Roaming regulation in Asia: A brewing tsunami or storm in a tea cup?

In a recent interview request I was asked to comment on the demand from Indonesian Communications and Information Minister Tifatul Sembiring to remove roaming fees between ASEAN countries.

The focus was on two questions: Do you think it would be possible for Asean to become a free roaming region? And if so Why? And what steps need to be taken for Asean’s telcos to agree to a no roaming fee agreement?
Whilst ‘free roaming’ is not completely free calls, most likely this is a quirk of translation, the idea of lower roaming calls being championed by a regulatory spokesperson certainly has resonance in the European region.

The stance taken by Tifatul Sembiring is very similar to that taken by Neelie Kroes, the European Commissioner for Digital Agenda. Miss Kroes has expressed her desire that the EU’s roaming rates reach parity with national markets and has undertaken legislation action to achieve this including three rounds of implemented regulation. Clearly legislative bodies around the world have begun to see the EU approach as something of a blueprint for their own actions toward roaming and as such there may well be the impetus to drive down roaming costs in the ASEAN regions.

However one must also consider the operator perspective. I previously wrote about immense profitability of roaming, particularly international roaming. As such there is little impetus from the operator perspective to make ‘roaming-free’.

In Europe regulation has brought some reduction in costs. This legislation has forced operators to cut both retail and wholesale rates and most recently has put in place processes to open the market to competition. But these developments have only come after repeated requests and exhortations by the EU to reduce roaming rates were ignored. This process has been ongoing since 2005 and clearly demonstrates the level of resistance surrounding reducing roaming rates.

As well as operator resistance to retail roaming rates reductions we must also consider the wholesale market in ASEAN. If retail rates fall what happens to the charges made between operators to interconnect and payments made to international transit providers (although this would be less of an issue between ASEAN countries) to facilitate the roaming call? Costs must be met somehow.

Sembiring’s concerns also focus upon cross border roaming where calls are unintentionally connected as roaming (inadvertent roaming). His argument follows that without roaming charges there would be no inadvertent roaming. But cutting roaming charges it not the only option to tackle this problem. In Latin American countries have taken a different approach including providing specific border tariffs and SMS warnings when roaming is about to occur. As between 4-5 per cent of the population of Latin America live in border regions this is a particular issue for them.

The LatAm region is of further interest in regard to pan-regional initiatives. The Integration of Regional Infrastructure in South America (IIRSA) group has worked toward delivering a pan-regional roaming tariff called, quite unoriginally, the South American Roaming Agreement, which provides a discounted rate between LatAm countries but at a slight premium to a national call. This provides a fairer proposition to customers while keeping operators relatively happy.

There are some justifications for radically cutting roaming charges. It is a mechanism to encourage consumers to make use of roaming services. As a heavily underpenetrated segment in roaming consumers react positively to cuts based on their high price elasticity.

Another justification is the potential that cheap roaming might encourage increased cross-border data use. As the most expensive form of roaming and the activity most likely to lead to bill shock (large unexpected bills while roaming) customers generally just turn off their device when out of the country. Reducing roaming fees might discourage consumers from simply turning off their data and roaming capabilities when abroad. The upshot of this would be greater use of data and the potential to generate premium revenues through data service purchase.

A further model of ‘free roaming’ is to use it as an incremental service revenue generator. In this model the sale of cellular services is not the aim but rather to drive uptake of other services that might not even be related to mobile. These models have been leveraged by multi-play operators as a mechanism to diversify and increase the perceived value of the services they offer, improving the richness of their service suite. In this way free roaming could be added as a loss-leader to generate revenue for a services or goods not directly related to the service being offered. This supplemental service approach can lose money or be nill-profit as its ultimate aim is to sell additional non-related services.

However with all of these models some form of payment and some form of differential between in-country and out of country charging is preferable. It is unlikely any one of these alternate strategies could be leveraged without a premium roaming charge being in place. As such it would appear Sembiring is posturing in much the same way that Kroes has done in the EU in order to encourage a process of reducing roaming costs from the operators within the ASEAN regions.

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