A Structural Solution to Roaming in Europe

Abstract

This paper suggests that international roaming markets suffer from structural flaws in the way that roaming agreements are established in Europe. The initial roaming interventions by the European Commission in 2007 have been very welfare enhancing and the transfer of producer surplus to consumers has brought significant benefits to end users. Nevertheless, there are clear opportunity costs of maintaining and/or extending the current roaming Regulation. The price for wholesale roaming services in a given country is driven principally by the amount of traffic that an operator is willing to send back to the country requesting a price offer and not on the basis of the roaming services requested. The paper suggests that by breaking the link between the prices offered in one country and the volume of returned traffic to the other country, this will enable the wholesale market for international roaming to operate competitively. It is further suggested that retail price regulation is unwarranted when the wholesale market can operate competitively irrespective of the issue of the retail elasticity of demand for these services. Preliminary suggestions are put forward as to how policy makers could transition from the current regime to a future market based regime by putting a number of required enablers in place.