February 2011 Fostering regional cooperation Lowering roaming charges in the Western Balkans Institute for Advanced Studies GAP Abstract Today Kosova has two mobile operators and 1.5 million telephone subscribers. The number of telephone subscribers has increased rapidly in the Western Balkans region as well. Due to competition, domestic call charges have been gradually getting lower, but roaming charges remain extremely high. For Kosovo roaming charges are up to 29 times higher than domestic calls. Other countries face the same problem. In EU member states, roaming charges are regulated by the European Commission. Western Balkan countries do not have a similar body to impose roaming caps. Mobile operators here seem uninterested to agree on having similar roaming tariffs. Hence, GAP Institute suggests that national regulatory bodies should stand up and regulate the roaming caps. Introduction Since political disputes have hindered cooperation among some of the Western Balkans countries, regional cooperation should start on other less politicized issues that would benefit all. This way, a new chain of mutually beneficial agreements should develop in order to bring these countries closer together. Telecommunication could be one of the means to foster such regional cooperation, with regulating roaming charges being the starting point of such cooperation. The telecommunication sector is one of the most successful sectors expanding rapidly in the region. It is also one of the most profitable sectors generating high revenues. Competition among mobile operators has led to better offers, thus the number of subscribers has more than doubled in ten years. - Today, Kosova has two mobile operators (VALA and IPKO) both reaching 1.5 million subscribers. - Albania has three operators (AMC, Eagle Mobile, Vodafone Albania) with 4.5 million subscriber. - Macedonia has three mobile phone operators (One, VIP Operator, T- Mobile) reaching 1.9 million subscribers. - Serbia has three mobile operators (mt:s, Telenor, VIP) reaching 10.4 million subscribers. - Montenegro with three mobile operators (Telenor, T-Mobile, m:tel) has 1.1 million subscribers. - Bosnia and Herzegovina has three mobile operators (BH Mobile, M-tel BH, HT-Eronet) reaching 4.1 million subscribers. In Kosovo the mobile telephony has seen a rapid expansion especially compared to fixed line subscribers. By the end of September 2010, the number of fixed line users has dropped slightly to 88.000, out of which 8.0001 users belong to the alternative operator IPKO and the rest to Kosovo Telecom. One reason for such decline is the increasing number of mobile users. By the end of the third quarter of 2010, the number of mobile users has reached 1.537.000 users, an increase of 3.41% compared to the second quarter of this year, or 18% increased compared to the third quarter of 2009. Telecommunication industry is one of the most profitable industries, generating high revenues. The total income of telecommunication services in the third quarter of 2010 was near 40 million euro, where 82% of the income was generated by mobile operators. Considering that 7,000 new users added to the mobile network during July-September period, this suggests that the penetration rate of mobile operators is also expanding. By the end of September 2010, the penetration rate has reached 74%, an increase of 11.2% compared to the same period of 2009. Nevertheless, the penetration rate is still low compared to countries in the region or EU. The table below shows the growth of mobile subscribers, market share, and penetration rate in Kosovo. Table 1: Market share of mobile operators in Kosovo 2007 2008 2009 2010* Mobile Mar Operator Mark Mark Mark ket Subscribe et Subscribe et Subscribe et Subscriber shar rs share rs share rs share s e Vala 774,980 76% 822,602 63% 986,960 64% 1.029,790 67% Ipko 93,600 9% 300,000 23% 366,000 23% 445,730 29% Unlicense d Mobile operators 150,000 15% 180,000 14% 200,000 13% 61,480 4% 1,018,58 1,302,60 1,586,96 100 Total 0 100% 2 100% 0 100% 1,537,000 % 74.3% Penetrati on Rate 48.5% 62.0% 75.6% Source: Telecommunication Regulatory Authority in Kosovo *Represents subscribers until the third quarter of 2010 (Q3) 1 ART Report 2010 2 The mobile industry has been successful in other countries too. The table below shows how the number has constantly increased in most of Western Balkan countries, suggesting that the number of mobile subscribers may grow even higher. Table 2: The growth of mobile subscribers in Western Balkans Albania Bosnia Macedonia Montenegro Serbia Kosovo Subscribers Subscribers Subscribers Subscribers Subscribers Subscribers (million) Year (million) (million) (million) (million) (million) 1999 0.01 n/a 0.12 n/a 0.2 n/a 2002 0.85 0.61 0.36 n/a 2.9 n/a 2005 1.47 1.7 1.28 0.59 6.3 n/a 1.02 2007 2.21 2.47 1.95 1.1 8.8 2008 2.78 3.18 2.36 1.11 9.7 1.30 2009 4.03 3.72 2.11 1.28 10.4 1.59 2010 4.5 4.12 1.99 1.11 10.4 1.54* Source: Buddecomm Report “Telecoms Market overview, statistics and forecasts”8th Edition, 2009 *Represents subscribers until the third quarter of 2010 (Q3) All these countries have at least three different mobile operators. The competition has pushed them to provide better and more competitive tariffs for their consumers with regard to domestic calling tariffs. Albania has gone even further not only by introducing the fourth operator, but also the Government has urged mobile operators to lower their tariffs.2 Kosovo on the other hand is the only country that has only two mobile operators. Unlike the Albanian Government, the Kosovo Government has recommended the Kosovo Telecommunication Regulatory Agency (ART) no to give a license for a third mobile operator till 20153. This kind of decision does not contribute to the idea of free market, it hinders competition and it may lead toward oligopoly. Nevertheless, the objective of this paper is to deal with a common problem faced by all consumers of Western Balkan countries, which is the high roaming tariffs. This policy brief analyses the roaming charges in six countries of the Western Balkans: Albania, Bosnia and Herzegovina, Kosova, Macedonia, Montenegro and Serbia. Croatia is not included in this study. Since Croatia seems much closer to EU accession, our recommendations would not fit for it and may be considered as a step back. Therefore, the Western Balkan notion used in this paper does not include Croatia. This paper deals with the issue of roaming charges applied in the above mentioned countries.4 Since the majority of subscribers are prepaid, this paper deals only with the roaming charges offered for prepaid users. GAP Institute believes that the status quo should be 2See:http://www.balkanweb.com/kryesore/1/berisha-projekt-per-arrat-e-lajthiat--taksa- celulareve-per-sms-te-54475.html 3 See Decision no. 06/124 of Kosovo Government, taken on May 13, 2010 4 Extremely high roaming charges are being applied to citizens of these countries. For instance, Kosovo citizens have to face roaming charges up to 29 times higher than domestic calling tariffs. This is much higher compared to roaming charges applied in EU countries; not to mention the differences in living standards and GDP. 3 changed since the welfare of consumers is at stake. The EU experience shows that it is very unlikely that mobile operators will ever reach an agreement setting roaming caps, hence GAP Institute suggests that alternative ways should be considered one of which is that national telecommunication regulatory agencies should stand up and put certain limits to roaming prices. To change the status quo, GAP Institute recommends that these countries should immediately start an awareness campaign on high roaming tariffs and then consider the following two policy options: a) join the Eurotariff zone; or b) establish a “Balkantariff” zone. Dealing with high roaming charges The telecom market in the Western Balkans has grown at a rapid pace. In most of the countries the number of subscribers has increased constantly, accompanied by new entrants into the marketplace, privatization of state- owned telecom companies, modern telecom infrastructure and more affordable products and services for consumers. 5 Moreover, the telecom industry has been liberalized and legislation on regulatory principles has been or is being adopted. This legislation is founded on the EU’s regulatory framework for communication, which promotes competition as the most effective way to offer communication products and services while ensuring universal access. Today, Albania, Serbia, Montenegro and Macedonia have adopted the regulatory principles found in the EU’s 2003 regulatory framework for communication. Kosova and Bosnia and Herzegovina are the only two countries still basing their regulatory principles on the EU’s 1998 regulatory framework for communication. Kosova is also a signatory of the eSEE Agenda Plus – a joint effort of Southeast Europe (SEE) countries to develop a benchmark based on the points and policies of the EU’s i2010 strategy, which also includes an appropriate regulatory framework. Policies and actions undertaken by eSEE correspond to the efforts to push SEE closer to EU action plans for Information Society development, as expressed in the current i2010. The number of telephone subscribers is rapidly increasing. As Table 2 shows, each country has seen a rapid growth of telephone users during the last ten years, suggesting that the number may even further increase. Kosova too has seen a rapid increase of telephone subscribers. The number of subscribers today is more than 1.5 million; including 13% of the overall subscribers who belong to mobile operators illegally operating in Kosovo6.