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Does Mobile Roaming Regulation Violate the GATS?

To reduce international mobile roaming prices, can countries regulate through bilateral or multi-lateral agreements without violating their trade obligations?
In an article published earlier this year, Professor Tania Voon, of the University of Melbourne Law School, analyzes whether this regulation complies with international trade rules.  She primarily uses Australia as a case study to understand the implications of regulating mobile roaming.

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It is important—and comforting—for international travelers to be able to use their existing mobile phone accounts to speak with loved ones back home.  Unfortunately, this service is extremely expensive.  For example, in Australia, a KPMG report shows there is an 85% retail markup on international mobile roaming.  Thus, countries are searching for solutions to this problem.
The Australian House of Representatives Committee on Communications in its report, Phoning Home:  Inquiry into International Mobile Roaming, recommended regulating the wholesale costs of mobile roaming through international negotiations.  Following this report, the Australian Department of Broadband Communications and the Digital Economy (“DBCDE”) investigated the mobile roaming market and proposed imposing wholesale or retail price limits that cannot be exceeded (“price caps”).  The DBCDE advised Australia to cooperate with other (particularly trans-Tasman) countries to avoid unilaterally imposing these regulations.
However, Voon asks whether these price caps violate Australia’s international trade obligations.  As a party to the World Trade Organization’s (“WTO”) General Agreement on Trade in Services (“GATS”), Australia is obligated to follow certain international trade rules.
Under GATS Article II, Australia must provide to any country that is a party to the GATS (“Member”) the same benefits it provides to like services of any other country (Member or non-Member).  This is known as the most-favored nation (“MFN”) obligation.
To determine if the Australian price caps violate the MFN obligation, Voon first asks whether trans-Tasman mobile roaming services are “like” those provided by other countries.  She says a WTO Panel—part of the organization’s judicial process—would likely find these are “like services” because the only material difference between the services is their country of origin.
Second, Voon asks whether the price caps would be according less favorable treatment to non-trans-Tasman countries.  She argues this is less favorable because operators from non-trans-Tasman countries will be subject to prices above the cap.  Moreover, because trans-Tasman operators will be charged less than they are now, Australian companies will likely increase the prices that the non-trans-Tasman countries’ operators pay.
Therefore, Voon concludes that the Australian price caps may violate the MFN obligation of the GATS.
Next, Voon analyzes whether the capping will violate the GATS Reference Paper which is incorporated into Australia’s GATS obligations.  Under Section 2.2, the Reference Paper requires the non-discriminatory, cost-oriented, and reasonable interconnection—cross-country access—between major cell phone companies.  Voon argues that the current roaming rates may already be unreasonable and not cost-oriented.  Further, she argues that the price caps are likely discriminatory, particularly because they may violate Australia’s MFN obligation.  Therefore, Australia’s price caps may also violate this GATS rule.
Voon also asks whether the proposed price caps violate the GATS Annex on Telecommunications.  Section 5 requires Australia to ensure that the service providers of other Members have access to and can use their public networks on “reasonable and non-discriminatory terms and conditions.”  Because the caps may be discriminatory under the MFN obligation analysis, they may be discriminatory here as well.  Thus, Australia may violate the Annex of Telecommunications by implementing trans-Tasman price caps.
Finally, Voon asks if there are exceptions that could justify these GATS violations.  Article XIV provides an exception for measures that are “necessary” to comply with regulations preventing deceptive or fraudulent practices.  Its opening paragraph (“chapeau”) requires that any excepted measure must not be a means for arbitrary or unjustifiable discrimination.
Voon argues that even if Australia could show this exception applies to price caps, it will not satisfy the requirements of Article XIV’s opening paragraph (“chapeau”).  The caps may be arbitrary or unjustifiable discrimination because they neither further consumer protection for all Members nor prevent anti-competitive conduct amongst non-trans-Tasman countries.
However, Voon finds a potential exception in GATS Article V, which deals with regional agreements.  Thus, Australia’s violations may be justified if the price caps are added to its existing trans-Tasman trade agreement, the Protocol on Investments to the New Zealand-Australia Closer Economic Relations Trade Agreement.  However, she cautions that this exception is not clearly defined and may not be broad enough to encompass this amendment.
If Voon is correct, her analysis may serve as a warning for countries seeking to regulate international mobile roaming rates.  When implementing regulations that may affect international commerce, countries must determine whether the regulations violate their international trade obligations.

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