UK telcos are potentially helpless in the European roaming debate

Brexit is now a reality for the UK, and despite the telcos asserting their commitments to the roaming status quo, the financial burdens could become too great to swallow.

With the January 31st deadline come and gone, the UK Government has started to warn its citizens of what Brexit actually means. Very little will change over the next 11 months, but come December 31st, the ‘grace period’ will have concluded and change will be a reality.

New passports might have to be ordered, the European Health Insurance Card (EHIC) will no-longer be valid, an international driving permit (IDP) might have to be sought and the Government cannot guarantee you won’t be charged a small fortune for cruising down the digital highways.

While it might seem like another era, EU roaming regulations were only introduced in 2017. Some telcos had built ‘roam like at home’ features into tariffs already, but this was a market reaction to impending regulation. Until the EU started making a fuss, the telcos and the GSMA were more than happy to charge ludicrous amounts and attempt to justify them in a truly laughable manner.

Using data when travelling to Europe has become almost second nature to UK consumers nowadays and few would want to return to the days of huddling around the wifi hotspots. The UK telcos have been keen to point out there are no intentions to return to the dark days of ‘bill shock’, but soon it might be out of their control.

“At O2, we are committed to providing our customers with great connectivity and value when they travel outside the UK,” an O2 spokesperson said. “We currently have no plans to change our roaming services across Europe. We will be working closely with the UK government to try to maintain the current EU ‘Roam like at home’ arrangements once the UK leaves the EU.”

Vodafone and Three have also confirmed Brexit will not have an impact on EU roaming for their customers, while BT/EE are yet to provide comment.

The issue which is at the heart of this debate is how much control the UK telcos actually have.

As it stands, termination fees on international networks are strictly managed and limited by the European Commission. This will no-longer be the case for UK telcos come January 1st, 2021; European telcos will be free to charge whatever termination fees they see fit for their network.

In the years passed since the introduction of EU roaming rules, telcos have effectively seen reciprocal revenues for roaming, as it was simply a case of any individual is equal to any other on a different network, irrelevant of destination or origin. However, should some nations decide to raise the termination fees, the telcos will have to decide whether to absorb these costs or raise prices for consumers to compensate and maintain profitability. This is a ‘doomsday’ scenario, though we suspect it wouldn’t take long for telcos to realise absorbing the cost in some areas is not feasible.

As you can see from the table below, the numbers do not add up.

Country Visitors from UK Visitors to UK
Spain 15.6 million 2.53 million
Germany 2.8 million 3.26 million
France 8.6 million 3.69 million
Netherlands 2.7 million 1.95 million

The question which remains is how much European telcos will decide on charging for termination fees for UK customers and how the UK telcos will react. For any telco, simply watching costs go up and doing nothing is not an option. If there are more visitors from the UK than going the other direction, termination fees will start to add up.

What is worth noting is that some telcos in the UK are more at risk than others. As part of the Telefonica Group, O2 could be protected in some European nations, as would Vodafone, but the risk cannot be completely mitigated. There is no-such thing as a genuine pan-European network, and partnerships might well be tested.

Some might suggest there is an opportunity for the UK and Europe to strike a deal, and while this might be the case, there is one significant argument against it; why would Europe want to help a post-Brexit Britain?

Brexit has looked like a painful procedure to anyone watching. What the material impact will be is anyone’s best guess for the moment, but there are some aspects we already know. The legislative agenda has slowed due to a disproportionate amount of time being spend debating Europe. Relationships have been damaged. Corporations face a restructure of some degree. Travel to Europe will be different for consumers.

We do not know how this will impact our day-to-day lives exactly, but Europe will only help to a degree. If they help too much or it looks attractive, leaving the European Union might become an option for some nations. This is a very cynical view to take, but it is probably also true.

The other factor you have to consider is the work some countries will put in to protect valuable tourism industries. The Spanish, Greeks and Portuguese will not want to lose the money which flows from the UK into their own economies and might be in a position to negotiate their own localised deals.

This is very much crystal ball gazing at the moment. There might be a deal to protect the UK consumer, but it is just as likely that there will not. The European powers control the roaming fate of the UK consumer, not the UK telcos.

A post-Brexit Ofcom worries us – Vodafone

With the anti-China rhetoric dominating the headlines in recent months, Brexit chatter has become unfashionable. But with the deadline fast approaching, what will Ofcom look like in the future?

Speaking at a breakfast briefing in London, Vodafone UK Chief Counsel and External Affairs Director Helen Lamprell let loose on the UK regulator. Cell tower height, rural roaming, potential reintroduction of international roaming charges, dark fibre and auction dilemmas, there seemed to be a lot of venting going on.

“The UK remains a challenging environment [regulatory], one of the most challenging in the world,” said Lamprell. “But we are seeing positive change.”

The issue which Vodafone is keeping an eye-on is Brexit. According to Lamprell, Ofcom is one of the most conservative regulators throughout the bloc, though when it is freed from the tethers of the Body of European Regulators for Electronic Communications (BEREC), there is a risk it could become even more so.

There isn’t necessarily one massive bugbear from the telco, but several little aggravations which all combine to a much larger nuisance. Let’s have a look at mast height to start with.

Everyone wants signal, but no-one wants towers

As it stands, UK cell towers are limited to 25 metres in height. This obviously doesn’t take into account those masts which are placed on the top of buildings, just the actual structure itself. In most cases, this doesn’t have a massive material impact on operations, such is the population density of the UK, but when you look at countryside locations it becomes a much larger discussion.

Part of the up-coming 5G spectrum auctions will place coverage obligations on telcos. This is a reasonable request by the government, as telcos have shown they will not bridge the digital divide on their own, though as it stands 99% of the UK population is currently covered. Geographical coverage is no-where near this figure, though as there is little commercial gain from providing coverage to these remote locations, reaching the 90% objective is difficult.

One way which this could be done is by providing exemptions to the 25-metre limit in certain situations, such as the countryside, as CTO Scott Petty pointed out, for every 10-metres you go up the coverage ring is doubled.

All four of the major UK MNOs (EE, O2, Vodafone and Three) are meeting with the Department of Digital, Culture, Media and Sport (DCMS) this afternoon, and this will be a point on the agenda. Should these exemptions be granted, it opens the door for shared infrastructure also, as the main cost of these structures is civil engineering and construction, not the equipment on the tower. Both of these developments combined would aid the telcos in reaching the geographical coverage objectives.

This brings us onto another interesting point raised by Lamprell, rural roaming.

My restless, roaming spirit would not allow me to remain at home very long

“Rural roaming takes away our incentive to invest,” Lamprell said. “It’s a really, really dumb idea.”

Three are one of the companies pushing for rural roaming, but as the Vodafone team points out, it is the only MNO which hasn’t built out its rural infrastructure. However, should rural roaming be introduced it would cause a stalemate for investment.

As Petty points out, why would any MNO invest in its own infrastructure when it could force its way onto a competitor’s? All the telcos would be sitting on the starting line, waiting for another to twitch first, such is the pressure on the CAPEX spreadsheet column when investing in future-proofed infrastructure.

Moving onto the international roaming question, Vodafone is staying pretty agile right now. As it stands, the status quo will be maintained, though the team will react to the commercial realities of a post-Brexit landscape. Currently, as a member of the European Union, Vodafone is protected from surcharges when it comes to termination charges, though those protections will end with Brexit.

Vodafone has quite a significant European footprint, in most cases there is little to worry about, but for those territories which fall outside the Vodafone stomp, negotiations will have to take place.

There are several countries, Estonia is an example, which has higher termination rates than the UK. If the reality of a post-Brexit world is Vodafone is swallowing up too many charges from international calls/SMS/data, roaming charges might have to re-introduced in certain markets. This is all very theoretical currently however Ofcom will prevent Vodafone from replicating these charges from the European nations. Vodafone is sitting and waiting for the realities of Brexit right now, though it will not be a broad-brush approach.

“Our position today is to maintain the position we are in, but we will have to evaluate the situation at the time,” said Lamprell.

Ignore Luke, the Dark Side is great

Dark fibre. It used to be a popular conversation, but everyone seems to have forgotten about it recently.

Not Lamprell.

The focus of Ofcom over the last 12 months or so has been on opening-up ducts and poles, and while this certainly is progress, it only addresses part of the problem. Dark fibre is an aspect of the regulatory landscape which could add significant benefits to the industry but has seemingly become unfashionable.

Dark fibre, fibre cabling which is not currently being utilised by Openreach, could answer the backhaul demands of the increasingly congested networks quickly and efficiently. Mainly as it is already there. There is no need to dig up roads, apply for planning permission or procure new materials, it could be as simple as flicking a switch.

Openreach resistance and Ofcom’s aggressive focus on ducts and poles is perhaps missing a trick.

Going, going, maybe not yet

The UK is currently in somewhat of an unusual and unprecedented situation. It is one of the nations leading the world into the 5G. This is not to say it is in a podium position, but compared to the 4G era, the UK is sitting pretty.

Part of the reason for this has been early auctions to divvy up spectrum assets, however, moving forward there are some irregularities which is causing some head-scratching.

Later this year, Ofcom will kick-start another auction which will see 120 Mhz of spectrum in the 3.6-3.8 GHz bands, as well as 80 MHz in the 700 MHz band go up for sale. For both Lamprell and Petty, this auction doesn’t make sense. These are two bands which will be used for different purposes (coverage and speed) so why auction them off together.

If Vodafone had known this was going to happen back in April 2018, during the first spectrum auction, it might have altered its strategy.

“We could end up with a very fragmented spectrum situation,” said Petty.

From the team’s perspective, it seems Ofcom has only just woken up to the coverage demands of the UK government, and is using this auction as a blunt tool to meet the objectives. From an engineering perspective it doesn’t seem to make much sense to Vodafone.

“We are not happy with the rules,” said Lamprell. “But it’s rare for us all [MNOs] to be happy.”

Looking good but looking suspect

The UK is currently in a good position ahead of the 5G bonanza from an engineering perspective. With test hubs being set up around the country and telcos who are acting proactively, the UK looks like an attractive environment to invest in for R&D. It is by no-means leading the global 5G race, but it is in a healthy position.

However, political and regulatory uncertainty are a threat to this perception. The activities and culture of both DCMS and Ofcom over the next couple of months will has a significant impact on the 5G fortunes of the UK, as well as the ability to attract new talent, companies and investment.

UK growth is slowing, but so is Europe’s

The numbers for 2018 GDP growth are in and, while they’re not great, they’re a lot better than some doom-mongers have expected.

UK annual GDP growth slowed to 1.4% in 2018, the lowest since 2012. Having said that growth was below 2% for the previous two years and historically we seem to have paid the price for few recessions by having smaller peaks too. This ONS chart shows around 2.5% is the long-term historical norm so we’re below par but not by a lot.

Further context can be provided by looking at the rest of Europe. A recently published European Commission report says German GDP grew by 1.5% last year, with the French managing exactly the same. In both cases, however, this was down from 2.2% last year and the UK is actually forecast to slightly out-perform Germany this year, with growth of 1.3%. The whole of the EU27 is only forecast to grow by 1.5% this year.

“GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining,” said Rob Kent-Smith, Head of GDP at the ONS. “However, services continued to grow with the health sector, management consultants and IT all doing well.

“Declines were seen across the economy in December, but single month data can be volatile meaning quarterly figures often give a better indication of the health of the economy. The UK’s trade deficit widened slightly in the last three months of the year, while business investment again declined, now for the fourth quarter in a row.”

The EC report defaulted to tried and tested ‘uncertainty’ to explain the slowdown. The main thing flagged up was the current aggro between the US and China, but also “…social tensions and fiscal policy uncertainty in some Member States,” which seems to be a reference to France and Italy, respectively. The uncertainty around Brexit was briefly mentioned at the end of the commentary.

That hasn’t stopped opponents of Brexit jumping on these figures as the next piece of news to support their apocalyptic narrative, with loads of supposed experts jumping on the bandwagon and claiming special insight into the minds of the country’s business people. Many such experts also predicted a recession in the event of a leave vote that never materialised, so we should probably take their latest blurts with a pinch of salt.

 

Potential return of roaming premiums causes latest Brexit flap

UK parliament has drafted new legislation that would release UK operators from their commitments not to charge extra for roaming in Europe.

The scoop was grabbed by the Huffington Post, which notes that the government will probably release operators from this obligation in the event of a ‘no deal’ Brexit. The apparent rationale is that, since the UK will no longer be able to oblige European operators not to charge UK operators a wholesale premium for roaming, it wouldn’t be fair to prevent them from passing that cost onto their customers.

Those opposed to Brexit have inevitably seized on this latest development as further evidence of what a catastrophe the whole thing will be. Labour MP Tom Watson brought it up in the house of commons and exploited the opportunity for a spot of scripted grandstanding to the fullest, which you can see at the bottom of this piece.

Wholesale carrier service provider BICS reckons it’s unlikely we’ll see a return to the bad old days, however, because operators on both sides of the channel will be aware of how unpopular such a move would be.

“The prospect of a ‘no deal’ in March has fuelled speculation about whether we’ll see the return of roaming charges, and post-holiday ‘bill shock’,” said Mikaël Schachne, VP of Mobility Solutions and IoT Business at BICS. “But with LTE/4G data roaming traffic in Europe surging by 600-800% after the implementation of Roam Like at Home, it would be exceptionally unwise for operators to go against such clear demand.

“In its abolition of roaming charges, the EU set a major precedent, and motivated other operators to offer competitive international tariffs. Most of us have now grown accustomed to using our mobile phones – and all of those data-intensive apps and services – when we’re abroad, to a similar degree as when we’re in the UK. In taking that away, operators risk alienating their customer base, and risk haemorrhaging subscribers to those offering more cost-efficient roaming packages.

“In the event that all UK operators decide to opt out of Roam Like at Home following a no-deal, we’re still unlikely to see the high tariffs that once existed. Roaming packages promote and drive subscriber loyalty, and encourage the use of all manner of mobile services and apps, helping operators to market and deliver additional services, making it in service providers’ best interests to stay competitive.”

Last summer UK operators indicated they have no intention of bringing back roaming, but as the prospect of ‘no deal’ grows only Three seems to be categorically ruling out any kind of hike. That could get interesting for Three if their wholesale roaming partners start getting funny ideas and our advice would be to publicly name and shame any such opportunistic European operators.

There will certainly be all sorts of bureaucratic chaos when Brexit finally happens, but you can’t undo decades of co-dependence overnight. Still, on the plus side, thanks to anticipated shortages of Mars bars, McDonald’s and Magnums we’ll probably all lose loads of weight and look great on the beach. Shame we won’t be able to afford to show off about it on social media, but you can’t have everything can you?

 

25% of Brits would ditch ISP if porn is blocked – MoneySupermarket

The net neutrality debate could be emerging on the UK horizon but the message here is don’t mess around too much; it wouldn’t take much for consumers to switch ISPs.

New research from MoneySupermarket has indicated UK consumers are pretty sensitive when it comes to the idea of the open internet. This is a debate which has certainly captured the imagination of the US, though the UK has largely been shielded by its inclusion in the European Union and rules being written in Brussels. With Brexit looming large, it is possible the UK would no longer be answerable to BEREC (Body of European Regulators for Electronic Communications) and free to decide its own course down the net neutrality road.

But the message from MoneySupermarket is simple; becoming too authoritarian on what content consumers can access and they will leave pretty sharpish. 64% of respondents would switch ISPs if blocks were put in place, with one in four specifying the blocking of porn as a reason to leave. Right now the status quo is holding solid, with the telcos largely only blocking requested and illegal content, though Brexit could change this.

By leaving the Union the UK is giving up the right to influence any new policies. Therefore, if it remains as part of BEREC it would have to comply with rules it has no influence over, Emily Thompson of MoneySupermarket points out. This would contradict the rationale of Brexit in the first place, though in the pursuit of a healthy relationship with Europe, the rules might have to be swallowed. Having the power to write the rules which govern the land is something which every government around the world would want, therefore staying in BEREC seems unlikely.

“While the dialogue regarding net neutrality in the UK is relatively low-key, it has controversially been repealed in the US, suggesting that it could become a much bigger issue once Brexit is finalised and we look at rethinking European legislation,” said Thompson. “For now, ISPs need to decide what’s in the best interest of their customers: eschewing the current net neutrality laws to reduce competition or getting on the side of the consumer and keeping the internet fair and equal.”

One of the areas which will come under scrutiny should the UK and BEREC part ways is net neutrality. We have already seen how divisive this debate has become in the US, with California introducing its own state level rules contradicting the FCC and potentially leading to a constitutional crisis. The scenario is slightly different in the UK, though the telcos will still want the opportunity to make more money.

Part of the reason net neutrality is such a big topic in the US is due to competition. A notable number of customers have limited options when selecting a broadband provider, which is not the case in the UK. Thanks to the UK being a small island and Openreach laying the foundations for broadband access, most customers have options when it comes to providers. ISPs cannot dictate the terms as much as across the pond and will have to be careful about blocking websites or promoting certain traffic for fear of losing customers to competitors.

However, executives might not be able to resist the temptation of making more money. The idea of a two-speed digital highway would be attractive to the telcos, monetizing the speed of delivery to the consumer. Experience is everything nowadays, and a slow-loading website might be enough for a consumer never to consider that curry house or wallpaper manufacturer ever again. We doubt the ISPs would go as far as holding the businesses to ransom by blocking websites who don’t pay or because a competitor pays for it, but it is a possibility.

Predicting which way the relationship with BEREC will go is a tricky one right now as it relies on the final deal the UK strikes with the European Union. We can’t imagine the UK Government will be happy about being told about how to regulate its own telco industry, irrelevant of how friendly the final terms are. It might not be too long before the net neutrality debate washes ashore; prepare for some propaganda from the telcos about why it is fair to create a digital toll-road to help fund the rollout of infrastructure.

Brexit doesn’t matter to us, as long as it doesn’t kill the economy – Vodafone UK CEO

Brexit has been an incredibly divisive topic of conversation for many, but Vodafone hasn’t concerned itself with lobbying at all. Brexit doesn’t actually matter, the success of the UK economy is the primary concern.

“We reflect the health of the UK economy, so we need the economy to thrive,” said Vodafone UK CEO Nick Jeffrey at Future Ready, a somewhat glorious name for a technology showcase and press conference.

Although responses were carefully worded, reading between the lines the message was simple. In or out of the European Union doesn’t actually matter for Vodafone, this is a company where the success in intrinsically linked to the success of the UK’s economy. For Vodafone UK to thrive, the UK economy needs to continue heading in the right direction.

There are of course worries for the business on the whole. As a multi-national corporation, Vodafone moves a lot of people, data and currency between the various different operating groups, a proposition Jeffrey would like to see continue, though as a national business, in or out of the Union is irrelevant.

A good example of this attitude is with the part PR pitch, part clever business move, taking the form of the Vodafone incubation initiatives. Tech Starter and Bright Sparks are two of the initiatives, both aimed at driving scale for start-up organizations, and creating growth in the UK technology industry.

“We have three of the top ten research universities in the world; innovation does absolutely happen in the UK,” said Helen Lamprell, Vodafone UK’s General Counsel & External Affairs Director. “We want to enable innovation and create exciting new jobs.”

Tech Starter offers a prize fund for start-ups who have working prototypes but lack the support to go to the next level, while Bright Sparks is a mentoring programme where the same organizations can lean on Vodafone’s experts, from digital sales strategy through to GDPR. Encouraging growth not only moves the economy in the right direction, an important point for Vodafone, but supporting these young businesses get Vodafone in on the ground floor.

With more than 50% of Vodafone UK’s business reliant on the enterprise market, if the economy is heading in the right direction, its business is likely to as well. With this in mind, the Brexit outcome matters very little, as long as it doesn’t tank the UK economy.

Brexit data contravention lands Facebook a £500,000 fine

The Information Commissioner’s Office (ICO), UK’s data protection regulator, intends to fine Facebook half a million pounds for its failure to safeguard user data in the run-up to the country’s referendum to leave the EU in 2016.

After more than a year’s investigation, the ICO’s progress report published today (11 July) determined that Facebook breached Data Protection Act 1998 by lacking transparency “and security issues relating to the harvesting of data”. Facebook is due to present its case in front of the ICO later this month.

We asked Facebook for a comment and got this from Erin Egan, its Chief Privacy Officer: “As we have said before, we should have done more to investigate claims about Cambridge Analytica and take action in 2015. We have been working closely with the ICO in their investigation of Cambridge Analytica, just as we have with authorities in the US and other countries. We’re reviewing the report and will respond to the ICO soon.”

In addition to penalising Facebook with the highest possible sum in its jurisdiction, ICO has also undertaken actions against a string of parties suspected of having involved in irregularities during the campaign:

  • Enforcement Notice to cooperate with investigation was sent to SCL Elections, affiliated with Cambridge Analyica, and steps are being take to bring criminal charges against SCL Elections for its failure to implement the Enforcement Notice;
  • Warning letters were sent to 11 political parties on their ways of buying and using voter data. Audits are planned for later this year;
  • Enforcement Notice was sent to the Canadian data analytics firm AggregateIQ (AIQ) demanding it to stop possessing UK voters’ data, in cooperation with the Canadian authorities;
  • Investigation into both the Leave and Remain campaigns are ongoing;
  • An audit on Cambridge University’s policy and process will be conducted. A recommendation to Universities UK was issued demanding the education institutions to be more vigilant on the usage of personal data gathered for academic research purposes vs. academics’ private commercial interest.

In a certain sense, Facebook was fortunate with timing. Had the new GDPR been in place before the referendum, the ICO would have the authority to handout a ticket of up to €20 million (£17 million).