ANALYSIS: Connecting Europe: too soon?

ANALYSIS: Connecting Europe: too soon?

European Commission plans for a united telecoms market across the region are being speeded up to breakneck pace.

A blueprint for how such a market might work was to be made public in October of this year, but will now be published in June, four months earlier.

Prime mover behind this acceleration is Neelie Kroes, Digital Agenda commissioner. Kroes intends that regulations to bring about a unified communications market be approved before the end of the year, ahead of elections for the European Parliament in 2014.

Ready to implement the initiative is the Connecting Europe Facility (CEF), a body with €50bn to spend on supporting joined-up infrastructure in the fields of transport, energy and broadband and digital services. Trans-European networks in these sectors will, it is claimed, boost competitiveness, create jobs and foster economic growth.

Time is now tight for the questions that hang over the creation of a Europe-wide telecoms market to be resolved. These fall into two main categories: Who gains, and how? And how workable is such a market in practical terms?

What we are likely to see in June is proposals for laws that, among other things, encourage network sharing, offer policy for the harmonisation of spectrum and the conduct of future spectrum allocation, and simplify cross border roaming. Ways to ease cross border mergers between network operators are also probable, as well as an idea of how pricing of services might work in a single European consumer market.

For any large network operator with a stake in two or more of the EU’s 27 member states, the proposals will surely feel like a win-win.

All will have felt the effect of incursion from the OTT sector, and are likely to see wider collaboration as the only way to tackle such rivals, none of whom are held back by adherence to 27 different regulatory regimes.

Regulations as they stand inhibit consolidation, and the ability of operators to match pricing to investment needs. The result for Europe’s big telecoms players has been a long-standing decline in revenues from the region, not helped by the general economic

malaise that presently affects large parts of it.

If operators are being held back from investing in essential infrastructure to support the internet of tomorrow, then Europe’s rivalry with other countries, like the US and China, where there are far fewer operators, will lag further, say potent voices like France Telecom-Orange.

It is not just individual operators urging reform. The GSM Association too has strongly recommended the European Commission to “seize the opportunity to drive further regulatory reform”.

Building better networks more cheaply is the overriding benefit, said Luigi Gambardella, executive board chair of ETNO, a Europe-wide policy group for expressing the views of operators: “Civil engineering, such as the digging up of roads to lay fibre, accounts for up to 80% of the cost of deploying high-speed networks,” he said. “The proposed regulation can significantly lower high-speed broadband roll-out costs.”

Anyone who disagrees now has a small window to get their point across. So who would want to spoil this chance for unity and efficiency? Well, there may well be European governments, not least the UK’s, which will bridle at the passing of the control for such an important engine of economic growth as broadband to Brussels. Anticipating such objections, a recent message from Brussels has described the proposals as “convergence, not central planning”.

Smaller operators, particularly those who work within only one border, might well feel that harmonisation will undermine their position and force them out of the market. And national regulators might well fear for their future role too, and defend it by saying they understand far more about the needs of their country’s consumers and enterprises than any central body. There are practical considerations to be explored in addition. Europe has shown again and again how hard it is to unite in concrete areas of investment policy, even where mutual benefit is involved, as wrangles over the rescue of endangered economies like Cyprus have proved.

In commercial terms as well as political ones, how will one type of network and one portfolio of services work from Stockholm to Lisbon, from Dublin to Athens? How can you converge pricing between these very different places? While overall pricing will surely fall, there will no doubt be winners and losers.

The reality is that convergence makes most potent sense when one border is concerned. Why does Deutsche Telekom have to run its German and Austrian businesses separately? Why two CTOs, two billing systems? Why if you make a call in Germany to a friend some 20 kilometres away in Austria does it cost you a lot more than a 800km call to the other side of Germany? Sheer logic will surely do away with Europe’s outdated telecoms islands, but not everybody is going to celebrate.

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