TIM Italia – July the 14th 2005
TIM Italia’s comments on the ERG Common Position on the coordinated analysis of the
markets for wholesale international roaming
TIM Italia (hereinafter TIM) welcomes the opportunity to express its comments on the Common Position of the European Regulators Group of National Regulatory Authorities on the preliminary analysis for the market definition and the assessment of Significant Market Power for the national market of wholesale international roaming based on a coordinated approach.
In particular, TIM will express its specific views on the following aspects of the Common Position:
1. Preliminary considerations
2. Market definition - Voice, SMS and other data services
3. Voice and SMS over 2G and 3G networks
4. Substitution between operators in a given national market
5. Single dominance assessment - Market shares
6. Joint dominance assessment
1 Preliminary considerations
ERG’s position: there exists the consumers’ perception of high retail tariffs paid when roaming abroad.
TIM considers that the above mentioned consumer’s perception of high retail tariffs paid when
roaming abroad should be interpreted only as an instinctive perception from customers as services offered abroad are considerable different from the domestic ones in terms of technological complexity, interoperability networks, number of actors in wholesale market and so on. In any case, the NRA’s rules and considerations should go behind this perception in order to guarantee both customers and wholesale competition. In other words, an adequate market analysis would need to consider the complete value chain of roaming services, and thus including its costs from the host operator to the final customers, and by including carrier network operators and service provider operators. This would drive us to consider the market as a transnational one. As a consequence, any regulatory intervention applied on a singular national retail market could surely lead to favourite some country operators against foreign ones and, at the same time, some countries customers against foreign ones.
2 Market definition - Voice, SMS and other data services
ERG’s position: there are grounds to regard SMS as being in the same relevant market as voice calls.
The current widespread offer of services like SMS and Voice provided by Mobile Operators represents part of a wide and complete offer that will soon include MMs, GPRS, videocalls, and can not be regarded as a natural bundle as no substitution exists between them.
The use of a SMS (only 160 characters) is different from that one of a voicecall and this is the reason why they are complementary between them. Even from a commercial point of view, the current offers don’t provide any bundle for roaming traffic.
TIM Italia – July the 14th 2005
Finally, from a regulatory point of view, it is important to preserve a coherence between the assessment of national call access and origination market and the assessment of wholesale international roaming market. Indeed, if market analysis demonstrate that in a given country there are no competitive concerns about access to mobile networks, it would be reasonable to achieve the same conclusion for the access for international mobile operators that ask for roaming services. As a consequence, the increasing competition in retail mobile market and the lack of market power in the mobile access will drive low wholesale roaming charges as already showed on the market through the recent retail tariff launches Indeed, being the international roaming a segment of mobile retail market, each operator will be incentivated to reduce its own international roaming tariffs (in order to compete on the overall home retail market) and, consequently, to pay lower wholesale tariffs through the selection in each country of one or more preferred partners (i.e. thanks to the recent alliances between operators).
3 Voice and SMS over 2G and 3G networks
ERG’s position: it may be reasonable to postulate that voice over both 2G and 3G networks are part of the same relevant market.
TIM agrees with the ERG’s position which postulates that voice over both 2G and 3G networks is
part of the same relevant market. Moreover, NRAs as well confirmed it by taking into account 3G
voice calls which, according to a technical neutrality approach, have been considered as a traditional termination voice service.
4 Substitution between operators in a given national market
ERG’s position: it could be argued that today the relevant product market encompasses all
MNOs in a given country.
TIM agrees with the ERG position which considers that there is one only relevant market including all mobile networks of a given country. Indeed, each network is a substitute of the other networks in roaming services’ provisioning to customers of foreign operators. In Italy for instance it is enough to have one only roaming agreement with TIM or Vodafone or Wind in order to have roaming all over Italy, and the Italian networks have to compete in order to steer international roaming traffic. Finally, the position above indicated regarding the existence of a one relevant market, is also thcompliant with the assumption of the market 15 definition in which, for national access, market
segmentation is not considered on the basis of single mobile networks.
5 Single dominance assessment - Market Shares
ERG’ position: market shares for voice and SMS traffic could be based on revenues or on
TIM doesn’t totally agree with this approach as a singular view (volumes or revenues) could overlook some relevant aspects of market influencing a market power such as the following: particular clusters of customer, pricing politics, discounts, coverage, etc.
Indeed, it could happen that an operator with limited volumes of traffic could have a high percentage of market share in terms of revenues due to high level of pricing or, in alternative, an high percentage of high spending customers or business customers.
Therefore, a comparison of both information is preferable. In any case, TIM considers that the revenue market share analysis represent a complete and representative method. Finally, as initially
TIM Italia – July the 14th 2005
expressed in the national Decision 197/99 regarding the Significant Market Power law, the revenue market is the most adequate method for understanding the entire business of an Operator.
Moreover, this choice has been confirmed even in the Guidelines on market analysis and the
calculation of significant market power, where it was stated that “retail revenues, call minutes ……
or subscribers of public telephone network operators are possible criteria for measuring the market shares of undertakings….. the use of revenues, rather than for example call minutes, takes account of the fact that call minutes can have different values (i.e., local, long distance and international) and provides a measure of market presence that reflects both the number of customers and network coverage. For the same reasons, the use of revenues ……. may be the most appropriate means to
measure the market presence of mobile network operators” (?77).
6 Joint Dominance Assessment
ERG’s position :it is very important for NRAs to analyse if the market affords the operators to maintain a non competitive outcome
In order to assess a joint dominance position, the NRAs should verify if all the essential conditions set out in the judgements of the European Courts in the jurisprudence relating to art. 82, as interpreted by the EU Commission SMP guidelines and in the light of the criteria discussed by the CFI in Airtours case are satisfied.
Therefore, following the three-test adopted in the Airtours case, and cited by ERG in its common position, the cumulative conditions to be satisfied are namely:
1) the existence of sufficient market transparency
2) incentives for sustaining cooperation between the collectively dominant firms beyond the
short term, which can be punished through retaliatory mechanism;
3) the inability of customers and competitors (existing and potential) to affect tacit collusion,
through their countervailing buyer power or market behaviour.
In this light, TIM believes that in order to evaluate if the structure of the wholesale international roaming market can be conducive of tacit collusion, the following aspects should be considered in addition to the characteristics of transparency and the possibility of setting retaliatory mechanism:
- the different economies of scope and sale of mobile operators resulting from a pan-
European footprint hich lead to different cost structure;
- the countervailing buyer power of business customers that exert competitive pressure on
roaming tariffs at retail level;
- the participation to Alliances and the development of traffic steering agreement which are
tools to stimulate competition and lowering prices at wholesale and retail level
- in most cases, each national mobile operator joins in different European Alliance (i.e. in
Italy, TIM is active within Freemove, WIND within StarMap and Vodafone within the
Vodafone Group). To the extent that each participant is subject to the internal rules of the
Alliance and that the aim of the Alliance is to create a pan European network in order to
offer best services at best prices to its customers in competition with other Alliances, it
follows that such environment excludes, or limits, per se any risk of collusion among
national mobile operators.