily clear to the customer on which network one is roaming. Thus, the operator’s incentive to market a superior network experience is removed. The customer cannot “reward” his preferred operator by switching for a superior experience.

Strand Consult has for the last 25 years build up an unique knowledge on ​​how to improve conditions for operators when it comes to building and operating mobile networks. In our report ”Understanding the impact of national roaming on investments and competition”  we look at how different national roaming models impact the mobile market and operators’ willingness to invest. This report focuses on the ways that regulators can support private investment for 4G and 5G coverage in rural areas today and in the future.

The report´s goal is to analyze how forced national roaming without the right pricing strategy can undermine the regulatory objective of infrastructure-based competition and reduce overall network quality and investment. The best long-term outcomes for consumers of telecommunications services will emerge from markets characterized by infrastructure competition – where two or more distinct networks compete for customers on the basis of providing a better product based on proprietary infrastructure.

The key challenge with mandated national roaming is that it is not necessarily clear to the customer on which network one is roaming. Thus, the operator’s incentive to market a superior network experience is removed. The customer cannot “reward” his preferred operator by switching for a superior experience.

The report looks at the various forms of network sharing, ranging from an essential facilities doctrine (under competition law, normally compulsory), through site sharing and RAN sharing all the way to national roaming which is the most extensive form of sharing. Sharing can be voluntary or mandated but all forms of network sharing can be found in the voluntary form, based on commercial interests and terms.

Our report ”Understanding the impact of national roaming on investments and competition” shows that mandatory full network sharing reduces the costs of deploying a network in the short run by allowing competition in retail elements of service provision but works against the development of full infrastructure competition in the long run. Regulated roaming and mandatory MVNO models represent the most extensive form of network-sharing. They provide perverse, value-attacking incentives (carrot) to enable competing operators to enter the market and potentially compete at a nationwide level without any requirement (stick) to invest in network infrastructure (or in the specific location where regulated roaming is mandated).

As with the determination of interconnection rates, setting efficient roaming rates for mandated national roaming is highly problematic and contentious. Efficient rates will vary with the relative geographic coverage and market share of the firms, their expected trajectories over the life of the agreements and the expected current and future costs of network deployment. As none of these are known with any certainty by regulators (and are not static), the best that can be hoped are that price and non-price terms are minimally distorting. If rate-setting is left to firms under voluntary free commercial sharing arrangements, then better information may be available. An operator that is able to charge higher prices nationwide because of superior coverage can use the additional revenue, arising from the valuation of coverage, to provide service in areas where the local use of the network would not be sufficient for it to justify the investment.

The report ”Understanding the impact of national roaming on investments and competition” looks at how national roaming efficiently eliminate this ability, network coverage (current or future) might suffer as networks refrain from investing in expansion and even from expanding capacity in certain areas. Strand Consult describe how regulatory intervention typically also impedes the ability of both network operators and their customers (both commercial and residential) to experiment with new technical and commercial models for delivering new and innovative products and services.

Enhanced consumer choice for some users might arise if infrastructure sharing enables service-based competition in geographic areas where otherwise it is efficient for only one network to operate but this will be highly market and context specific, as network sharing may interfere with incentives to develop infrastructure-based competition.

The political incentive to provide network coverage in remote regions that are not attractive to server commercially (“not spots”) can be satisfied by public subsidies to be awarded through open competition. The report ”Understanding the impact of national roaming on investments and competition” shows that it has proven successful in many countries, without deterring infrastructure-based competition.

Get more information about the reportUnderstanding the impact of national roaming on investments and competition, to arm yourself with the facts.

Contact Strand Consult to get more information about this unique and important report.

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