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Why the European Union’s Roaming Regulations Might Leave MVNOs out in the Cold

By Dennis Jones

Why the EU Roaming Ban Might Leave MVNOs Out in the Cold

On April 30, the European Union entered into roaming regulatory limbo. Roaming surcharges were drastically cut in advance of a complete ban on roaming fees, set to begin on June 15, 2017. As expected, travelling consumers welcomed the beginning of the transitional period as a pre-summer gift. But there’s another group with an equally significant stake in the debate over the European Union’s proposed roaming regulations that is nervously looking on. And they are the hundreds of Mobile Virtual Network Operators (MVNOs) located in the EU.

What do MVNOs have to fear? Well, let’s back up a bit before answering. Like the name implies, MVNOs don’t actually own wireless network infrastructure, instead they enter into agreements with Mobile Network Operators (MNOs) to obtain access to services at wholesale rates. After a slow start in the early 2000s, MVNOs have become a real force in the market. They’ve been able to offer more innovative services – from multi-number SIMS to IoT payment solutions – at more competitive prices to consumers who are wary of carrier dominance.

But MVNOs have little to no bargaining power when it comes to negotiating international roaming deals with individual MNOs. MVNOs don’t actually host inbound roamers on their networks. MVNOs only buy wholesale roaming access, so that their consumers can roam.

In other words, MVNOs suffer from a structural absence of bargaining power. And that asymmetry will only be exacerbated by the EU’s roaming regulations.

Why exactly? The EU’s roaming regulations don’t actually reduce wholesale roaming charges, the charges a home operator has to pay to a visited operator when the home operator’s customer roams on the visited operators’ network.  The roaming regulations only eliminate retail roaming charges, i.e. the charges levied on customers by their mobile operators when those customers travel abroad.

The fear for MVNOs – and even some smaller MNOs – is that they will have to pay overpriced wholesale roaming charges to visited mobile operators.

The only alternative for MVNOS, already operating on lean margins, is to pass costs onto their consumers. Incidentally, critics contend that carrier subscribers will also bear the brunt of loss revenue (from retail roaming surcharges), in the form of higher plan rates or new miscellaneous fees. But MVNOs have less wiggle room to compete, as pricing is a main source of differentiation from carriers. The EU’s roaming regulations could, therefore, make it impossible for MVNOs to compete in their domestic markets.

MVNOs are in for a battle. But luckily, offloading to global Wi-Fi offers clear benefits to MVNOs. Congested roaming networks – set to become even more crowded – offer a terrible user experience. Offloading users from those networks and onto global Wi-Fi enables MVNOs to recover spectrum and capacity, which reduces costs, allowing MVNOs to offer a lower cost solution for their users.