  The ability to make international roaming calls is of increasing importance
to customers in Europe. This contrasts with various complaints that retail
prices of roaming calls are rigid and excessive. The focus if the paper is on
wholesale roaming, which is the prime determinant of retail roaming prices. The
paper analyses the structural conditions of wholesale roaming markets that have
impaired incentives to competition, namely high combined market share of the
two leading GSM 900 operators combined with second mover disadvantages for new
entrant GSM 1800 operators, and demand externalities. The paper argues that a
number of developments are under way that are likely to modify this situation
in the future. With the introduction of SIM over-the-air programming, home
mobile operators will be able to direct customers to networks with the lowest
charges. As dual mode handsets become ubiquitous and as new entrant GSM 1800
operators reach nationwide coverage, second-mover disadvantages will disappear.
Given the relatively small roaming volumes that GSM 1800 operators currently
provide, they should have an incentive to lower charges in exchange for
preferred roaming status. On the demand side of wholesale roaming markets, it
will be the larger GSM 900 operators, and in particular those with a
pan-European footprint, that will ask for lower charges in exchange for
preferred roaming status. This could discriminate against mobile operators in
downstream retail markets that do not have a pan-European footprint and that
lack the bargaining power. However, arbitrage by roaming brokers, new entry and
wider geographical markets on the retail roaming level will work against this.
