ITU cost model and methodology to assist national regulatory authorities to engage with international mobile roaming
| Pages | 125-148 |
| Published date | 12 March 2018 |
| DOI | https://doi.org/10.1108/DPRG-06-2017-0033 |
| Date | 12 March 2018 |
| Author | Simon Forge,Lara Srivastava |
| Subject Matter | Information & knowledge management,Information management & governance,Information policy |
ITU cost model and methodology to assist
national regulatory authorities to engage
with international mobile roaming
Simon Forge and Lara Srivastava
Abstract
Purpose –Tariffs for international mobile roaming (IMR) are often viewed by governments as an
additional tax on internationaltrade and on tourism. IMR customer bills may appear to be arbitrary and
sometimes excessive. The purpose of this paper is therefore to set out a pragmatic approach to
assessing international charges for mobile roaming, making use of a realistic cost model of the
international roamingprocess and its cost elements, at a level that is useful to regulatoryauthorities and
operators.
Design/methodology/approach –The discussion presented is based on industry practices for
handling voice calls and data sessions with the mobile network operators (MNOs) business model,
based on industrysources. The basic mechanismsuse two common constructs from businessanalysis –
business processesand use-cases –to provide a simplified form of activity-basedcosting. This provides
a model suitablefor national regulatory authorities to movetowards cost-based IMR tariffs.
Findings –Using a perspectiveon costs based on a bottom-up surveyprocedure for elucidating the key
information,the paper presents the cost elementsfor the various IMR network components andbusiness
processes,with an approach suitable for analysingboth wholesale and retail pricing.
Research limitations/implications –The methodis specifically designed to overcomethe key problem
of such approaches, the limitations set by differences in network technologies, network topology,
operationalscale and the engineering, as well as MNO business model and accounting practices,which
otherwisewould preclude the method presentedhere from being vendor neutral.
Practical implications –Vendor and network engineeringneutrality implies the approach can be used
to comparedifferent MNOs in terms of the validity of their IMR charges and whetherthey are cost based.
Social implications –Impacts on society of so-called ‘‘bill-shock’’ have become quite common,
increasingly for data sessions. The cost model presented here was developed with the intention of
improving the accountability and transparency of the mobile roaming market. It thus assists in the
introductionof cost-based tariffs over an economicregion, such the European Union.
Originality/value –The paper examines the practical implications of building large-scale cost models
for assessing the real IMRcosts, a modelling exercise that has not been seen elsewhere in terms of its
approachand neutrality as to MNO structure andassets.
Keywords Cost model, International mobile roaming
Paper type Conceptual paper
This paper introduces the concepts of cost modelling based on actual network and
business systems costs of internationalmobile roaming (IMR). Its aim is help industry
regulators and operators to understand the underlying costs involved in roaming
operations. The approach has been used and tested in both developing and developed
economies. Its basic principles of cost-based pricing formed the core of the original paper
for a committee of the European Parliament delivered in 2007, contributing towards a
process that has finally resulted in the abolition of EU-wide roaming charges on 15 June
2017. This approach has been developed much further and expanded since, for the ITU, to
Simon Forge is Director at
SCF Associates Ltd,
Princes Risborough,
Buckinghamshire, UK.
Lara Srivastava is based at
ITU, Geneva, Switzerland.
Received 29 June 2017
Revised 20 November 2017
Accepted 20 November 2017
DOI 10.1108/DPRG-06-2017-0033 VOL. 20 NO. 2 2018, pp. 125-148, ©Emerald Publishing Limited, ISSN 2398-5038 jDIGITAL POLICY, REGULATION AND GOVERNANCE jPAGE 125
offer a detailed guide for regulators and operators. It is now available from the ITU (2015).
The kind support of the ITU is acknowledged in the preparationof this paper.
1. The macro-economic impacts of international mobile roaming
1.1 Why is a cost model for international mobile roaming needed?
To understand this need, it is necessary to recognise that the macroeconomic
repercussions of IMR tariffs are considered to be a serious hindrance to achieving the goals
of multinational trading communities. As EU Commissioner Kroes noted (in 2014):
Roaming makes no sense in a single market –it is economic madness
IMR tariffs may act as an extra tax on trade that is also experienced by tourists as a form of
visitors’ tax. In consequence,their impacts are currently being examined by many multistate
economic communities such as the ASEAN Economic Community (AEC), the European
Union (EU), the Southern African Development Community (SADC) and One Network Area
(ONA) in East Africa. Roaming is considered to be impeding trade and tourism through high
mobile tariffs, and debates around mobile-roaming tariffs are becoming more important, as
modern networks carry higher levelsof data traffic than what would be observed in a purely
voice/SMS market. In the USA, the FCC has also noted the effects of bill shock (FCC, 2015;
FCC, 2010).
1.2 Europes experience with international mobile roaming tariff reduction using
cost-based tariffs
Europe, with its 28 Member States and its move towards a single market, is a key case
study. A European Commission survey in 2014 to determine the behaviour of EU citizens
when travelling within the EU found that (EuropeanCommission, 2016):
n25 per cent of EU travellers switch off their phone when travelling;
n47 per cent never use mobile internet; and
neffectively, the mobile industry is missing out on serving 300 million EU customers
visiting neighbouring EU Member States.
As stated by the European Commission’s 2006 Impact Assessment [European Commission
(2006)] analysing the European mobileroaming situation:
nThe core problem is that prices for EU-wide roaming at both wholesale and retail levels
stand in no meaningful relationship to the underlying costs of providing the service.
nThis problem is compounded by a lack of transparency of prices at retail level which
means it is extremely difficult for consumers to understand what they will actually pay.
The Commission and some national regulatory authorities have attempted to address
the transparency problem by creating websites for roaming prices, but these initiatives
have not led to sufficient improvements.
nHaving studied this market carefully, national regulatory authorities have alerted the
Commission services to the fact that they believe the problem is “non-trivial” and
requires action.
nA key issue is the cross-border nature of this service whereby no one national
regulatory authority can solve the problem.
The EU regulatory group BEREC found that, in the EU in 2012 (after 5 years of price caps),
that retail roaming prices were, on average, 118 per cent higher than the underlying costs
estimated by what they termed their “conservative estimations”, and that the real costs
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