International Roaming Explained

International roaming explained

Asia Pacific Contents

1. Mobile roaming explained...... 1

2. Mobile roaming in the Asia Pacific...... 5

3. Price trends...... 11

4. Impact of regulation...... 12

5. Best practice...... 15

3 1. Mobile roaming explained

International mobile roaming The most common international roaming is a service that allows mobile services are: users to continue to use their Voice: Making and receiving calls to mobile phone or other mobile or from home country, visited country device to make and receive or a third country, while abroad voice calls and text messages, SMS: Sending and receiving text browse the internet, and send messages to or from home country, and receive emails, while visiting visited country or a third country, another country. while abroad Email: Reading and replying to Roaming extends the coverage of the emails while abroad home operator’s retail voice and SMS Mobile broadband: Using mobile services, allowing the mobile user to devices or dongles to access the continue using their home operator internet, including to download images, phone number and data services within MP3s, films and software, while abroad another country. The seamless extension of coverage is enabled by a wholesale Applications: Using mobile roaming agreement between a mobile applications while abroad that require user’s home operator and the visited mobile data, such as location-based mobile operator network. The roaming services and language translators. agreement addresses the technical and International mobile roaming is one of a commercial components required to wider range of communications services enable the service. offered to mobile users while travelling abroad. Other services include hotel services, Wi-Fi, national global SIMs cards, multiple SIM card mobile handsets, and local pre-paid SIMs cards.

1 How mobile roaming works When a mobile user is abroad and turns a visited mobile network. The visited their mobile device on, the mobile device network picks up the connection from attempts to communicate with the user’s mobile, recognises whether

Initiated call Received call

Visited International Home Receiver’s operator transit operator home services operator

Figure 1.1 Overview of international roaming technology and operations

To explain roaming in more detail, has wholesale roaming agreements with Figure 1.2 the shows commercial and more than one operator in the same visited technical details for international mobile country, which in this case is Visited roaming. The diagram focuses on the Operator A and a second network, Visited international roaming wholesale and Operator B. As a result, Mobile User A retail arrangements, for simplicity. can call home using either visited operator networks, both of which use international The mobile user (Mobile User A) has an transit services to carry the call back to international roaming service with their Mobile User A’s home country. home operator (Home Operator) and is automatically connected to a visited Mobile User A pays a retail price to Home network (Visited Operator A) while Operator for the roaming service and roaming. Mobile User A is automatically does not pay Visited Operator A. Provided granted access to Visited Operator A’s Mobile User B is not also roaming, they will network when arriving in the visited not incur any extra charges to receive a call country by an exchange of a data between from, or to make calls to Mobile User A. Home Operator and Visited Operator Visited Operator A sends transferred A, where Visited Operator A confirms account procedure (TAP) files to a clearing Mobile User A is a roaming customer with house which forwards them to the Home Home Operator. As such, the wholesale Operator. TAP files are used for billing of roaming agreement between Visited calls while roaming. Operator A and Home Operator specifies how this data is to be provided to the Home Operator can then pay Visited visited operator. Home Operator usually Operator A the wholesale charges as per

2 Mobile Mobile User B User A RETAIL

it is registeredHome with its system, and The visitedVisited network also requestsVisited service attemptsoperator to identify the user’s home informationoperator from A the homeoperator network B network. If there is a roaming agreement about the user, such as whether the between the home network Clearingand one house phone being used is lost or stolen, and WHOLESALE of the mobile networks in the visited whether the mobile device is authorised Roaming country, the call is routed by theagreement visited for international use. If the phone is network towards an international transit authorised for use, the visited network International network (Figure 1.1). The internationalcarrier creates a temporary subscriber record transit network carrier is responsible for the device and the home network for theRoaming call delivery services to the destinationTraffic flow Revenueupdates flow its subscriberData exchange record on where network. Once this is done, the the device is located so if a call is made to destination network will connect the call. the phone it can be appropriately routed.

Mobile Mobile User B User A RETAIL

Home Visited Visited operator operator A operator B

Clearing house WHOLESALE

Roaming agreement

International carrier

Roaming services Traffic flow Revenue flow Data exchange Figure 1.2 Commercial links required for international mobile roaming call volumes in the TAP file and rates in the the call and handing over the call to Home wholesale roaming agreement. Operator. International Carrier pays Home Operator a termination rate for terminating Visited Operator A pays an international the call in the home country. carrier (International Carrier) for carrying

3 Data roaming With the increasing popularity of feature megabytes (MB), which refers to the phones and smartphones, the use of volume of data transmitted for the mobile data services while roaming is service used. Data traffic volumes can set to continue to grow exponentially. vary significantly depending on the type Mobile data services are typically and use of different data services. measured in kilobytes (KB) or

Activity Data traffic use

One hour of instant messaging 0.25 – 1 MB

One hour of web browsing 1.5 – 25 MB

Download 100 emails 1 – 10 MB

100 minutes talk on VoIP video calling Around 50 MB

Download one photo 0.05 – 2 MB

Download one MP3 3 – 8 MB

One software download 70 – 800 MB

Download one film 700 – 1500 MB

Streaming one hour of video 250 – 500 MB

Streaming one hour of audio 50 – 150 MB

Figure 1.3: Mobile data traffic volumes1

There are significant differences in the size estimates, as file size depends on the type of data, quality, and file length. For example, high definition and DVD quality streaming consumes greater amounts of mobile data than standard video or audio streaming.

4 2. Mobile roaming in the Asia Pacific

The mobile environment is growing prepaid subscriptions.5 Asia Pacific’s in the Asia Pacific region, both in roaming services will continue to subscribers and data traffic. Roaming develop, as the region hosts just services, however, are still being 25 per cent of the world’s global established. Countries within the region roaming market with 42 per cent of are in different stages of economic the world’s population.6 development, with significant differences Roaming use and its relevance as in inflation rates, currency exchanges, a service for mobile users varies labour costs and GDP per capita. GDP significantly across the region. Only per capita in some Asia Pacific countries 10 per cent of the region’s population can be up to 56 times higher than others travelled abroad in 2011 (Figure 2.1), in the region.2 Overall, the average GDP with factors such as greater distances per capita for the region is lower than between countries and less affordable in the developed world and four times travel contributing to this low rate. lower than in Europe.3 Research has shown up to 80 per cent There is varying market maturity across of roaming traffic from the region is the region, with penetration ranging international calls to mobile user’s from four per cent in North Korea to home country.8 226 per cent in Macau.4 On average, mobile penetration is one and a half times less than the European average, with 83 per cent of mobile users using

65% 35% 10% 7%

Europe North America Asia Pacific Latin America

Figure 2.1 Ratio of international trips to population %, 20117

5 Roaming alternatives Regional challenges The Asia Pacific mobile market is As the Asia Pacific market develops, evolving in different ways to other parts structural and technical barriers must of the world, with new lower-income be addressed. Introducing roaming subscribers and multi-SIM ownership regulation while these obstacles driving the trend. It is also common remain could result in unintended and to see Asia Pacific mobile users using unforeseen consequences that negatively roaming substitutes, such as call impact the industry, mobile users and back services and international call government revenue. There are active forwarding services. Certain substitutes and engaged regional groups working may be more appropriate than others within the region to manage and depending on national market improve roaming services for users. An conditions. intergovernmental organisation, the Asia Pacific Telecommunity (APT), serves For data roaming, Wi-Fi is generally as the focal organisation for ICT in the regarded as the most common substitute region, covering 38 member countries, in Asia Pacific. Although Wi-Fi coverage four associate members and 130 affiliate in some areas might be limited, it is members. Its roaming working group considered that the main reasons for has been working with regulators and Wi-Fi being unavailable is low market mobile operators to review the roaming demand or regulatory concerns.9 In environment for mobile users, resulting general, countries within the Asia in the recent adoption of guidelines, as Pacific region believe substitutes provide part of its working group report. benefits to budget-conscious consumers rather than all mobile users.10

6 Technical and structural barriers significant proportion of the total roaming costs. Even with volume Legal and technical developments are growth, there is no bargaining required to combat fraud and liberalise power for operators working across international gateways. Combating monopolised gateways. This means these barriers is vital prior to any inter-operator tariffs are likely to implementation of roaming regulation, continue to be high. International as they artificially inflate roaming long distance termination charges charges in individual countries. are another cost that inflates end- Fraud remains a major financial user prices. Although there has been concern for operators despite increased much improvement in the level of efforts and requires further investment competition, international gateway in technology and negotiation of monopolies remain in at least eight roaming agreements for minimisation. per cent of Asia Pacific.11 International Some countries in the region regard roaming call prices between countries particular types of telecommunications with liberalised gateways are typically as illegal and bypass, for example 25 per cent lower than between those 12 traffic concealment by licensed with gateway monopolies. carriers to avoid taxes or contribution Asia Pacific countries have worked to universal service; termination of hard to remove issues of double traffic by unlicensed operators using taxation in the case of international technologies like VoIP and SIM roaming, which is a key issue in boxes; flow of international voice other regions. This is where sales or traffic from PSTN to PC-to-PC calls other indirect taxation is applied at through service provided by VoIP a wholesale level on roaming or on providers. In many countries, however, international inbound services, and VoIP services are permitted. There produces a situation of double taxation. is currently no specific investigation It is important that governments focus on method for detecting heavy mobile removing and reducing these structural callers in relation to bypass through barriers to help to reduce roaming costs VoIP and SIM boxes. for mobile users. International gateways are the facilities through which international calls are sent and received. Where international gateways are not liberalised, their costs make up a

7 Technical barriers Quality of service: Further investment In addition to structural burdens, the is required in the Asia Pacific region industry continues to heavily invest to ensure consistent performance of in meeting the technical challenges the link connections for international of international roaming. This level roaming. This is so links have of investment is in addition to the the adequate capacity, reliability, investment in new technologies to redundancy and diversity available achieve roll outs of mobile broadband in more developed mobile markets. across the region. Regulatory Additional investment is also required intervention on roaming services will to constantly monitor the loading and affect the ability of operators to invest performance of the links to prevent in meeting the challenges of national congestion and ensure that the mobile broadband roll outs. requirements are met. Technology challenges requiring Inadvertent and border roaming investment: In addition to structural and technical Interoperability: CDMA technology barriers, incidences of inadvertent and is in use in some parts of the region border roaming can also affect mobile which prevents seamless roaming. users. As a region, the Asia Pacific has Additionally, use of different low travel traffic around borders in GSM/3G spectrum can prevent comparison to Europe. In many cases, many low-cost handsets from differences in frequencies used for roaming. Enforcement of particular mobile devices or existing geographical technologies and monitoring costs will barriers eliminate the occurrence of disproportionately burden operators accidental roaming. Where a border is in less developed countries. Additional divided by a street or river, for example, investment is required by operators to this is much harder. provide consistent quality of service across roaming networks. Operators offer competitive roaming packages for mobile users in these zones Coverage: Network coverage, and are continuing to invest in technical particularly 3G, remains inconsistent measures to eliminate inadvertent as operators continue to roll out and roaming in narrow border zones. upgrade their networks. Operators are investing in consumer communication and marketing to promote roaming and ensure transparency.

8 Case study: routes, a crucial stage of assessing the Singapore and Malaysia positive impact of competition was missed. In May 2011, governments of Singapore Regulators in both countries identified and Malaysia announced bilateral price benefits of the regulation to be for business controls on international mobile roaming. users, rather than general mass market The regulation required roaming price mobile users. On considering income levels reductions of up to 30 per cent for voice between Singapore and Malaysia, and in calls and 50 per cent for SMS for all mobile the greater Asia Pacific region, low-end operators in Singapore and Malaysia. The mobile users on pre-pay subscriptions are regulators adopted a European Union-style more likely to see travel SIMs as attractive model of imposing wholesale and retail while post-pay roaming customers will price caps on voice and SMS. However, most likely be business users or high-end the regulation did not address evidence of mobile users. In the case of Malaysia and competitive activity in route pricing, where Singapore, the numbers of Singaporean evidence is different to the European mobile users that benefit from regulated Union example. By not reviewing the retail price reductions is three times greater evidence of competition on high-volume than the number of Malaysian users.

Before regulation After regulation Singapore retail revenues Malaysian retail revenues Singapore retail revenues Malaysian retail revenues 350 mins x 1 100 mins x 1 350 mins x 0.7 100 mins x 0.7

Wholesale flow Wholesale flow 100 mins x 0.6 100 mins x 0.3 % % 350 mins x 0.6 -15 350 mins x 0.3 -42 Singapore revenues Malaysian revenues Singapore revenues Malaysian revenues 350 – 150 = 200 100 + 150 = 250 245 – 75 = 170 70 + 75 = 145

Assumes: Initial retail price = 1, Initial IOT = 0.6. Roaming traffic is inelastic.

Figure 2.2 Macro-financial effects of roaming regulation on voice roaming revenues, Singapore and Malaysia

450 400 350 300 Singapore to Malaysia 250 200 150 Malaysia to Singapore 100 50

Q1 2011 Q2 2011 Q3 2011 Before regulation After regulation Singapore retail revenues Malaysian retail revenues Singapore retail revenues Malaysian retail revenues 350 mins x 1 100 mins x 1 350 mins x 0.7 100 mins x 0.7

It has also reduced Singaporean Rather, it has created a welfare operators’Wholesale out-payments flow to Malaysian transfer fromWholesale the flowregulated operators,100 mins andx 0.6 total national roaming communications100 mins xsector 0.3 to businesses payments from the wealthier, more in other% economic sectors. This% 350 mins x 0.6 -15 350 mins x 0.3 -42 developed and densely populated case-study has not provided evidence Singapore revenuesSingapore to theMalaysian less wealthy, revenues developedSingapore that revenues regulatory actionMalaysian on roaming revenues 350 – 150 = 200 100 + 150 = 250 245 – 75 = 170 70 + 75 = 145 and densely populated Malaysia. will improve Asia Pacific regional communications linkages in the Despite regulated price reductions, Assumes: Initial retail price = 1, Initial IOT = 0.6. Roaminglonger traffic term. is inelastic. intervention does not appear to have increased international roaming traffic volumes (Figure 2.3). There has been no elasticity-linked increase in short-term economic welfare or strengthening of overall market performance.

450 400 350 300 Singapore to Malaysia 250 200 150 Malaysia to Singapore 100 50

Q1 2011 Q2 2011 Q3 2011

Figure 2.3 Bilateral minute traffic volumes in 2011 (Q1-3)13

10 3. Price trends

Regionally, market trends are As a result of the trend towards higher positive and the industry is volumes of data downloaded, operators committed to taking the lead have introduced innovative data tariff in developing innovative packages, including flat rate daily, tariffs that suit mobile users. multi-day, weekly and monthly bundles, which deliver transparency and often Roaming prices are declining significantly lower prices per megabyte and operators continue to develop than were previously available. innovative offers, including to accommodate inadvertent and Examples of different tariffs available in border roaming, as described the region include: in Chapter 2, and to cater for Fixed or flat fee regional tourism. Additionally, Similar charges for using the same operators are investing heavily network provider abroad to address technical challenges Alliance partnerships (SIMs that works such as interoperability and in specific countries at same rate) quality of service. Flat-rate data-only SIMs that work in Mobile operators offer users a menu multiple countries of tariffs where they can choose tariffs Call home rates equivalent to depending on their preferences. With local rates. different needs and uses, mobile users It should be noted that the structure can choose the most appropriate tariff of these roaming tariffs varies widely, to suit them. If regulation determines from opt-in regional rates and monthly one price over another, this would mean bundles for post-paid customers, to regulation effectively favours one group prepaid roaming tariffs and credits. of mobile users over another.

11 4. Impact of regulation

Regulators have expressed Impact on developing countries concerns about the level of The development stages of roaming charges and consumer telecommunications industry and the bill-shock. However, this concern levels of use of roaming services vary should not necessarily translate to significantly among economies in the a single global or regional solution. Asia Pacific region. The adoption of a Differences in market conditions single framework to regulate roaming between countries may determine prices across all Asia Pacific countries certain higher roaming charges in may create unintended or unforeseen adverse impacts to some economies. some countries and the reasons for Due to the large variations in GDP, higher charges. As such, regulators economic growth rates, cost structures should first address concerns at the and inflation rates in Asia Pacific local level. countries, it is neither reasonable nor Uniform regulatory measures may fail to practical to adopt uniform pricing for address the source of any problem, and international roaming services across are likely to be detrimental to market all Asia Pacific economies. In addition, performance. Global regulation cannot volatility in foreign exchange rates take into account all the different local may reduce tariff transparency if the market conditions and, as a consequence, uniform price caps across all Asia Pacific may fail to address policy makers’ economies are priced in US dollars. This concerns. Additionally, the imposition could place a greater financial burden on of uniform regulatory measures may developing countries to meet regulatory introduce new problems that could have requirements, impacting on funds unintended consequences on mobile users available for other greater needs for the and the industry. local population, such as subsidised handsets, or it may result in removing roaming services all together.

12 Impact on tourist destinations developed markets, there appears to be a wealth transfer from the regulated Roaming prices in the Asia Pacific are communications sector to businesses in substantially lower on high volume, other economic sector, with no overall bilateral routes and the highest discounts increase in economic performance. are found on the highest volume, and most travelled routes. Regulation is Competitive market dynamics are unlikely to acknowledge the difference already strong in the Asia Pacific and between on-net and off-net14 visited are the best frameworks from which to networks, and as such reduces the determine the price for international competitive impact of such offers. The mobile roaming services. Mobile users economic cost of providing roaming choose a mobile tariff based on the in tourist destinations may also be full value it provides across a number significantly greater than the economic of services and operators optimise the cost of providing mobile services to the pricing and value of the bundled tariff to local population. Any shortfall might address the needs of their local market. need to be met through increasing prices Regulating on the roaming elements of for the local population, which means the tariffs reduces operators’ flexibility they may end up subsidising the network to tailor its services for the mass market capacity used by affluent tourists. of end-users. The Asia Pacific region should aim for a more competitive long Economic impact term landscape than has resulted from The macro-financial implication the adoption of price regulation in to the of roaming regulation is an overall European Union.15 reduction of financial transfers from developed markets like Singapore to The mobile sector is a major contributor other Asia Pacific economies (Figure to Asian economic growth and accounts 2.2). In addition, mobile operators in for an estimated US$485 billion, or less developed markets are subject to 2.7 per cent of GDP, across the 17 major greater percentage revenue reductions AP17 countries. It also accounts for 11.4 as inter-operator tariff revenue falls million jobs — and for each job created in addition to retail revenue, leaving by a mobile operator, there are eight more less revenue to invest in innovative generated in the mobile ecosystem and services and extended broadband wider economy. Additionally, in 2010 coverage in the future. Within the more almost US$300 billion was generated

13 through various taxes and fees. This positive contribution of the mobile sector to employment, public funding and productivity is important for the region to sustain and grow. A global or regional regulation that decreases coverage, penetration and mobile phone use may in turn reduce the region’s economic prosperity.16

14 5. Best practice

The industry recognises the concern of Only consider price regulation after: regulators regarding international mobile – Other measures have been given roaming prices. However, regulators sufficient time to conclude there is a need to also recognise that international persistent problem mobile roaming is a complex service, involving many different factors that – Clear evidence shows that operators can influence price, as described in offering roaming services have market this brochure. This complexity creates power — that is, competition in the a significant risk that regulatory market for roaming services is limited measures will result in unintended, – Clear evidence shows that the detrimental consequences for mobile operator company derives its market users, governments and the industry, power from owning a natural particularly in the long term. Regulating monopoly price may result in short-term benefits for – Clear evidence shows the benefit mobile users; however, these are more exceeds the cost of regulation. than likely to be offset in the long-term by a reduction in the level of competition Regional guidelines and innovation, as evidenced by the European Union experience. The Asia Pacific Economic Cooperation (APEC) Telecommunications and It is for this reason that the industry Information Working Group (TEL) supports a measured approach to developed the Guidelines for the Provision regulation, where regulators: of Consumer Information on International Encourage operators to take measures Mobile Roaming17 following a workshop that enhance mobile user awareness on international roaming. The APT (transparency and bill shock) of tariffs further developed the guidelines into when they travel two best practice versions, for mobile operators and regulators.18 These Address structural barriers that documents provide guidance on how to increase costs for service providers and address international roaming and raise mobile users, such as double taxation mobile user awareness for using mobile and international gateway monopolies, services while travelling abroad. as well as those barriers that hold back the development of market based substitutes

15 Industry self-regulation These are consistent with the APEC TEC guidelines and the In June 2012, the GSMA announced an APT international roaming working initiative that will provide mobile users group report. with greater visibility of their roaming charges and usage of mobile data The measures – which already cover services when travelling abroad. more than a billion mobile users – will offer a more transparent and uniform At a meeting held in July, 24 operator experience for all travellers. These groups agreed to undertake a number operators groups agreed to implement of measures which will help mobile these data roaming transparency subscribers better understand their data measures by the end of 2012, extending roaming charges and more effectively the coverage to more than four billion manage their use of data services. connections across 120 countries. The measures include: Sending text messages to remind mobile users of their data roaming tariffs when they arrive in another country and turn on their mobile device Implementing a monthly data roaming spending limit to help consumers manage their roaming bill and sending alerts when their data usage approaches the limit Temporarily suspending data service when use exceeds the spending limit.

16 Endnotes

1 http://www.broadbandgenie. 13 Source: Celcom Axiata co.uk/mobilebroadband/help/ mobilebroadbandusage-guide-what-can-you- 14 ‘On-Net’ is when a call or message originates get-foryourgigabyte, accessed 25 June 2012 on the mobile user’s home operator’s network and terminates to another mobile number that 2 A.T. Kearney 2012 resides with the operator. It does not matter if the receiver is using the home network or is off 3 Ibid Island roaming with a different provider. ‘Off- 4 Source: EIU, Wireless Intelligence, Merrill Net’ applies when the call or message is made Lynch Wireless Matrix, A.T. Kearney analysis on a different network, such as while roaming, or when a mobile user uses their home network 5 Wireless Intelligence Q1, 2012 to make a call or send a message to a number that resides with a different network provider. 6 A.T. Kearney analysis. Based on detailed bottom-up data for Europe. Asia Pacific is based 15 Commissioner Kroes’ makes the observation on high-level estimate and includes wholesale that, in the case of the European Union, and retail revenues for intra- and inter- region price competition has not emerged in the roaming EU roaming services markets following the introduction of price regulation, http: 7 A.T. Kearney 2012. Based on number of trips europea.eu/rapid/pressReleasesAction. divided by population so overestimates do?reference=speech/10/735 percentage of unique roamers. Regions based on UNWTO definitions. 16 GSMA, Asia Pacific Observatory 2011

8 A.T. Kearney analysis, 2011 17 http://www.apec.org/Home/Groups/SOM- Steering-Committee-on-Economic-and- 9 Asia Pacific Telecommunity, International Technical-Cooperation/Working-Groups/ Mobile Roaming Working Group, Working Telecommunications-and-Information Group Report, 15 May 2012 18 http://www.apt.int/sites/default/files/2012/05/ 10 Ibid APT_IMR_Working_Group_Report_Final.pdf 11 A.T. Kearney, 2012. Sample for Asia Pacific based on 24 countries – data not available for 14

12 Source: Gateway Liberalization – Stimulating Economic Growth, GSMA, February 2007 For further questions on roaming, please contact: Isabelle Mauro Head of International Affairs Email: [email protected] Vikram Raval International Roaming Regulation Manager Email: [email protected]

GSMA Head Office Level 7, 5 New Street Square New Fetter Lane London EC4A 3BF United Kingdom www.gsma.com