BEREC Consultation on the Guidelines on the application of Article 3 of the Roaming Regulation WHOLESALE ROAMING ACCESS

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1 BEREC Consultation on the Guidelines on the application of Article 3 of the Roaming Regulation WHOLESALE ROAMING ACCESS KPN Group response KPN Group Attn. PO Box GA The Hague The Netherlands Contact persons: Dirk Grewe (Dirk.Grewe@eplus-gruppe.de) Paul C. Knol (paul.knol@kpn.com) Saskia Bellinx (Saskia.Bellinkx@kpngroup.be) Reference: R/12/U/ August 2012

2 I. Introduction and general remarks Within the group of Royal KPN N.V. (hereinafter KPN Group) three mobile network operators are active: E-Plus in Germany, KPN in the Netherlands and KPN Group Belgium (Base) in Belgium. KPN Group welcomes the opportunity to respond to the public consultation of BEREC. It is very important that the new obligations in the not unambiguous regulation are clarified. If not mentioned specifically our response is relevant for all three operators and all three countries. If specific remarks are only relevant for one of the operators, or one of the countries, it is explicitly mentioned. The consultation of BEREC covers the access obligation for wholesale roaming access of article 3 of the Roaming Regulation. This article covers access obligations for direct wholesale roaming access as well as wholesale roaming access for reselling. It is noteworthy that both forms of access (at least in our markets) have been developed on commercial terms and commercial negotiations in the market already. We believe that it is not the intention of the Regulation to be disruptive for existing relations and business models, but to create legal certainty for new and additional relations and business models. Although the definitions of the Regulation do not restrict the direct wholesale access definition to the current wholesale relations, it should be noted that in order to avoid a distortion of the market the concepts and practices that have been developed for wholesale roaming in the last 15 years should be allowed to continue as far as possible under the Regulation. Additional forms of direct wholesale access may develop, but there is no need to impose restrictive obligations to the existing practice. As for wholesale roaming access for reselling, KPN Group is and has been willing to cooperate with alternative (roaming) providers. During the last years, the business models of the KPN Group operators have been focused on cooperation with numerous wholesale partners and resellers. Furthermore, KPN Group has profound experience in cooperation with MVNOs. We know that establishing new MVNOs requires advance payment and investment on both sides MNO and MVNO. In an increasingly difficult market environment these business models will only succeed if both partners can negotiate on a level playing field. We have been successful in all three countries to introduce a range of business models that benefited the commercial needs of a variety of MVNO s and independent service providers (ISPs). On the other hand, in Germany E-Plus is, according to the GSM license (submitted in 1994), subject to a service provider obligation, which forces E-Plus to immediately offer any new product on the wholesale level to the ISPs although the retail market share of the biggest SP has traditionally been higher than E-Plus. The SPs usually do not create innovative products of their own but just copy the products provided by the MNOs on the wholesale level. Therefore, the ISPs rather prevent competition instead of promoting it. Also the German Federal Cartel Office stated that the Service Providers have a limited potential impact on competition. 1 Given this background KPN Group is not opposed to wholesale roaming access. We believe that cooperation with wholesale partners can be a key for prospering markets. But balanc- 1 Beschluss zum Verfahren B7-61/07 zur Prüfung des DVB-H -Zusammenschlusses, Rdnr. 149, 157 KPN Group Response to BEREC art. 3 consultation 1 10 August 2012

3 ing the negotiation power between MVNOs/ resellers and mobile network operators as stated in recital 25 of the Regulation will be crucial to increase competition. This means that regulation has to be designed in a way both parties can profit from cooperation. Unbalanced, one-sided weakening of the MNO s negotiation power will not help to reach the regulatory goals. In particular, we have doubts that in this case there will be alternative, innovative and Union-wide roaming services and offers for customers (recital 25). As mentioned above, ISPs so far have generally been copying existing tariffs instead of developing new products. Therefore their major interest in wholesale roaming access may be optimizing their margins. It is the intention of the Regulation to create a new market for specific roaming services and the aim of implementing the Regulation should be to achieve that goal without unnecessary impacting the national mobile markets which by all national regulators in our countries are considered competitive. Hence, the wholesale roaming access obligation has to be balanced taking into account the MNO s as well as the reseller s / MVNO s negotiation power. Before we add our comments on the specific questions of the consultation to these general remarks we would like to give some additional background to the concept of regulated wholesale access for reselling and to the scope of the regulation. II. Concept of regulated wholesale access for reselling The market has not created specific forms of wholesale access for reselling in relation to roaming, as now included in article 3. Wholesale agreements for reselling that were concluded on commercial basis usually include all relevant services as offered by the network operators to the retail markets. To our experience no market interest for access which would fall under the now mandated wholesale roaming access for reselling has been present. Therefore, different from direct wholesale roaming access no prior practice is available that illustrates potential problems and pitfalls. KPN Group urges BEREC not to use the guidelines to dictate certain structures and tariffs upon the market without proper prior assessment to the effects thereof. The draft guidelines illustrate this more than we consider appropriate, as shown hereunder. In relation to wholesale access for roaming it is further important to point out a potential inconsistency of the regulation. In recital 26 of the Regulation a basic connotation in European telecommunications regulation is stressed: In order to ensure a level playing field, wholesale access for the purpose of providing roaming services should be granted in accordance with the regulatory obligations laid down in this Regulation applicable at the wholesale level and should take into account the different cost elements necessary for the provision of such access. Sound regulation and an economic approach lead to the general applicable rule in regulatory practice that regulated services that are required to be cost oriented include all relevant cost plus a reasonable rate of return. Wholesale services that include a more limited set of network components and associated facilities therefore by definition have lower regulated tariffs than services that include more components. All of the European Regulatory Framework is built upon this principle. Otherwise a level playing field and proper investment incentives are endangered. Both forms of wholesale roaming access that are included in article 3 (direct access and access for resale) can also be seen as forms of unbundled roaming access versus a bundle of services for reselling as shown in the next graph: KPN Group Response to BEREC art. 3 consultation 2 10 August 2012

4 Red Arrow A shows the direct roaming access as currently practiced in the market, on the basis of agreements between mobile network operators, usually based on the Standard International Roaming Agreement format of the GSMA. These unbundled wholesale roaming inputs constitute elements of the wholesale roaming resell service that is offered at the level of yellow arrow B. All components in the green blocks are necessary to offer the bundled service, but are not necessary to enter the wholesale roaming market, since article 3 includes an access obligation at the level of red arrow B. If the tariffs at levels A and B would be equal as a narrow reading of article 3 clause 4 suggests all costs incurred in the green blocks should be born solely by the MNO. Thereby these costs in the retail market would only be recouped by the retail services of the MNO itself and not be partially recouped by the services of the MVNO. The activities included in the green boxes in the graph include all operators time, support systems and resources to negotiate and manage direct roaming accesses, such as (but not limited to) negotiating, testing, maintenance of roaming services and connections, steering of traffic, supporting value added services, traffic mediation, wholesale billing, fraud risk and fraud management, setting up of systems and commercial relations with MVNO s, MVNO billing, etc., etc. These costs are incurred on top of the out-payment to the foreign networks that have offered direct roaming access. For some countries and operators it could be argued that such costs may not be recovered by the reselling fee, but may be compensated by the return traffic that most MNO s may offer against regulated tariffs, insofar as these regulated tariffs would still exceed the costs of delivering direct roaming access. This is however not at all applicable to MNO s from countries where traffic streams are uneven and outgoing roaming traffic exceeds incoming traffic by far. This applies in general to KPN Group, which in almost all bilateral relations is offering (far) more retail traffic to foreign networks than it receives wholesale visitor traffic. We are thereby net out-paying in general and therefore compensation from regulated tariffs incoming traffic is not available. It is obvious that thus an interpretation leading to equal tariffs for both types of wholesale roaming access would lead to an unlevelled playing field which would contradict the clear statement of recital 26. It would in extreme cases even lead to a situation that an MNO in order to avoid these costs would be better off to present itself as an MVNO to a nationally competing MNO and request bundled wholesale roaming resale services at the same regu- KPN Group Response to BEREC art. 3 consultation 3 10 August 2012

5 lated tariffs that it would have access to abroad, but missing the associated costs. Only for MNO s that are able to negotiate discounts on the regulated tariffs direct access would be preferable. This clearly illustrates that article 3 clause 4, second paragraph, should be read differently than many do at first sight. A relevant part of the costs that are shown in the green boxes should be included in the fair and reasonable costs that are allowed on top of the necessary direct access services at regulated tariff levels. III. Scope of the regulation It is clear that the Roaming regulation is restricted in scope to international mobile roaming services. As included in the recitals and concluded by most NRA s national mobile markets are fully competitive. The legal basis for the Roaming regulation (article 114 of the Treaty on the Functioning of the European Union) was approved by the European Court of Justice (8 June 2010, Case C 58/08) for these markets and services. Furthermore the regulation only covers roaming between the EU countries and not with the rest of the world. The fairly last minute and hardly debated extension of scope in articles 14 and 15 (worldwide information SMS and data limits) is the untested exception thereto. Therefore as a rule of interpretation the regulation should be restricted to those services and systems that indeed are or are necessary for international roaming within the EU. IV. Questions for consultation Q1. Do you agree with BEREC s interpretation of the Regulation concerning timing of provision of service? Although we agree in general with BEREC s textual interpretation of the regulation, we would like to remark that the regulation insufficiently has taken into account the necessity that proper legislation requires adequate implementation times. We therefore would like to invite BEREC and its members to acknowledge that the initial period might raise some difficulties or uncertainties in implementing various provisions, such as those that are subject of these guidelines. We think that article 3 of the roaming regulation is somehow dysfunctional with regard to the timing of provision of service. Furthermore, the regulation lacks some basic definitions (ISPs, roaming hubs). If MNOs publish a reference offer before the BEREC guidelines have been published there will be a substantial risk for both parties MNOs and resellers that the national regulator will impose changes to these offers. Existing contracts have to be adapted. Any safety in business planning will be precluded by that. Hence, it is not a question of delaying wholesale roaming access but of providing the necessary legal certainty for implementing new and innovative roaming products (in the sense of recital 25) for end users. Furthermore, developing and implementing new business models requires some time in advance of market launch (the technical implementation usually requires assistance of third parties / technical partners). The implementation time differs according to the type of access seeker. If anyone would demand wholesale roaming access immediately, it could however be expected that he plans a pure re-selling of existing roaming tariffs or just wants to opti- KPN Group Response to BEREC art. 3 consultation 4 10 August 2012

6 mize his margin. Because of the technical complexity a minimum contract duration of 2-3 years, at least one year (international MVNOs, ISPs), and 5 years (full MVNO) must be possible. In guideline 31 BEREC expects that most contracts will be negotiated each year. We would like to point out that we do not think this is realistic. Furthermore, according to guideline 35 the reference offer must be updated every year in order to update regulated prices. From our point of view this is not necessary the contract can already address the regulated prices until Therefore, we believe that successful wholesale roaming access requires reliable legal and regulatory conditions based on well balanced guidelines. Q2. Do stakeholders agree with BEREC s approach to mandatory and optional resale access services and to its approach to pricing? We agree with BEREC that the roaming regulation does not include an explicit obligation to offer services which resellers commonly need to purchase from MNOs (such as control of pre-pay credit and data bill shock). We also agree that some of these services may be necessary for wholesale roaming access. But we neither see the legal basis nor the necessity to make the provision of these services mandatory, as described in the general parts of this response. In relation to the approach to pricing of wholesale access for reselling we refer to our general remarks under II on the concept of regulated wholesale access for reselling. MNO s incur costs for roaming that need to be shared by MVNO s requesting access and should be part of the fair and reasonable costs. KPN Group would also like to refer BEREC to clause 7 of article 3 that leads to the conclusion that clause 2 is not applicable to not strictly necessary resale access services. Thereby the regulation includes the possibility that these services may be rejected for other objective criteria only. The approach of BEREC thereby goes further than the regulation. These additional services should be part of balanced commercial negotiations between MNOs and MVNOs / resellers. Once more, we would like to point out that our long market experience has shown that wholesale partnerships will only be successful and sustainable if both parties can benefit from their agreement. In particular, the following aspects should be taken into account: The Home MNO should be able to recover the costs related to online charging systems (interfaces are customized and costly to adapt for each access seeker). The Home MNO should be able to recover costs of the basic access with transit fee (as is the case with roaming hubs, MNE) otherwise the regulation would be discriminatory. The Home MNO should be able to recover the implementation costs, in particular in case of NO TRAFFIC (i.e. set-up fee). Transparency measures should be borne by the access seeker as the Home MNO has to either upgrade existing systems or buy special vendor solutions. KPN Group Response to BEREC art. 3 consultation 5 10 August 2012

7 In this context, it may be worthwhile noting that the regulation may put the vendors of such solutions in a kind of unfair and dictating pricing position as all operators will have to buy such solutions to comply with the EU regulation. Q3. How would your business be affected if the right for direct wholesale roaming access applies to hub aggregators for the purpose of supply of regulated roaming services to EEA customers? How could a distinction between access for such purposes and access for purposes unconnected with the Roaming Regulation be applied in practice? A major objective of the roaming regulation seems to be the creation of an internal market for roaming services by promoting competition (see recitals 2, 23, 25). With regard to hub aggregators it should be taken into account that such platforms are first of all driven by the big multinational operators. The attractiveness of the aggregator model depends on the number of its partners. In consequence, big multinational operators implement hub aggregators to save costs for implementation, connection and resources while small operators do not have these advantages. If operators are forced to connect to a roaming hub this will require changes in networks, wholesale invoicing systems and financial processes. If article 3 of the roaming regulation and the related BEREC guidelines would also apply to hubs this would strengthen the power of the big operators. It seems to be doubtful at least if this would be the adequate method to strengthen competition. Operators from outside the EU currently consider to get connected to hub aggregators combined with the usage of dual IMSI in order to get the regulated wholesale roaming price caps, which could effectively broaden the scope of the regulation outside the legal basis as described under II in the general remarks. This will endanger the negotiation position of EU MNOs in non-eu destinations. Today, lowering costs on both sides is in both parties interest. If hubs could be used for non-eu traffic it would be difficult for a EU MNO to achieve sufficient discounts for traffic in non-eu destinations (as the non-eu MNO could then get access to the attractive EU regulated rates without having to offer return discounts) and thereby the EU-MNO s would be limited to offer attractive retail non-eu tariffs to the detriment of EU customers. The Regulation is clearly intended to benefit retail EU roaming customers (as defined in article 2, under g) and should therefore not be open to by-pass commercial negotiations relating to non EU traffic and non EU roaming customers. Therefore, KPN Group advocates that the regulation of wholesale roaming access should not apply to hub aggregators. A roaming hub could only act as a (technical) enabler between an MNO and an MVNO. The commercial relationship should always be directly between the MNO and the MVNO which is seeking access. Other forms of access by hub aggregators should be subject to bilateral negotiations. Applying the regulation would impose huge imbalances at the expense of the smaller network operators and their customers. Therefore, the guidelines should explicitly exclude roaming hub aggregators and mobile network enablers. If however hubs would be considered to be in scope, some practical issues should be addressed. In practice we see some hubs that request access for one of their EU wholesale customers, using non-preferred connection methods, which could be remedied by imposing requirements on using preferred standards. Hubs will moreover create further imbalances in traffic streams and can create higher bad debt risks than individual hub customers would KPN Group Response to BEREC art. 3 consultation 6 10 August 2012

8 cause. This leads to the necessity to be able to have additional financial contractual safeguards that would not have been applied to the individual hub customers. Q4. Do you agree with BEREC s general approach to refusal of requests? Do you have any specific suggestions on how the guidance in this area could be strengthened so as to deter refusals on spurious grounds while not constraining the right of MNOs to refuse to provide on the basis of careful objective justification? KPN Group agrees with BEREC that there should not be any refusals of reasonable requests on spurious grounds. On the other hand, a reliable regulatory framework i.e. balanced guidelines is necessary to enable fair competition. Any wholesale roaming agreement without official guidelines bears high regulatory risks and may lead to competitive distortions and discrimination (see also Q1). Furthermore, guideline 5 states that the MNO may not, during consideration of request, seek information about the commercials nature of the services which the access seeker plans to offer. It is agreed that attempts to reduce ongoing competition should be inhibited. On the other hand it may be necessary to have information about the business model planned by the access seeker for appropriate capacity planning. Therefore, questions about the expected traffic or number of customers may be unavoidable due to capacity planning, upgrade and so on. Therefore it must be possible that the MNO can ask for penalties if traffic estimations are not met. In this respect we do not agree with guideline 10 that we cannot ask for penalties. In general, the MNO has to know the nature and the viability of the business of the access seeker to be able to evaluate return on investment or bankruptcy risks. The Home MNO may also refuse access in case of bad debt history or, if technical information needed for connection are not duly provided. Furthermore, we think that limitations of networks and billing system can be a legitimate reason to refuse, as upgrading, adapting existing billing systems, or developing interfaces granting access to it, represents huge efforts in terms of costs and resources which are unlikely to be recovered by the access seeker. We would like to point out that access requests should not be redirected to roaming hub aggregators (see Q3). Finally, the Home MNO has to be able to prioritize access requests according to his own resources or outsourcing partner availability. One additional remark on guideline 3 (reasonable request): It is stated that NRAs will have to judge reasonable quality (see also guideline 2, case a): satisfactory quality ). We understand that there should be no discrimination of resellers and MVNOs by providing inferior service quality. But we don t see any legitimation for the NRAs to define a certain level of quality which has to be provided. The question if a network operator supplies reasonable quality has to be judged by the end users in a competitive market. In any case a definition of the quality which has to be provided would be out of scope of the roaming regulation. KPN Group Response to BEREC art. 3 consultation 7 10 August 2012

9 Q5. Do stakeholders consider that further Guidelines should be developed to deal with the issue of requests for wholesale resale roaming access from market players whose retail services are otherwise hosted on other networks? If so, please provide examples of commercially credible retail services which could be operated in this manner. No. Q6. Do you agree with BEREC s views on resale access to unregulated services? With regard to extra EU / EEA roaming services we believe that this issue exceeds the legislative competence of the EU legislator. We do not see in which way any regulation of extra EU / EEA services should have a positive impact with regard to the common market goal. Hence, the extra EU / EEA services should be out of scope of these guidelines and guideline 16 should be deleted. Q7. Do you agree with BEREC s general approach to fair and reasonable prices? Do you consider that other general principles should be articulated? We agree that there should not be any detailed guidance covering the meaning of fair and reasonable prices this should be subject to bilateral negotiations. In light of this it is surprising that BEREC nevertheless aims at providing rather detailed guidance in guidelines 19 and 20 (e.g. specifications about the reasonable charges per outgoing SMS). Overall, guidelines 19 and 20 seem to be based on the assumption that there is a big, powerful MNO and a small, weak access seeker. For example for the German market this does not always reflect reality: E-Plus (MNO) has a lower retail market share than the biggest ISP (mobilcom debitel) to whom it has had to grant non-discriminatory access for almost 20 years. Regulatory guidance which ignores such market reality would distort competition to the detriment of E-Plus. Therefore, NRAs dealing with potential complaints should carefully take into account the specific market situation. Apart from that, the objectives in guideline 19 seem to be imbalanced: The objective of minimizing the overall costs of resale access mistakes that the HOME MNO should be able to recover its costs. Q8. Do you agree with BEREC s proposed basis of charging for resale of incoming roaming voice calls? KPN Group does not question that there should be fair and reasonable prices for any service. But BEREC s statement about the basis of charging for resale of incoming roaming voice calls seems to be in contradiction to the statement that there should be no detailed guidance covering the meaning of fair and reasonable charges. In case of complaints the NRAs will have to consider the specific case. KPN Group Response to BEREC art. 3 consultation 8 10 August 2012

10 Hence, we think that this should not be subject matter of the BEREC guidelines. Anyhow, if BEREC wants to address this issue in the guidelines, it should be taken into account that the Home MNO has to be able to charge MTC at wholesale levels in cases of misuse (e.g. call back call providers, as these types of providers generate MTCs without any possibility for the Home MNO to recover costs via MOC charges). The costs which need to be at least chargeable should be MTR, transit costs and internal costs. Q9. Do you agree with BEREC s proposed basis for resale charges for termination of outgoing SMS? We don t believe that incoming and outgoing SMS are balanced in general, there is no symmetry of originating and terminating SMS. Therefore, the charges for termination of outgoing SMS should at least cover the full costs of provisioning this service. Q10. Do you have any comments on BEREC s approach to service level agreements and guarantees or on the regular monitoring of service levels? By reading the guidelines on the reference offer KPN Group can hardly resist the feeling that BEREC s interpretation of the reference offer is mainly based on NRA s experiences with the SMP regulation that includes the same wording. The SMP environment however is restricted to markets where there is insufficient competition and operators that are designated to have SMP. The regime of the regulation is totally different and is applied in competitive markets for all (groups of) operators. If dominant positions would occur, they would only be likely with some of the larger European operators/operator groups. Since the regulation applies to all MNO s and the current practice had not shown any deficiency in this respect KPN Group strongly urges BEREC to refrain from adding additional complexity to the current practice. The GSMA standard reference documents used between MNOs do not contain any service level agreements. The visited MNO acts always on best effort principle. Due to the actual roaming business standards the host MNO can only provide best practice approach to the access seeker as well. Therefore we don t think there should be any regulation of service level provided by the MNO (s. Q4). Q11. Please set out your views on what the accepted standards and methods are. Is there any action which BEREC could usefully take to promote further useful standardization? The access seeker should comply with existing standards and with customized systems or interfaces of the Home MNO as currently provided under the GSMA standards and practices. Overall, for practical reasons the access seeker should comply with the MNO s technical requirements otherwise there will be no interworking. For wholesale roaming access for resale the market has benefited from the broad range of options that KPN Group has used in its various countries of operation. No or hardly any KPN Group Response to BEREC art. 3 consultation 9 10 August 2012

11 standards or methods are available in this market and BEREC should refrain from creating a one-size-fits-all (or rather: none) approach by defining standards. Q12. Do you consider that the Guidelines should include specific provisions on fraud prevention in addition to the generic statements in the draft? For fraud prevention, the partners should at least meet the following basic conditions: The access seeker should comply with GSMA standards. The access seeker should be liable for fraud generated by his subscribers. The MNO should be able to suspend services in case of fraud. Q13. Do you consider that BEREC should provide more detailed guidance on restrictions of conduct of business? In particular, would it be useful to include an indicative list of generally unacceptable restrictions in the Guidelines. As we have pointed out in our general remarks we think that conditions and restriction of business should be subject of balanced negotiations between the partners. Guidelines 18/19 state that complaints will have to be dealt by NRAs, anyhow. In this case, we believe the single decision whether restrictions are acceptable or not would depend on a potential case an indicative list will not bring additional benefit. Q14. Do you consider that any current practical permanent roaming applications should be considered as an unfair use of roaming wholesale access agreements? If so, please explain why and also how you would propose to distinguish between fair and unfair uses of permanent roaming. Would a distinction based on the phone number of the roaming MSISDN be relevant and applicable? If allowed, the usage of permanent roaming applications should be transparent and follow GSMA guidelines of having own PLMN and TADIG codes to be able to differentiate between services used by permanent roaming subscribers (in particular, because of capacity management reasons). Q15. Do you consider that the Guidelines need further detail concerning anti-competitive provisions which must not be included in the Reference Offer or supply contract? We don t believe that a detailed description of anti-competitive provisions or an indicative list will help to enhance wholesale roaming access. The adequate safeguards should be negotiated between the partners. In case of complaint, the NRA has to judge whether a safeguard is unfair or anti-competitive. KPN Group Response to BEREC art. 3 consultation August 2012

12 Q16. Do you consider that the Guidelines should cover additional issues or that the draft guidance on issues already covered should be further developed? No. Q17. Do you have any other comments on the draft Guidelines? As mentioned in our general remarks, balancing the negotiation power between MVNOs/ resellers and mobile network operators will be the basic condition to increase competition in a way that both parties can profit from cooperation. For this reason the draft guidelines should be reviewed having regard to the aspect of balancing the interests of access seekers and MNOs as well. We believe that wholesale roaming access will only be successful if MNOs and MVNOs can both gain from this. In relation to some of the guidelines, not specifically addressed in the questions, we would therefore like to make the following remarks: Priorisation of requests (guidelines 7 and also 40): The regulation includes relatively short timelines for implementing wholesale roaming access. We believe the regulation implies that these timelines can only be applicable for services included in the reference offers and if based on existing standards. However, since the regulation also could attract other access requests, MNO s cannot be prepared for all requests to be treated in equal timelines and simultaneously. The concept of non discrimination (though not very clear how BEREC intends it to be used) can hardly be made practical, especially where non standard services and methods are agreed. Financial safeguards (guidelines 10 and 33): The amounts of traffic involved in wholesale roaming access and reselling may be high and the associated risks in case of non-balanced payments such as with reselling may be equally high. Contractual safeguards are needed. Guideline 33 seems to acknowledge this, but guideline 10 in contradiction includes the statement: Not meeting up to a given estimates should not lead to penalties. This should be deleted. Non-discrimination (guideline 21): We believe non-discrimination obligations cannot be imposed in guidelines if not based on the legal framework that the guidelines try to clarify do not include such obligations. In practice the published reference offer(s) will already sufficiently serve as instrument to avoid the behaviour that BEREC seems to address. This guideline should be deleted. Finally, KPN Group likes to refer to an issue that is of a different nature. Council Directive 2008/8/EC of 12 February 2008 amending Directive 2006/112/EC as regards the place of supply of services (OJ 2008, L 44/11) has consequences for the VAT regime in the Union as of 1 January The main consequence that is relevant here is that VAT is taxable based on the place where the recipient is established, rather than where the supplier is established. In relation to LBO and other forms of decoupling where services are offered outside of the roaming customers territory the consequence is that a supplier should be able to use 27 KPN Group Response to BEREC art. 3 consultation August 2012

13 EU VAT tariffs. In the first 6 months of implementation the current regime will still apply. The Commissions Implementation measures should include instructions on this issue, bearing in mind that additional costs for implementation should be avoided where possible. KPN Group would like BEREC to support an approach in its advice to minimise costs and burdensome implementation.. /. KPN Group Response to BEREC art. 3 consultation August 2012

14 BEREC Consultation on the advice to the Commission on its forthcoming Implementing Act on the choice of Decoupling Methods June 2012 KPN Group response KPN Group Attn. PO Box GA The Hague The Netherlands Contact persons: Dirk Grewe Paul C. Knol Saskia Bellinx Reference: R/12/U/ August 2012

15 I. Introduction and general remarks Within the group of Royal KPN N.V. (hereinafter KPN Group ) three mobile network operators are active: E-Plus in Germany, KPN in the Netherlands and KPN Group Belgium (Base) in Belgium. KPN Group welcomes the opportunity to respond to the public consultation of BEREC. If not mentioned otherwise our response is relevant for all three operators and all three countries. If specific remarks are only relevant for one of the operators, or one of the countries, it is explicitly mentioned. KPN Group has always supported the existence of the EU Roaming Regulation and its intention to stimulate competition through (mainly) proportionate wholesale regulation. As a relatively small North-Western operator on European scale we have always promoted a balanced regulation, concentrated on a level playing field at wholesale level and sufficient room for competition at retail level. We still believe that this should be the primary focus of the regulation. Unnecessary complexity in operations that do not convincingly support these purposes should be avoided. BEREC has constructively discussed with operators (GSMA) on the technical consequences of solutions for decoupling of roaming services and it is important that BEREC shares its interim report with the market. By including two forms of decoupling in Article 4, clause 1, of the Roaming Regulation i.e. bundled decoupling and Local Break-out for data the institutions of the European Union have imposed far reaching challenges on the mobile sector. KPN Group recognises BEREC s cautious views on imposing these challenges during the preparations phase of the Regulation. However, since the Regulation has entered into force and has to be implemented, the attention should now be given to implementing measures that are proportionate. KPN group fully supports BEREC s position, that only methods of decoupling that provide a reasonable prospect of delivering competition benefits sufficient to justify the costs and complexity of implementation should be considered. In general KPN compliments BEREC on the quality of its analysis. However, on various issues we would like to comment and clarify technical details that should be taken into account. KPN Group likes to emphasise that for consumers and business users the future coexistence of the traditional solutions for international roaming with decoupled services based on Single IMSI and LBO is only beneficial if the existing high service quality level will be maintained and the complexity of the new services are low. Greater complexity will lead to higher costs and greater uncertainty if these costs can ever be compensated by potential positive competitive effects. II. Questions for consultation Q1. Do stakeholders agree that the basic version of LBO should be introduced in July 2014? What are the elements that may hinder or facilitate the diffusion? KPN Group acknowledges that LBO is included as a requirement in the Roaming Regulation, even if we do not think an adequate impact assessment has been con- KPN Group Response to BEREC Decoupling Advice 1 10 August 2012

16 ducted prior to the inclusion. As a result, KPN Group agrees that only the basic version of LBO should be introduced in July 2014 and not any other version. However, although in BEREC s opinion the implementation effort on the Home MNO is low, KPN urges that a solution should be developed that will only remove the blocking of certain networks for customers who actually want to use LBO on that network. Removing the blocking for all customers will have a negative effect on the commercial agreements at wholesale level, which are based on volume commitments, and thereby limit room for attractive retail offerings. Therefore it is essential that the home provider knows which customer is going to use LBO on which network. KPN Group concludes that, even for the basic version of LBO, currently too many specifications are missing to ensure a timely launch. Without a specified technical solution between the home provider ( Home MNO ) and the LBO provider it is very difficult to make any estimations and / or commitments. Without being complete we see the necessity to secure the availability of clear guidelines and specifications for at least the following issues: Information Process: The Home MNO must know in real time which customer want to use LBO on which network so that steering of traffic to certain networks can be disabled for that customer. Clear processes are necessary. Home MNO Perspective: A Home MNO is not responsible for introducing new handsets and new operating systems of handsets. The variety of handset specific data setting is increasing. Nevertheless, customers traditionally expect support from their Home MNO. It is yet unclear how this information could be provided. Higher customer care costs are likely, due to the complexity of the solution and the uncertainty of who is responsible for the customer. Reduction of unnecessary costs is required by having clearer definition of responsibilities. Responsibility of the LBO provider: The Transparency measures stemming from the Roaming regulation (cut off limit, tariff information, credit management, fraud) is the responsibility of the LBO operator, which should be clarified. It is not yet clear how Home MNO s are to be notified on customers using LBO, yet interfaces must be available prior to implementation. IT and technical aspects A Visited MNO must be able to recover costs from the ARP to adapt its SGSN, GGSN and billing systems, yet no mechanisms are available (contracts, standards, interfaces); It must be ensured that when customer returns in his home country the according APN settings apply, knowing that ADC (Automatic Device Configuration) is not functioning with all devices. Therefore a START and END LBO event must be provided to the Home MNO. The BEREC report relies on the use of an Universal APN. However, as described further in the GSMA response to the consultation, we believe this solution is not yet sufficiently developed, standardised and supported by all in- KPN Group Response to BEREC Decoupling Advice 2 10 August 2012

17 terworking systems and devices to conclude that smooth operations are likely. KPN Group urges BEREC to include in its report a strong recommendation that the Commission will not include any technical solutions in its Implementing Measures of which the effects are not fully overseen and which are not beyond doubt resistant to disruptions and operational problems. Q2. Should co-operative efforts be made to develop a more user-friendly version of LBO for subsequent evolution? What kind of efforts would be most productive? Could you provide any cost estimations for the development of user-friendly interfaces? Can BEREC assist with this process? KPN Group believes that manual selection of an LBO network as well as changing an APN in the terminal is user unfriendly. This is also the case for restoring settings after returning home or when travelling to another country. Loss of service when going outside coverage of the LBO provider could potentially be dangerous if emergency numbers could not be dialled. Therefore, standardization efforts are necessary before LBO will be widely used by customers. Standardization is needed in terminals and it will take a few years until these will have significant presence in the market. However, KPN Group is not at all in favour of periodical amendment of the Implementing Measures of the Commission which according to the regulation should be available by January If the Commission is not able to present clear and unambiguous guidelines for the technical implementation in time, KPN Group believes operators cannot be held to the implementation date of July A set of guidelines that the Commission would publish as interim measures prior to finalising more detailed and better developed measures would create a large risk for disinvestments, operational risks and customer dissatisfaction. The current market uncertainty in the EU and the recognised large investments necessary to cope with the increased requirements for mobile data services require the Commission to act very cautiously in this respect. Q3. Are there any measures which BEREC could consider to facilitate the ability of MVNOs and resellers to offer LBO? If so, can you provide clear evidence on the technical feasibility and the costs which would arise from such measures? KPN Group does not see additional measures for BEREC in this respect, but refers to the answers above for the complexity already incurred in the basic version that BEREC proposes. As for the position of MVNO s KPN Group agrees with BEREC that the Roaming regulation does not contain an adequate legal basis to enforce rights to the required access. Furthermore, from a more practical point of view, an LBO offer by MVNOs will be difficult to realize as the APN EUInternet will end up at the GGSN of the mobile operator. If a portal page would be presented which gives the different LBO KPN Group Response to BEREC Decoupling Advice 3 10 August 2012

18 offers of the MNO and the MVNO s and the customer chooses for a particular option, the registration and accounting should still be managed by the MNO. So an MVNO LBO offer can only work if the MNO provides a special service to the MVNO. Development of this functionality will require a substantial investment. Q4. Do you agree that Dual IMSI should not be implemented in July 2014? KPN Group agrees with BERECs conclusion and is not in favour of a dual IMSI solution. Such a solution would be extremely costly as customers need to replace their SIM cards to make this possible. This is especially in case of prepaid subscribers, which are often difficult to reach. Where we have tried SIM swaps, the attempts have shown low success rates. Also technically we have many doubts on the possibilities for a dual IMSI solution. Based on KPN Group s experience, there are many interworking problems between terminals and dual IMSI SIM cards. New interfaces and network specifications would be required, which before agreed by all relevant parties would most likely involve at least some years for development, testing and rollout. Before such a solution could be available in the market a realistic period would be around four years../. To illustrate this, we include some technical information in Annex 1 of this response. Q5. Can you provide clear evidence on the feasibility and the costs which would be involved in making access to traffic steering possible (within the normal limits of steering technology) via Single IMSI + by 1 July (Any information you provide will be treated by BEREC as commercially sensitive, if you prefer). KPN Group is not able to give clear evidence on the exact costs and feasibility of all aspects related to the Single IMSI+ solution. A detailed reply would require a detailed impact analysis of all operational and technical issues, which in itself needs a costly process. Only after this impact analysis necessary third party activities could be defined and offers of suppliers could be requested. We have not undertaken this effort, but are able to address some of the issues that such an effort would include. Without being exhaustive we can refer to the following issues: The Home MNO would have to be equipped with the roaming profiles of each of the possible ARP s. An interface for exchanging this information would have to be implemented and the capacity of the steering application would have to be increased. Capacity upgrades for SS7 and OTA based steering are required, which would involve additional license fees and monitoring resources A Home MNO must be able to recover costs related to steering for the case it has a steering platform, therefore a SLA for steering is needed. KPN Group Response to BEREC Decoupling Advice 4 10 August 2012

19 ./. To illustrate this, we include some technical information in Annex 2 of this response. Q6. What is your view of the difference in incremental competition benefits achievable, as between implementation of Single IMSI and Single IMSI +? Please provide as much justification as possible for your view. We do not believe that the Single IMSI+ solutions create benefits for competition that outweigh the additional costs and complications associated therewith. The fact that Article 4, clause 1, of the Regulation mandates a combination of LBO and bundled decoupling already constitutes a hurdle for alternative roaming providers ( ARPs ) to enter the market. New ARPs as well as existing roaming providers will find additional uncertainty to base their business models on reliable volume forecasts, due to the potential risk of losing traffic to the advantage of an LBO provider. The Single IMSI+ model may add some possibilities for the business cases of large international groups that already enjoy a high international or worldwide perception with potential subscribers, but is unlikely to support a larger take up of alternative service providers. This solution as promoted by larger companies will allow steering away from smaller operators, but with uncertain consumer advantages. Q7. Do you agree that a version of the Single IMSI family should be implemented in July 2014? Which elements are key to a successful implementation? The regulation requires operators to be able to decouple services by July 2014 and therefore KPN accepts the fact that the least far-reaching method is used to realise this. Alternatives are unlikely to be realistically implemented by that time. Although the Single IMSI concept is based on existing roaming standards between mobile operators, even with that solution there are a number of challenges which, according to KPN, are taken too lightly in BEREC s description: What will be the process of a customer subscribing to an ARP? Customer related processes need to be agreed between Home Providers and ARPs to facilitate the process. National experience with carrier (pre)selection practices in fixed network illustrate that processes are required, e.g. to avoid slamming practices. Is there a need for a pan European database which holds data about to which ARP a customer belongs? Who will setup and maintain this database? The relation (and the interfaces) between a Home provider and an ARP are not the same as between an MNO and an MVNO. Full MVNOs are already responsible for sending EU Tariff SMS and maintaining the data limit themselves. Light MVNO s rely on the MNO because they use the GGSN of the MNO. Because the MNO is responsible for the wholesale cost, the traffic should be routed from the visited network to the MNO s GGSN. The challenge for an ARP to send SMS info and to apply the cut-off KPN Group Response to BEREC Decoupling Advice 5 10 August 2012