International roaming explained
Latin America Contents
1. Mobile roaming explained...... 1
2. Mobile roaming in Latin America..... 5
3. Price trends...... 11
4. Impact of regulation...... 13
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
Roaming extends the coverage of the Email: Reading and replying to home operator’s retail voice and SMS emails while abroad services, allowing the mobile user to Mobile broadband: Using mobile continue using their home operator devices or dongles to access the phone number and data services within internet, including downloading another country. The seamless extension images, MP3s, films and software, of coverage is enabled by a wholesale while abroad roaming agreement between a mobile user’s home operator and the visited Applications: Using mobile mobile operator network. The roaming applications while abroad that require agreement addresses the technical and mobile data, such as location-based commercial components required to services and language translators. enable the service. International mobile roaming is one of a wider range of communications services offered to mobile users while travelling abroad, which also include hotel services, Wi-Fi, national “travel” SIMs, and visited operator SIMs.
1 How mobile roaming works When a mobile user is abroad and a visited mobile network. The visited turns their mobile device on, the mobile network picks up the connection from device 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, more than one operator in the same visited Figure 1.2 the shows commercial and country, which in this case is Visited technical details for international mobile Operator A and a second network, Visited roaming. The diagram focuses on the Operator B. As a result, Mobile User A international roaming wholesale and can call home using either visited operator networks, both of which use international retail arrangements, for simplicity. transit services to carry the call back to The mobile user (Mobile User A) has an Mobile User A’s home country. international roaming service with their Mobile User A pays a retail price to Home home operator (Home Operator) and Operator for the roaming service and is automatically connected to a visited does not pay Visited Operator A. Provided network (Visited Operator A) while Mobile User B is not also roaming, they roaming. Mobile User A is automatically will not incur any extra charges to receive granted access to Visited Operator A’s a call from, or to make calls to Mobile network when arriving in the visited User A. country by an exchange of a data between Home Operator and Visited Operator Visited Operator A sends transferred A, where Visited Operator A confirms account procedure (TAP) files to a Mobile User A is a roaming customer with clearing house which forwards them to Home Operator. As such, the wholesale the Home Operator. TAP files are used for roaming agreement between Visited billing of calls while roaming. Operator A and Home Operator specifies Home Operator can then pay Visited how this data is to be provided to the Operator A the wholesale charges as per visited operator. Home Operator usually call volumes in the TAP file and rates in has wholesale roaming agreements with the wholesale roaming agreement.
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
Visited Operator A pays an international pays Home Operator a termination carrier (International Carrier) for carrying rate for terminating the call in the the call and handing over the call to home country. Home Operator. International Carrier
3 Data roaming With the increasing popularity of feature (MB), which refers to the volume of phones and smartphones, the use of data transmitted for the service mobile data services while roaming is used. Data traffic volumes can vary set to continue to grow exponentially. significantly depending on the type Mobile data services are typically and use of different data services. measured in kilobytes (KB) or megabytes
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 Latin America
Regionally, the mobile environment significantly across the region. As a is growing, both in subscribers and result, up to 90 per cent of roaming traffic data traffic; however, roaming services from the region is business-related.4 are still emerging. Latin American Within Latin America, there are around countries are in different stages of 500 operator roaming agreements and economic development, with significant this number is growing. As commerce differences in inflation rates, currency and tourism develop, more roaming exchanges, labor costs and GDP per routes are becoming economically capita. GDP per capita in some countries viable. Roaming traffic flows are mainly is up to 12 times higher than in others.2 across a number of key routes, although Additionally, compared with regions exact traffic patterns vary from operator such as Europe, roaming penetration in to operator (Figure 2.2). Latin America is small. Just seven per cent of the region’s population travelled Both inter-regional and intra-regional abroad in 2011 (Figure 2.1), with factors roaming are major contributors to the such as greater distances between Latin American roaming market. The countries and less affordable travel in exact traffic pattern can vary significantly the region contributing to this lower rate from operator to operator, depending on of travel. Roaming use and its relevance factors such as the country, consumer as a service for mobile users varies base and market position.
65% 35% 10% 7%
Europe North America Asia Pacific Latin America
Figure 2.1 Ratio of international trips to population %, 20113
5 North America
Portugal
Spain
Mexico Honduras Guatemala Nicaragua Venezuela El Salvador
Columbia
Ecuador Latin America
Peru Brazil
Paraguay
Chile
Uruguay
Argentina
Main inter-regional roaming routes Main inter-regional roaming routes Main intra-regional roaming routes: tourism Main intra-regional roaming routes: tourism MainMain intra-regional intra-regional roaming roaming routes: business business
North America
Portugal
Spain
Mexico Honduras Guatemala Nicaragua Venezuela El Salvador
Colombia
Ecuador Latin America
Peru Brazil
Paraguay
Chile
Uruguay
Argentina
Figure 2.2 Main inter-regional and major intra-regional roaming routes for Latin America5
6 Regional challenges Few agreements have been reached to prevent double taxation in Latin America As the Latin American market and some operators report that tax develops, structural and technical treaties in existence are operationally barriers must be addressed. difficult to implement. In addition, Introducing roaming regulation many countries levy other local taxes, while these obstacles remain could such as withholding taxes and local and result in unintended consequences state taxes, which further inflate prices. that harm the industry, mobile Double taxation remains on 72 per cent 6 users and government revenue. of roaming routes in South America. Fraud remains a major financial Structural barriers concern for operators despite increased Legal and technical developments are eradication efforts, causing loses of required to remove double taxation, up to five per cent of total mobile combat fraud and liberalize international revenues in Latin America – and gateways. Combating these barriers up to 25 per cent can occur while is vital prior to any implementation of users are roaming.7 The GSMA and roaming regulation, as they artificially regional bodies are leading initiatives inflate roaming charges in individual to reduce fraud, and more than 80 countries. per cent of Latin American operators have implemented Near Real Time Double taxation inflates retail Data Roaming Exchange (NRTDRE). prices. This means retail prices can be For fraud to be significantly reduced, inefficiently high, which affects the NRTDRE must be enforced through industry and mobile users, as well as roaming agreements, which requires government revenue. While initiatives further investment in technology and by regulatory bodies such as the negotiation of roaming agreements.8 IIRSA (Initiative for the Integration of Regional Infrastructure in South International gateways are the America) exist to help remove double facilities through which international taxation, the problem continues and calls are sent and received. Where substantially increases roaming tariffs. international gateways are not In Latin America VAT rates range from liberalized, their costs make up a seven to 27 per cent, complicating the significant proportion of the total task of roaming pricing for operators. roaming costs. Even with volume growth, there is no bargaining power for operators working across
7 monopolized gateways. This means GSMA recommends governments inter-operator tariffs are likely to focus on removing and reducing these continue to be high. International structural barriers to help to reduce long distance termination charges are roaming costs for mobile users. another cost that inflates end-user prices. Although there has been much improvement in the level of competition, international gateway monopolies remain in at least 29 per cent of Latin American countries.9 In Arab countries, for example, international roaming call prices between liberalized gateways are typically 25 per cent lower than between those with gateway monopolies.10
+ X% 1.5 + X% 0.20
0.22 % 1.07 +40
VAT VAT VAT Other Final excluded (Country 1) and other resident retail price taxes taxes price (Country 2) (Country 1) 12
Figure 2.3 Impact of double taxation on end-user roaming prices11
8 Technical barriers In addition to structural burdens, the industry continues to heavily invest in meeting the technical challenges of international roaming. This level of investment is in addition to the mobile broadband roll outs across the region. Regulatory intervention will diminish the ability of operators to invest in meeting the challenges of mobile broadband roll out.
Technology challenges Required investment
Prepaid roaming: Operators have invested Technical implementation costs, including heavily to enable prepaid roaming, there are still system upgrades and expansion of prepaid many more post-paid routes available, roaming, which burden smaller operators. with prepaid platforms such as CAMEL13 Operators have increased the number of prepaid expensive to implement. routes three fold over four years (Figure 2.4) and continue to invest.
Interoperability: CDMA technology is in use Enforcement and monitoring costs, which will in some parts of the region which prevents disproportionately burden least developed seamless roaming. Additionally, use of different countries. Additional investment is required GSM/3G spectrum can prevent many low-cost by operators to provide consistent quality of handsets from roaming. service across roaming networks.
Coverage: Network coverage, particularly 3G, Consumer communication and marketing costs remains patchy as operators continue to roll out will need to increase to promote roaming and and upgrade their networks. ensure transparency.
9 Route availability Origin (for South America only) Increase in routes available 2007 2011
Argentina 5 21 16 (320%)
Brazil 2 12 10 (500%)
Colombia 0 6 6 (N/A)
Chile 17 32 15 (88%)
Peru 0 4 4 (N/A)
Total 24 74 51 (213%)
Figure 2.4 Prepaid route availability for a sample of South American countries, 2007 vs. 201114
Inadvertent and border roaming Operators are continuing to invest in technical measures to eliminate In addition to structural and technical inadvertent roaming in narrow border barriers, incidences of inadvertent and zones, and offer competitive roaming border roaming can also affect mobile packages for mobile users in these zones. users. As a region, Latin America has Many operators across Latin America low travel traffic between borders have introduced roaming tariffs that in comparison to Europe or North offer special rates across borders to America. Up to four per cent of the facilitate cross-border trade and travel. population, according to the IIRSA15, This is an ongoing trend as operators lives in zones within a few kilometers increasingly work towards serving the from an international border. In many needs of roaming consumers, which can cases, differences in frequencies used for be particularly seen in specialized tariffs mobile devices or existing geographical for heavy tourism routes. The structure barriers eliminate the occurrence of of these roaming tariffs varies widely, accidental roaming. Where a border is from opt-in regional rates and monthly divided by a street or river, for example, bundles for postpaid users, to prepaid this is much harder. roaming tariffs.
10 3. Price trends
Regionally, market trends are positive Tariffs options may generally include and the industry is committed to taking different call prices (pre-paid/postpaid), the lead. Roaming prices are declining whether the mobile phone has been and operators continue to develop purchased as a part of the bundle, the innovative offers, with reductions of size of the monthly access fee, among up to 79 per cent since 2007 (Figure many other factors. 3.1). Operators across the region are taking steps to serve the needs of mobile users living on international borders and address inadvertent roaming, as described in Chapter 2, as well as cater for regional tourism. Additionally, operators are investing heavily to address the technical challenges such as prepaid route availability and interoperability. Mobile operators offer their customers a menu of tariffs from which they can choose from depending on their own preferences. With different needs and uses, mobile users can choose the most appropriate tariff to suit them. If regulators chose one price over another, this would effectively favor one group of mobile users over another.
11 Outgoing local call SMS Data
1.29 9.85
0.36
-68% % % 0.41 -72 -79 0.10 2.07
2007 2011 2007 2011 2007 2011
Figure 3.1 Selected examples of postpaid tariff comparison for Argentinian users roaming in Paraguay (USD), 2007 to 201216
As a result of the trend towards It should be noted that the structure higher volumes of data downloaded, of these roaming tariffs varies widely, operators have introduced innovative from opt-in regional rates and monthly tariff packages, including flat rate daily bundles for postpaid customers, to bundles, which deliver much lower prepaid roaming tariffs and credits. prices per megabyte than were previously available. There is also a pre-paid roaming platform agreement between several Central American countries: Guatemala, El Salvador, Honduras and Nicaragua.
12 4. Impact of regulation
Regulators have expressed concerns advanced, developed countries. This about the level of roaming charges and could place a greater financial burden consumer bill-shock. However, this on developing countries to meet concern does not translate to a single regulatory requirements, impacting solution for the region. Differences in on funds available for other greater market conditions between countries needs for the local population, such as may determine certain higher roaming subsidised handsets, or it may result in charges in some countries and the removing roaming services all together. reasons for higher charges. As such, Impact on tourist destinations regulators should first address concerns at the local level. Countries that rely heavily on tourism are more likely to have invested Uniform regulatory measures may fail to significantly in network capacity to address the source of any problem, and support roaming. For example, some are likely to be detrimental to market Latin American countries experience performance. Regional regulation cannot large numbers of in-bound tourists; take into account all the different local while sometimes supporting a smaller market conditions and, as a consequence, domestic market of relatively lower may fail to address the actual cause of revenue customers. In these instances, the problem. Additionally, the imposition the economic cost of providing of uniform regulatory measures may roaming might be significantly greater introduce new problems that harm than the economic cost of providing mobile users and the industry. mobile services to the local population. Impact on developing countries However, if regulation determines roaming charges to be the same as The burden of regulation can fall providing mobile services to the local unequally and disproportionately population, then revenue earned from impact less-developed countries. roaming may not meet its cost. Any If regional roaming regulation was shortfall might need to be met through implemented, less-developed countries increasing prices charged to the local could be required to invest heavily population, which means they may end to obtain interoperability and high up subsidising the network capacity quality services to align with the more used by tourists.
13 Impact on universal broadband These impacts suggest large businesses and affluent leisure customers would Universal broadband access in Latin benefit most from lower prices, rather America depends on the ability of than the mass market of mobile users mobile operators to continue their who is most often incorrectly cited as high rates of investment. The mobile suffering from high roaming charges. industry is capital intensive and Competitive market dynamics are the pace of asset replacement and the best frameworks from which to investment in new technologies is determine the price for international rapid. Operators take considerable mobile roaming services. Mobile users risks when they invest. The level of choose a mobile tariff based on the regulation is a strong influence on full value it provides across a number the investment decisions made by of services and operators optimise the mobile operators and that, in turn, pricing and value of the bundled tariff to will impact on the services available to address the needs of their local market. mobile users. By reducing the incentive Regulating on the roaming elements of for operators to invest in innovative the tariffs reduces operators’ flexibility to services, it reduces the likelihood that tailor its services for the mass market of mobile users will benefit from new end-users. services and extended broadband coverage in the future. As such, Regulating roaming is a move away regional roaming regulation will from successful liberalisation of ultimately negatively impact on the telecommunications markets which has broadband services available for the promoted technological development unmet needs of consumers. and economic progress over the last two decades. With mobile phone penetration in some Latin American countries at just 13 percent17, regulation of roaming could be detrimental to connecting the region and providing access to universal broadband.
14 5. Best practice
The industry recognises regulators’ Only consider price regulation after: concern 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 this brochure. This complexity creates market power — that is, competition a significant risk that regulatory in the market for roaming services measures will result in unintended, is limited detrimental consequences for mobile – Clear evidence shows that the users, governments and the industry, operator company derives its particularly in the long term. Regulating market power from owning a price may result in short-term benefits natural monopoly for consumers; however, these are more than likely to be offset in the long-term – Clear evidence shows the benefit by a reduction in the level of competition exceeds the cost of regulation. and innovation, as evidenced by the EU experience. Industry self-regulation It is for this reason that the industry In June 2012, the GSMA announced supports a measured approach to an initiative that will provide mobile regulation, where regulators: users with greater visibility of their roaming charges and usage of mobile Encourage operators to take measures data services when travelling abroad. that enhance mobile user awareness At a meeting held in July, 24 operator (transparency and bill shock) of tariffs groups agreed to undertake a number when they travel of measures which will help mobile Address structural barriers that subscribers better understand their data increase costs for service providers and roaming charges and more effectively mobile users, such as double taxation manage their use of data services. and international gateway monopolies, The measures include: as well as those barriers that hold back the development of market based Sending text messages to substitutes remind mobile users of their data roaming tariffs when they arrive in another country and turn on their mobile device
15 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. These measures, which already cover more than a billion mobile users, will offer a more transparent and uniform experience for all travellers. These operators groups agreed to implement these data roaming transparency measures by the end of 2012, extending the coverage to more than four billion connections across 120 countries.
16 Endnotes
1 http://www.broadbandgenie. 11 A T Kearney 2012, Outgoing voice call co.uk/mobilebroadband/help/ price is given for a hypothetical example of mobilebroadbandusage-guide-what-can-you- a Claro Argentina subscriber travelling to get-foryourgigabyte, accessed 25 June 2012 Chile in USD
2 AT Kearney, 2012. Note: Barbados and Aruba 12 Other resident taxes may be indirect have very high GDP per capita on PPP basis or regulatory fees applied to IOTs and (up to 86 times the lowest GDP country) but retail prices they have been excluded from this analysis because of their small size 13 CAMEL is Customized Applications for Mobile networks Enhanced Logic, which is 3 A T Kearney based on information from an intelligent network designed to work on UNWTO and EIU either GSM or 3G core networks. CAMEL features include no-prefix dialling, real-time 4 Regional Study of the South American billing and being able to receive voice calls, Roaming Services Market – Stage I, IIRSA, MSM and use data services while abroad for April 2009 pre-paid users
5 Source: SICA - Central American Integration 14 A T Kearney 2012. Sample is of the five System, WTO Factbook, BlueNote MC largest Latin American countries by mobile 6 Percentage on all roaming routes provided by subscribers numbers, October 2011 A T Kearney, based on a sample of 10 South 15 Source: IIRSA: Initiatives for the American countries and sourced through improvement of the South American IIRSA Regional Study of South American market of roaming services, Analysis and Roaming Services Market, April 2009; EIU; Recommendations, February 2010 Operator websites 16 Selected examples of operators decreasing 7 Source: IIRSA: Initiatives for the prices, using medium data from Argentina improvement of the South American Telecom Personal, Argentina Claro and market of roaming services, Analysis and Argentina CT Movil sourced from operator Recommendations, February 2010 websites
8 Ibid 17 Wireless Intelligence, Q1 2012 9 AT Kearney, 2012. Note: Sample for Latin America is based on 24 countries as data unavailable for 14 countries
10 Source: Gateway Liberalization – Stimulating Economic Growth, GSMA, February 2007 For further questions on roaming, please contact: Isabelle Mauro Head of International Affairs Email: imauro@gsm.org Alexis Arancibia Senior Technology and Innovation Manager Email: [email protected]
GSMA Head Office Level 7, 5 New Street Square New Fetter Lane London EC4A 3BF United Kingdom www.gsma.com
3 © July 2012