Regulation impact statement

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Creation of the International Mobile Roaming Industry Standard by the ACMA in response to Ministerial Direction

June 2013

Table of Contents

Executive Summary 3

Introduction 5

Background 6

International mobile roaming charges 6

Regulation of international mobile roaming 6

The Direction on international mobile roaming 7

Market Composition 9

Problem 11

International Mobile Roaming Market in Australia 11

The cost and consumer awareness about data usage is the main issue 12

Table for International Charges in New Zealand: default rates 13

Australia – Domestic Rates 13

36.A recent breakdown of IMR traffic indicates that data use is the main service used by travellers, accounting for 72 per cent of usage. Voice and SMS use constitute 23 per cent and 6 per cent respectively. The high use of data correlates to the higher charges and unfamiliarity by consumers over data usage, which both contribute to bill shock. 14

Consumer Complaints 14

Current consumer information on roaming provided by industry 15

Alternatives to International Mobile Roaming 18

Travel Products (New Zealand used as default destination) 19

Objective 21

Options 22

Option 1 – Minimal requirements under the Direction 22

Option 2 –Extensive requirements for alerts and spend management tools 22

Option 3 – Multi-tiered approach 23

Impact Analysis 24

Option 1 24

Costs 24

Benefits 25

Risks 25

93.There is value in the ability to monitor usage in addition to sending price alerts on arrival. Reducing the frequency of bill shock incidents – without also tackling the increasing ‘size’ of those incidents as indicated by the TIO data - means that the cost to the community of IMR bill shock incidents may remain relatively high. 26

Option 2 26

Costs 26

Benefits 27

Risks 27

Option 3 27

Costs 27

Benefits 29

Risks 30

Comparative Impacts of Options 1, 2 and 3

Competition impacts of Options 1, 2 and 3 31

Preliminary Consultation and Stakeholder workshop 34

Public Consultation Process 35

Submissions 35

Targeted Consultation 36

Consolidated Stakeholder Views 36

Consumer Concerns 39

Other Views 39

Consideration of stakeholder views 40

General 40

Definitions 40

Section 5 40

Section 6 40

Section 7 40

Section 8 41

(New) Section 10 41

Conclusion and recommendations 42

Implementation and Review 43

Executive Summary

Australians travelling overseas can receive unexpectedly high bills for their mobile devices when utilising International Mobile Roaming (IMR). This is commonly referred to as ‘Bill Shock’. The Telecommunications Industry Ombudsman (TIO) receives complaints relating to IMR charges totalling around $6.4 million per year. The overall number of complaints is declining, but the average value of each complaint is rising. Based on the analysis undertaken, the value of IMR complaints is around $58 million.

The underlying cause of Bill Shock is the significant differences that can exist between both the types of charges and the rate of charges when overseas compared to domestic use. The three Mobile Network Operators (MNOs) advise that charges relating to data usage are the major source of Bill Shock due to IMR. The rapid take-up of mobile internet connected devices such as smart phones and tablets appears related. It is also more complicated for consumers to understand and estimate their data usage, than voice or SMS. The growth in international travel by Australians, which has more than doubled over the past decade, also likely has an influence. Many first time travellers may not be aware of the relatively high roaming charges or alternative methods in accessing data or voice services.

It is important to note that the three MNOs have been taking action in recent times that would be expected to reduce IMR Bill Shock. This has been mostly evident over the past twelve months. This includes attempts to better inform customers of the costs of IMR and also the growth of alternative IMR services. Various resellers also provide some IMR services, however it is less clear what action they have taken in relation to IMR.

The overall objective of this proposal is to meet the terms of the Australian Communications and Media Authority (International Mobile Roaming Industry Standard) Direction (No. 1) 2012. The Direction aims to enable consumers to better monitor and manage their spending while roaming overseas.

Three options that could achieve this objective have been considered; option 1 - the minimum required by the Direction, option 2 - extensive requirements for alerts and spend management tools, and option 3 - a multi-tiered approach, with the main focus on data usage. Option 3 is similar to option 2 but allows a longer lead time for resellers and removes some provisions that consultation has revealed are unlikely to impact Bill Shock. That is, the intent of Option 3 is to largely target the Bill Shock related to data usage.

The costs estimated for the three options fall largely on the three network providers. The costs of establishing and running the three options over a 10 year period have been estimated at about $xx million for option 1, about $xx million for Option 2, and about $xx million for option 3. However, consultation with resellers has revealed that the compliance costs associated with all three options are significant enough relative to the size of their IMR operations that it may cause them to exit to IMR market. All options are expected to result in reduced choice and competition in the IMR market, by raising the barriers to entry, and are inconsistent with the Competition Principles Agreement. Option 2 is the most likely to result in resellers leaving the IMR market. The MVNOs that the ACMA has liaised with note that they are a price-taker for IMR services and that it is not a core part of their business model.

The major benefits under Option 1 are that all customers will receive notification and charging information when they start roaming overseas. This should reduce the likelihood of Bill Shock, but it’s likely to be at the margin given current practice in the industry.

Option 2 is more likely to reduce Bill Shock than option 1, particularly through the use of spend management alerts. Option 3 is expected to result in total industry establishment costs of less than Option 2, while delivering broadly similar benefits to consumers relative to Option 2. Option 3 is likely to achieve this in a less costly manner largely by focussing on data - the main service that causes Bill Shock.

It is worth noting that all three options build on the approaches already being taken by many providers in the industry. Consequently some of the costs in complying have already been absorbed by the providers.

The ACMA conducted extensive consultation on this issue, including with industry, consumer groups and the general public. Feedback has helped both in defining the nature and extent of the problem, and in identifying the likely impacts of the options. Indeed, feedback has helped shape the preferred option, with the delayed implementation of elements of the Standard being one significant change made in response to stakeholder responses.

Based on the impact analysis presented in the RIS, Option 3 is a relatively low cost option, while delivering relatively low benefits. Overall, it is likely that Option 3 would result in a relatively low but positive net benefit. Option 3 is the preferred option. The ACMA will also run a consumer education campaign, to coincide with the launch of an IMR Standard, to raise consumer awareness relating to the options available for overseas mobile use.

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