Eastern Partnership Roaming Arrangment

EMERGWORKSHOP ON

INTERNATIONAL ROAMING

Biel, 5.11.2019

1. EasternPartnership –roaminginitiative

About Eastern Partnership (1/2)

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About Eastern Partnership (2/2)

About EaPeReg

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• EaPeReg established in 2012

• Goals: Cooperation between the EaP countries and the EU, supporting thedevelopment of their electronic communications markets, social and economicdevelopment of partner countries

• EaPeReg provides its activities according to the MoU and PoC

• Membership: Members - 6 EaP countries; Advisors - 12 EU MS and Macedonia;Observers – EC; External Experts (when it’s necessary)

• Board: Chair and Vice-Chair (1 y. term), Troika (current + outgoing + incomingLeadership) and CN

• Annual Works Plan – Plenary Assemblies (2), Thematic WS (2), EWGsmeetings = Annual Activity Report

• Three EWGs: SEWG, REWG and IRBEWG

• Website: www.eapereg.orgSource: EaPeReg

About EaPeReg

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EaPeReg Action Plan 2017-2020 (Mid-Term-Strategy) – 5 pillars:

Legislative approximation and fostering NRA independence

Spectrum coordination

Harmonization of roaming tariffs

Benchmarking studies

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Broadband Development Responsibilities:

➢ IRBEWG – Pillars 1, 4, 5➢ SEWG – Pillar 2➢ REWG – Pillar 3

Source: EaPeReg

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2. EU4DIGITAL project introduction

About EU4Digital

Overall project objectiveEliminate existing obstacles and barriers for pan-European online services for citizens, both women and men, public administrations and businesses, including through the harmonisation of the digital environments among the EaP partner countries and with the EU.

Project purpose• Promote key areas of the digital economy and society in the EaP region, in line with

EU norms and best practices.

• Establish EU4Digital as a recognized and well communicated brand, encompassing EU support to the digital economy and society in the EaP region and providing links to other complementary activities by the EaP partner countries, EU Member States, IFIs and other donors.

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Scope of EU4Digital project

6 Eastern Partner Countries

6 Thematic areas:

• Telecom Rules• Trust and Security• eTrade• ICT innovation • eHealth• eSkills• Communication (horizontal area)

3 Years for implementation (01/2019 – 01/2022)

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Expected Results

1. TELECOM RULES▪ Achieving common roaming space▪ NRA independence strengthening▪ Develop coordinated frequency

distribution strategies for freeing 700MHz

2. TRUST & SECURITYCross-border eSignature pilot andregional framework for cross-bordereServices for business, cyber-resiliencestrategies

3. eTRADEThree pilots - cross-border eTrade, eCustoms, and eCommerce, preparatory actions to pilot Digital Transport Corridor

4. ICT INNOVATIONActions to favour development of ICTresearch, start-ups & innovationecosystems

5. eHEALTHHarmonised frameworks for eHealth, among EaP partner countries and with the EU

6. DIGITAL SKILLSDesigning digital skills strategies,Competence framework for SMEs

COMMUNICATIONBuilding EU4Digital brand to streamline visibility and leverage impact of EU cooperation across the digital economy and society in the EaP

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REWG

EaPeReg Network

EaPeReg Chair

EaPeReg Vice-Chair

BBEWG SEWG

SEWG Chair

SEWG CO-Chair

EU MS participants

EU4Digital Team Lead PMO Team Lead

BBEWG Chair

BBEWG CO-Chair

EU MS participants

REWG Chair

REWG CO-Chair

EaP participants

EU MS participants

Roaming

EU4Digital Telecom Rules Team

Telecom Rules Work Stream Lead

Deputy Lead

Independence of NRAs

Freeing 700 MHz

SpectrumTeam Lead

Other expertsOther expertsOther experts

Country coordinators

Support Team

Close cooperation

on all levels

EU4Digital project

REWG country coordinators

Other REWG members

AM AZ BY

GE MD UA

EaP participants

BBEWG country coordinators

Other BBEWG members

AM AZ BY

GE MD UA

EaP participants

SEWG country coordinators

Other SEWG members

AM AZ BY

GE MD UA Azerbaijan

GeorgiaMoldovaUkraine

Belarus

Armenia

European CommissionDG NEAR | Chief Programme Manager

Organizational structure (1/2)

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2. Validation of approach for common roaming space and updates within the EaP / current status

Roaming market in EaP countries as of 2016

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Structure of roaming revenue:• Roaming among EaP Countries constitutes

around 10% of total roaming revenue• EU roaming is around 50% of total revenue• EaP roaming revenue represents less than

0.5% of the total mobile operators’ revenue • Rest of the world counts for 40% of total

roaming revenueImplications:• If EaP roaming prices are reduced, this will

have only a minor financial impact for EaP mobile operators

• Currently around 50% of revenue from roaming comes from customers who travel to the EU

• For customers to gain a more significant benefit from reduced roaming prices, future EaP Countries’ roaming regulations need to be fully harmonised with the EU

*Roaming revenue split for Moldova is calculated based on roaming usage indicators instead of roaming revenue due to data availability

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Effects of a decrease in roaming service prices* Positive intervention by the regulator – customer benefit is much higher compared to the loss incurred by the operators:

Country Voice Out Voice In SMS Data

Armenia 81% 195% 19% 620%

Azerbaijan

Belarus 257% 291% 19% 2108%

Georgia 500% 288% 100% 674%

Moldova

Ukraine 263% 1806% 217% 1588%

Increase in roaming services volume, %

Country Voice Out Voice In SMS Data Total

Armenia 0.27 0.69 0.00 0.46 1.42

Azerbaijan

Belarus 1.55 0.79 0.02 7.36 9.73

Georgia 0.86 0.29 0.02 0.25 1.42

Moldova

Ukraine 0.88 11.93 0.24 6.97 20.02

Total 3.55 13.70 0.28 15.05 32.59

Change in total surplus, mEUR)

Country Voice Out Voice In SMS Data Total

Armenia -0.32 -0.35 -0.03 -0.07 -0.78

Azerbaijan

Belarus -0.59 -0.27 -0.08 0.38 -1.32

Georgia -0.28 -0.18 -0.05 -0.06 -0.58

Moldova

Ukraine -1.06 -1.39 -0.38 -1.16 -4.00

Total -2.25 -2.20 -0.54 -1.68 -6.67

Change in operators’ surplus, mEUR

Country Voice Out Voice In SMS Data Total

Armenia 0.59 1.05 0.03 0.54 2.20

Azerbaijan

Belarus 2.14 1.06 0.10 7.74 11.04

Georgia 1.13 0.48 0.07 0.31 2.00

Moldova

Ukraine 1.94 13.32 0.62 8.14 24.02

Total 5.80 15.90 0.82 16.73 39.25

Change in consumer savings, mEUR

*Roaming study data, to be updated

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Regulation model alternatives analyzed in the Roaming study (1/2)Roaming Study suggests 3 viable options:

EU Roaming regulation modelbased on the EU Roaming regulation, which would regulate wholesale rates (setting them at thesame level as in the EU) and eliminate retail roaming tariffs through a Roam-Like-At-Home(RLAH) model

Clear wholesale and retail rates modelbased on a detailed costing study to establish specific EaP rates for wholesale and retail tariffs

Amended EU Roaming regulation model (AERRM)partially based on the EU Roaming regulation, which would regulate wholesale rates (settingthem at the same level as in the EU) and set the retail rates equal to RLAH rates and charge towholesale rate on top

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As a result of the analysis theAmended EU Roaming regulationmodel (AERRM) is proposed asoptimum, given the circumstances.

The suggested approach under theAERRM would imply a glidepath(timeline) with that would allow fullimplementation of the AERRM overfive years, while ensuring acoherent decrease of roamingcharges and giving the operatorstime to adjust accordingly.

Regulation model alternatives analyzed in the Roaming study (2/2)

Criteria EU model Amended EU model

EaP specific model

Implementation 5 5 2

Regulatory fit 1 4 5

Customer impact 5 3 3

Operator impact 1 5 5

Future perspective 5 5 3

Total 17 22 18

Ranking 3rd 1st 2nd

Roaming intervention – proposed wholesale cap

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The average wholesale charge that the visited networkoperator may levy on the roaming provider for the provisionof regulated data roaming services by means of that visitednetwork shall not exceed a safeguard limit of EUR 7,70 pergigabyte of data transmitted.

That maximum wholesale charge shall decrease to:

• EUR 6,00 per gigabyte on 1 January 2018

• EUR 4,50 per gigabyte on 1 January 2019

• EUR 3,50 per gigabyte on 1 January 2020

• EUR 3,00 per gigabyte on 1 January 2021

• EUR 2,50 per gigabyte on 1 January 2022

It shall remain at EUR 2,50 per gigabyte of data transmitted until 30 June 2022. The Article 19 requires the European Commission by 15 December 2019 submit to the European Parliament and to the Council, accompanied, if appropriate, by a legislative proposal to amend the maximum wholesale charges for regulated roaming services. Effectively this means a deviation in levels of applicable wholesale rateswithin the EU and EaP countries.

Roaming intervention – proposed retail cap

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Retail prices would be set according to following formula: applicable wholesale rates plus domestic rates, effectively ensuring a transparent mechanism whereby the per unit cost consists of domestic rate and a surcharge equal or less than stipulated wholesale rate.

Prices would reach EU wholesale roaming prices of 2017 in Year 4 and would further decrease to the then-new EU wholesale roaming rate in Year 5. Retail roaming charges are set with a 50% mark-up from wholesale cost and would gradually move in Year 5 to the then-current wholesale level, plus the effective national price applied at that time.

Roaming intervention – proposed IMTR cap

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The Study recommends to gradually decrease international mobile termination rates (IMTR) towards average mobile termination rates in the EU.

Mobile roaming services amounted to 3.24% (EUR 76.9 m)

Operator revenue loss, EUR

Consumer Surplus,

EUR

Total Surplus,

EUR

EaP roaming price reductions (%)Outgoing

voiceIncoming

voice SMS DataCountry

AM -823 935 1 168 021 344 086 90.43 94.78 75.81 -40.63

AZ -971 346 1 408 905 437 559 93.16 92.95 75.94 89.69

BY -1 545 961 4 355 218 2 809 257 96.85 97.85 85.24 83.82

GE -491 503 1 228 664 737 161 95.92 97.85 91.59 82.05

MD -419 375 552 222 132 847 90.31 94.21 75.06 96.06

UA -1 772 201 2 578 649 806 448 86.47 96.48 85.21 69.98

Total -5 306 535 11 291 679 5 267 358

EaP TELECOMMUNICATIONS MARKET IN 2019

• Voluntary decreases of roaming prices areobserved, however, substantial reductions are stillto be implemented to align with suggestedroaming model. On average – 87% decreaseexpected

• Initial societal welfare impact assessed at EUR5.267 m. Down from over EUR 32 m indicatedunder Roaming study (2017) mainly due to pricedecreases but also substantial changes in Ukrainemarket structure (increase of data usage) which inturn impact majority of EaP market

• Impact assessed on the 5th year ofimplementation

PRELIMINARY EaP MARKET IMPACT ASSESSMENT DUE TO REDUCED ROAMING CHARGES

► Just over 80 m mobile users

► Ukraine being the largest market with over EUR 1 bn of revenues and over 50 m active connections (more than half)

Total mobile services market – just under EUR 2.4 bn

EaP retail roaming totalling only 0.28% (EUR 6.77 m)

Roaming Rate Harmonisation Impact Assessment

• Expected changes of traffic volumestaken into account when assessingimpact reduction of IMTRs for EaProaming traffic

• Full picture of applicable terminationrates was not made available, overallregion impact could be higher

• IMTR reduction to be taken into accounton top of estimated societal welfare

• Initial impact of reduction ofinternational termination rates assessedat EUR -0.195 m

• Varying impact from country to countrydue to country varying market sizes

• Impact assessed on the 5th year ofimplementation

PRELIMINARY EaP MARKET IMPACT ASSESSMENT DUE TO INTERNATIONAL MOBILE TERMINATION RATES

IMTR Harmonisation Impact Assessment

Country Impact, EURArmenia -19 542

Azerbaijan -14 470Moldova -48 918Ukraine -111 800

AS IS Volume

TO BE Volume

As Is IMTR

To Be IMTR

As Is Revenue

To Be Revenue

Revenue diff.

%

AM 218 609 1 381 049 0.15 0.01 33 353 13 810 59

AZ 276 156 2 222 757 0.13 0.01 36 698 22 228 39

MD 586 439 2 462 301 0.13 0.01 73 541 24 623 67

UA 2 050 349 9 297 988 0.10 0.01 204 780 92 980 55

• Total estimated impact is calculated as a sum of monetary impact of reduction of applicable roaming rates and the estimated monetary impact of reduction of applicable IMTRsic

• As reduction of roaming rates is estimated to bring EUR 5.26m of societal welfare and proposed glidepath of IMTRs would bring a EUR -0.195m impact on revenues, the total estimated impact is calculated at EUR 5.07m

• Impact is expected to be higher but not significantlyfor termination part as not all EaP countries provided relevant data to the EU4Digital

• Indicatively, there may be differences between roaming trafffic termination revenues and those generated by termination of international traffic on mobile networks

PRELIMINARY EaP MARKET IMPACT ASSESSMENT DUE TO ROAMING AND IMTR

Total estimated Roaming and IMTR HarmonisationImpact Assessment

Country IMTR impact Roaming Impact Total Impact

AM -19 542 344 086 324 543

AZ -14 470 437 559 423 089

BY Data is not available 2 809 257 2 809 257

GE Data is not available 737 161 737 161

MD -48 918 132 847 83 929

UA -111 800 806 448 694 649

Total -194 730 5 267 358 5 072 628

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• Out of all EaP countries’ international commitments, only WTO GATS is identified as havingan impact on potential RRA

• 4 out 6 EaP countries are WTO members• MFN principle providing any WTO party to be eligible for entering RRA without equal

market impact or similar type of analysis, is seen as a risk for EaP countries’ roamingmarket.

• 2 possible exceptions to the obligation to grant MFN treatment to services and servicesuppliers from all WTO members are identified:

1. via a preferential trade agreement that meets the conditions of GATS Article V: e.g., itapplies for broad free trade agreement having substantial services sectoral coverage or

2. via a recognition agreement that meets the conditions of GATS Article VII: it applies foragreements mutually recognizing the education or experience obtained, requirementsmet, or licenses or certifications granted.

EaP countries’ international commitments (1/2)

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Intergovernmental agreement and/or mesh type agreement;

Intergovernmental agreement and/or mesh type agreement under broader umbrella of comprehensive free trade agreement;

Intergovernmental agreement of Mutual Recognition Agreement (MRA) type;

Voluntary (facilitated) agreement among involved operators.

EaP countries’ international commitments (2/2)

Feedback on outlined WTO options from all EaP countries is expected – to be aligned at the Vilnius Workshop on 12 November

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Four potential legal framework options have been identified for conclusion of an RRA:

3. EaP Regional Roaming Arrangment –further steps

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EaP wide data collection finalization and country profiles• Information collected from all 6 EaP countries

• Country Profiles prepared for each of the 6 countries

• Update of impact assessment

• Alignment with various levels of stakeholders

International commitments angle further exploredAnalysis of international commitments prepared for the EaPeReg international roaming group :

• Document circulated via the EaPeReg to the Contact Points and line and trade governmental bodies

• Feedback expected and based on feedback decision on further steps pending by Roaming Expert Working assisted by the EU4Digital