A major reform moves for a single market in EU telecoms.
The EU calls it the biggest reform in the telecoms market in 26 years. The most eye-catching move is the proposal to abolish foreign roaming charges by 2016. But the meat of the proposals lies in the attempts to open up a single market in telecoms. Europe is lagging Asia and the US in broadband speeds and 4G roll-out, and fragmented markets are thought to be one reason why.
For an industry that connects people across continents, the telecoms industry is still an oddly national affair. No operator has a presence in more than half of the EU’s markets. The reason, says the Commission, is that rules are still to a large extent national.
In his keynote ‘State of the European Union’ speech in September, Commission President José Manuel Barroso proposed a raft of measures to make things easier and boost investment. One authorisation for all 28 member states and harmonisation of spectrum assignment are key. The package includes rules on simpler, shorter contracts and network neutrality.
The Commission has had to tread carefully between the two lobby groups that represent the upstart telecom companies and the established national giants. The upstarts welcomed the proposals that will make it easier for small companies to exploit pan-European business opportunities, but the giants said it could increase the very fragmentation the Commission was battling, which has prevented the emergence of large-scale investment in next-generation networks. Nor are they happy about the abolition of roaming charges, which had been a nice earner.
The incumbents have marshalled their arguments. They say Europe has gone from telecoms leader to laggard in a few years, experiencing an annual decline in telecoms investment of 2 per cent. Companies are prevented from capturing the fair returns needed to fund investments because of the uneven playing field that favours bright new whizz-kid companies.
Previous EU legislation unbalanced the playing field, encouraging large value migration to ‘additional service players’. The EU pursued the ‘outdated strategy’ of encouraging more retail competitors in any market. The rules favoured companies that rented infrastructure over those who built it. Renters have much higher return on capital as they can choose the locality with the most favourable tax rules. Competition authorities fail to allow healthy consolidation but do allow new entrants who can drive down prices aggressively.
The upstarts say incumbents failed to invest in next- generation networks when they were rolling in money, and that smaller companies have a better record on roll-out of high-speed networks than the big companies. The weakening of Europe’s monopolies is one of its big success stories, they say, and means Europeans get cheap mobile and broadband.
That may be the crux. There is no free lunch. While America has seen considerable investment in next-generation networks (and consolidation), users also pay substantially higher prices for using Web and mobile. The Commission’s approach is populist, leads to lower prices, but whether it will lead to more fibre investment is obviously contested.
One thing everyone in Brussels thinks about is next year’s European elections. Cutting roaming and service fees is one of those rare things that might appear on the public’s radar – and make the EU that little bit more popular.