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Pushback: big telco wants telecoms regulation eased, ECTA doesn’t


via Flickr © CreditDebitPro (CC BY 2.0)

  • Big telcos are pushing for a regulatory relaxation to stimulate investment in telecoms
  • But this is a course that, history shows, falls short
  • The real solution to investment, argues ECTA, is competition

The European Electronic Communications Code is seeing the European Commission busy rewriting EU regulation to enable the ‘Gigabit Society’, says ECTA, the European Competitive Telecommunications Association. While this effort covers both fixed and mobile networks (the one steadily more dependent on the other) the Commission is particularly fixated on a strategic action plan for advancing 5G. Europe, the commission has decided, has a strategic imperative to lead the world in 5G and harvest all its industrial benefits to the full.

ECTA, while welcoming the focus on preparing for a gigabit society, is slightly worried about what all that fostering of 5G might lead to in practice, especially if the commission ends up paying too much heed to Europe’s big mobile telcos. They are urging that regulation be relaxed to give them an easier ride and a more compelling business case to present to their shareholders in advance of their committing large sums for a 5G and fibre rollout.

So what’s the problem?

The way ECTA sees it, competition has driven, and continues to drive, investment in European telecoms. Relaxing the rules is strictly the wrong way to go.

In this fight it’s up against a familiar adversary, the European Telecommunications Network Operators' Association, ETNO. ETNO and its members, says Luc Hindryckx, Executive Director of ECTA, “unceasingly continue to call for additional regulatory relief to provide them with investment incentives. The essence of these calls seems to be that, only if entirely freed from the shackles of regulation can they hope to do what competitors have already been doing for years: invest in first class VHC networks.”

Luc and ECTA urge instead that the Electronic Communications Code must remain thoroughly pro-competitive with regulation supporting competition and therefore investment - the exact opposite course from that being urged on it, not only from within Europe by the likes of ETNO and the GSMA, but from the US FCC chairman, Ajit Pai who advocates radical de-regulation as a solution to all telecom problems.

Says Luc: “People seem to forget that the full access regulation and open networks got new carriers into the market in the first place. Then once they were in, incumbents responded to the increased competition with more network investment.”

Lesson: Competition, not its loosening, drives investment. With the European regulatory regime, if there is enough competition operators are released from relevant regulation. On the other hand, if an operator is judged to possess significant market power (SNP) it stays regulated. Unfortunately, the big telcos and their allies “are trying to change the rules to make it harder to declare SNP.

“We see much fibre and network deployment and innovation taking place in Europe - there are more operators in Europe and that’s a big force for the good,” he says. “It’s always easier for small organisations to innovate as the risk of cannibalising the existing business models is lower, for a start. But more importantly, the European economy is based around small sized enterprises and so it’s very important for them to achieve, in a smooth way, their transition to digitalisation.

“If they get a diversity of choice in terms of providers then they will be able to innovate much more easily - much easier than if they have go play with one or two large players.”

Luc’s pro-competition, pro-regulation blueprint was the prevailing mantra in the 1980s and 1990s when deregulation in telecoms was taking place and competition first started to impact the scene.

But today, instead of promoting the virtues of competition, which at first even the ex-monopolist incumbents pledged fealty to, a new mantra has emerged extolling scale and consolidation. Europe we are often told, has just too many telcos. It is fragmented and therefore would be unable to apply itself to the next iteration of technology coming down the track.

Endless barrage

The consolidation barrage has continued with a narrative that ignores the fact that the most innovative, and value-offering telcos in Europe tend to be the smaller and/or challenger ones.

For instance Finland. It unsurprisingly excels in mobile with its small (5.5 million or so) population. But it nevertheless manages to support five operators.

It has close to 150 per cent service penetration and it consistently performs amongst the best in the world for average mobile service speed and cost - way superior to US performance in LTE, for instance. Operators have been offering ‘unlimited data’ there for years.

Or let’s take France. Six or seven years ago its telecoms segment was still wallowing in post-crash lethargy. Services were unexciting and mobile pricing was high. Then came Iliad and its mobile service Free. Suddenly (and it was sudden) French mobile woke up like a Tour de France rider dosed with a cocktail of performance-enhancing drugs. It turned out that, once the calls to politicians to stop Free from crashing the rest of the French mobile market had subsided, the other French telcos soon responded with investment to fight back.

“Orange was able to invest as well,” says Luc, “especially in fibre access. They could have done it before, but it took Iliad to push the investment case.

“The key thing to understand is that incumbents will invest to make sure they remain competitive.”  In other words, they don’t invest just because it might be a good idea for the rest of the telecoms ecosystem if they did.

Today, says Luc, the range of products and services and the prices that companies and individuals have to pay here in Europe, mean that users are much better off here than in the US.

But given the current push in some quarters toward consolidating players and attenuating their competitive impact we have to be vigilant - all the ground made up by competition over the past three decades could be lost.

“In terms of the service offerings running on top of the data highways that telcos cannot control anymore... that competition is not dead.” he says, ”I believe that we are only at the beginning of unprecedented service competition as we see that more and more things are happening in the cloud.”

So, I asked Luc, given the scenario he has painted, far from net neutrality being an unnecessary encumbrance - even an anachronism as it is now painted in the US - it should be seen as even more important as we go forward to cloud-based service competition?

“I would agree.”

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