Chapter 1 Introduction
1.1
Anybody who has travelled overseas and used their mobile phone knows how
useful it can be to reach loved ones and conduct business using international
mobile roaming. They also know the significant cost they pay for this
privilege.
1.2
International mobile roaming permits international travellers to use
their existing mobile phone account on networks in other countries. The
service is underpinned by agreements between the traveller’s provider and providers
in the country the traveller is visiting. The traveller is then billed for the
service by their home provider.
1.3
When the ACCC examined international mobile roaming costs in 2005, it
considered the end user charge for international roaming services to be high
because of: a lack of competition; the limited range of substitutes; and the
lack of consumer information on international mobile roaming costs.
1.4
With four years having elapsed since the ACCC’s Review and with rapid
development of mobile technologies, the Minister referred terms of reference
for an inquiry into international mobile roaming to the Committee.
Conduct of the inquiry
1.5
The Committee agreed on 4 June 2008 to undertake an inquiry into
international mobile roaming. The inquiry was referred by Senator the Hon
Stephen Conroy, the Australian Government Minister for Broadband,
Communications and the Digital Economy.
1.6
The terms of reference called on the Committee to inquire into and
report on:
n the extent to which
retail international mobile roaming charges for both voice and data services
reflect the underlying costs to operators of supplying the service;
n the adequacy of
information available on Australian mobile operators’ international mobile
roaming costs and revenue in both retail and wholesale markets;
n the impact of new and
emerging technologies and commercial initiatives that may reduce international
mobile roaming charges for users or provide a substitute for international
mobile roaming services; and
n the adequacy of
existing information from mobile operators available to consumers concerning
international mobile roaming charges for users.
1.7
The inquiry was advertised on 19 June 2008 in The Australian newspaper.
1.8
The Committee sought submissions from relevant Australian Government
Departments, regulatory agencies, telecommunications operators, consumer groups,
and peak bodies representing the telecommunications industry. In all, the
Committee sent 47 letters inviting submissions.
1.9
The Committee received 18 submissions, including two supplementary
submissions. These submissions are listed at Appendix A.
1.10
The Committee received one exhibit to the inquiry. The exhibit is listed
at Appendix B.
1.11
The Committee held four public hearings in Canberra and Sydney and called 15 witnesses. These witnesses are listed at Appendix C.
1.12
Copies of submissions and exhibits, and transcripts of public hearings,
can be obtained from the Committee’s website: http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=coms/mobileroaming/index.htm
Structure of the report
1.13
This report contains five chapters. Chapter one is this introduction.
Chapter two
1.14
Chapter two describes how international mobile roaming (called ‘roaming’
hereafter) works. An explanation is necessary because the delivery and charging
arrangements associated with roaming services are far more complex than the
delivery and charging arrangements behind domestic mobile services.
1.15
Roaming is based on agreements between providers in different
countries. The agreements permit a provider to host another provider’s clients
on its network when those clients travel.
1.16
For the traveller, roaming allows them to use their mobile phone in the
same manner they can use it in their home country.
1.17
Roaming is supported by a complex technical treatment of calls to and
from roamed phones. This treatment means that the cost of making and receiving
calls is higher for roamed calls. The chapter concludes that this technical
complexity is one of the reasons why roaming is expensive for Australian
travellers.
Chapter three
1.18
Chapter three examines why, even with the more complex nature of
roaming, charges are considered high for Australian travellers.
1.19
To understand the reason for this, the Committee examines two previous
reviews of roaming costs:
n the ACCC’s 2005 Mobile services review: International inter-carrier roaming (hereafter called
the ACCC report); and
n the Department of
Broadband, Communications and the Digital Economy’s (DBCDE’s) 2008 Report of
findings on International mobile roaming charges, prepared for the
Department by KPMG (hereafter referred to as the KPMG report).
1.20
The ACCC and KPMG reports each adopt a different approach to
investigating roaming, leading to findings that emphasise different aspects of
the roaming market. The ACCC’s approach focuses attention on the role played by
the party-to-party agreements in determining the end user cost. KPMG’s approach
directs attention to the discrepancy between the actual cost of roamed calls
and the end user cost.
1.21
While both the KPMG and ACCC reports are based on valid sources, neither
entirely reflects the pricing situation as both rely on extrapolating
conclusions rather than direct data, and that as a consequence, both are flawed.
1.22
The ACCC argued that the large wholesale cost was a result of Australian
providers being price takers in the wholesale roaming market. The wholesale
market does not operate effectively because the small size of the Australian
population distorts competition. Australian providers cannot offer enough
customers to providers in other countries to make negotiations over price
competitive.
Chapter four
1.23
Chapter four discusses:
n regulating the retail
price of roaming (called retail price control); or
n regulating the
wholesale price of roaming; and
n whether the price
information provided to travellers is adequate for them to be aware of the
costs involved in roaming.
1.24
Retail price control involves placing a cap on the retail cost of calls.
In other words, consumers cannot be charged more than the cap for a call. The
Committee decides against retail price controls. Australian providers would be
left with the double burden of coping with the underlying distortion while
carrying the cost of retail price controls. In the long run, it might even mean
Australians are not offered the option of roaming in some countries at all.
1.25
However, the Committee notes that an alternative to retail price control
is to regulate the percentage of the retail mark up charged over the wholesale
price.
1.26
Regulating the wholesale cost of roaming is very complicated because of
the international element involved. The Committee considers three regulatory
mechanisms for dealing with the wholesale cost of roaming:
n declaring
international roaming under Part XIC of the Trade Practices Act 1974;
n regulation similar to
the European Commission (EC) Roaming Regulation; and
n regulation through
international cooperation.
The Committee concludes that regulation
through international cooperation is the most practical mechanism for dealing
with the cost of roaming.
1.27
The Committee recommends that the Australian Government continue its
efforts to seek international cooperation in dealing with roaming costs.
1.28
In relation to information provision, the Committee discusses both the
provision of information by Australian providers to it to assist the ACCC in
price monitoring; and the provision of information to the public. The
Committee recommends:
n that the ACCC
introduce reporting requirements for international mobile roaming services on
Australian providers, in particular, cost, revenue and service usage
information should be provided; and
n that the Australian
Communications and Media Authority facilitate a meeting to discuss the
development of a minimum standard for information on roaming.
Chapter five
1.29
Chapter five examines the following alternatives to roaming:
n international calling
cards;
n Short Messaging
Service (SMS);
n use of local networks;
n email; and
n use of hotel
telephones.
The Committee finds that none of
these offers the mobility and functionality of roaming. However, the Committee
finds that the use of email provides a close alternative at a fraction of the
cost.
1.30
The Committee concludes that, given improved regulation of international
mobile roaming is a long term proposition, the alternatives provide the best
opportunity to reduce the costs of staying in touch with work and family while
travelling overseas. While none of the alternatives offers a direct
replacement for the utility of roaming, a traveller who pays attention to their
communications needs can come close to replicating the utility of roaming at a
fraction of the cost.
1.31
To make travellers more aware of the alternatives, the Committee
recommends that when an Australian Government agency provides information to
the public on roaming, the alternatives to roaming be included as part of the
information.
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