Right to roam

Pan-regional regulation could do more harm than good for roaming in the MENA region
GCC, GSMA, Roaming, Steering

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With operators making solid progress to improve roaming services in the MENA region, the GSMA warns regulators against taking a similar approach to Europe and imposing a one-size-fits-all set of regulations on operators.

Peter Lyons, director of spectrum policy, Africa & Middle East at the GSM Association, gave a keynote speech at last month’s Roaming MENA conference in Dubai. He offered a persuasive argument for regulators to avoid attempting to apply European style regulation to the Arab world and indicated that market forces may prove to be the best driver of fairer roaming tariffs in the region.

Outlining the general global trend of roaming regulation, Lyons says that regulatory activity is growing, with policy makers and regulators from around the world trying to address the problem of “high charges and bill shock” that many mobile subscribers experience when they travel abroad.

“We are seeing various levels of regulation, from bilateral between countries, regional and global,” Lyons says. “Our position is that one side does not fit all, and especially global measures do not work because you are really dealing with companies at different stages of development, very different stages of mobile market maturit. Our analysis is going to highlight even in Europe that there are vast differences between member countries of the EU and especially in the Middle East region.”

For example, he adds that there are few similarities between two countries such as Yemen and the UAE which are at vastly different stages of development.

According to Lyons, parts of the European regulatory approach, which included wholesale and consumer price caps on roaming charges, would be difficult to apply to the Arab world and could prove to be counter-productive.

“Parts of this regulation presents a risk to consumers and the industry through unintended consequences,” he says. “We are talking about regional regulation and a uniform price cap regulation does not consider economic or market differences that could cause market distortions over time and impact the industry’s ability for fair mark-ups.”

Indeed, Lyons points to significant differences between countries in the region, including inflation rates, GDP and the proportion of the local population that travel abroad. To illustrate his point, Lyons points out that Yemen experienced inflation of more than 11% annually while the UAE has an annual inflation rate of about 1%. “To impose a price cap between those two markets would completely distort the operating costs of the operators. Operators in countries with high inflation will be disproportionately affected as their costs rise faster,” he says.

Another potential problem with price caps is that they can hinder operators from making a fair return on investment, and given that many operators in the region still generate a significant proportion of their revenue from roaming, this could become a serious problem.

Furthermore, countries with higher levels of tourism depend more on roaming traffic, and countries including Morocco, Egypt and Jordan depend more on tourism than countries in the GCC.

“We want to maintain a level of investment in networks where putting price caps on roaming could deter investment, particularly in the roaming services,” Lyons says. “And there is the waterbed effect. If you push prices down in one place they could ultimately rise in another.”

The GSMA also believes that competition and innovation in roaming tariffs are likely to suffer as a result of regional regulation. Imposing regional regulation across the Arab world’s diverse markets could serve to create some “commercial restrictions” that could deter transparency, Lyons says.

Furthermore, there are numerous steps that regulators and operators can take to improve roaming without the need to implement restrictive pan-regional regulation.

As Lyons says, the telecoms market in many countries in the MENA region still faces structural challenges, including a monopoly on international gateways and a lack of routes for pre-paid roaming within the region. In some countries, fraud also remains an issue.

“Our position is that the liberalisation of international gateways is an important first step,” he says. “What we have seen is that 70% of countries in the Arab world still have monopolies on international gateways. Liberalising the international gateways would put downward pressure – market forces into play – on the price of international calls and reduce a large component of the price in roaming.”

Regional innovation

Another reason for not imposing regulation on the region’s operators is that they are already making strong progress towards improving their customers’ experience of roaming.

“Operators in the region are driving a lot of innovation and you can see that is an important driving force in the growth of the Arab mobile industry. Introducing regulation at this point could distort the market and we really think it’s best to leave a good thing alone. If it’s not broken, don’t try to fix it,” Lyons says.

The key points for operators and regulators to improve customers’ roaming experience hinges around transparency and liberalisation of international gateways. And in terms of transparency, there are some relatively simple steps that operators can take to improve their roaming service including clear websites to inform consumers, simplified and easy-to-understand roaming tariffs that are priced in global currency, and clear prices based on geography rather than network, Lyons says.

Other initiatives that can help avoid bill shock include giving the user the ability to control their consumption abroad. To achieve this, operators can allow users to choose a cut-off point that will prevent their roaming bill from going over a certain limit. Operators can also set up schemes that allow their customers to top-up in with local calling cards while abroad. Users should also be able to access basic information, such as calling rates and the amount of credit they have, for free while abroad.

Driving competition

According to data quoted by Lyons at the Roaming MENA conference, market forces in the Middle East appear to be “pushing roaming prices generally in the right direction”.

Indeed, a brief comparison of post-paid retail tariffs in the region demonstrates just how much roaming prices have fallen in recent years.

The cost of outgoing call roaming from UAE to Egypt from 2007 to 2011 fell by 48%, while the same service from KSA to Kuwait decreased by 82% in the same timeframe. Incoming calls between Egypt and Saudi decreased by 60% and SMS tariffs between UAE and Egypt decreased by 35%, Lyons said. “Operators are responding to competition in the market and are driving prices down across the region,” he added.

Pointing to specific operator roaming initiatives in the Middle East, Lyons singled out Zain and Du as examples of operators that have pushed ahead with strong roaming deals.

Indeed, operators with a footprint – or event partnerships – in a number of countries could consider offering preferential rate schemes. Kuwait’s Zain Group launched its ‘One Network’ initiative in 2008, allowing its users to roam across its operations in Bahrain, Iraq, Jordan and Sudan at local rates. The telco added more operations to the single network during the past few years. Zain, which sold most of its African assets to Bharti Airtel in 2010, still offers preferential roaming rates to most of former African territories through a deal with Airtel. Zain’s pre-paid customers can also top-up with local cards at destination countries.

Meanwhile, UAE telco Du offers a single preferential rate across the GCC. “Prices are declining, operators a keen to develop innovative offers, operators are investing and improving transparency,” Lyons says.

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