Europe’s broadband system is highly fragmented and in need of improvement. That helps explain why the European Commission is working toward a digital single market. Reduced regulation and tax rules harmonization play a key role in achieving this goal.
The EU’s struggle with broadband connectivity is largely due to inadequate investment in infrastructure from broadband providers. As the European Commission explained in its memo about the connected continent, there are hundreds of telecom operators in Europe, but none active in all member states.
Many European leaders are increasingly abandoning their regulatory approach and looking to the US broadband model.
The American market-led approach of facilities-based competition has resulted in greater investment in next-generation broadband technologies. American operators have invested almost twice as much per capita as their European counterparts in recent years.
While broadband investment can be cyclical, with periods of high spending for network upgrades followed by periods of lower spending and maintenance, the US has been the world pacesetter, investing some $1.2 trillion since 1996. Since then, an average of at least $60 billion annually has been invested to build and upgrade wired and wireless networks, to lay millions of miles of fiber-optic cable (more than in the whole EU combined), and to erect cell towers.
The EU is composed of some 28 nations, 24 official languages, and 11 currencies.
America’s de facto single market allows companies of all sizes to achieve scale, and this holds true for both large broadband providers that deploy infrastructure and for entrepreneurs and emerging companies that want access to a large domestic market.
Indeed, Europe is the top location for America’s digital exports, and some concern exists that the lack of broadband investment in the EU could inhibit the growth for some digital exports to Europe in the future. So both previously mentioned points are really the clue.
That helps explain why the European Commission is working toward a digital single market across the EU, with initiatives aiming to bring American-style investment, innovation, and entrepreneurship to the European broadband market and Internet-based industries.
Which are those recipes that could bring us potential success?
Generally speaking, the European Union should simplify and reduce regulation of broadband providers, remove barriers to consolidation, and embrace a market-led with technology-neutral approach.
1) Market-led broadband development. The government should not decide which technology citizens should have and shouldn’t give subsidies for broadband deployment where providers are investing. Given the right regulatory circumstances, the marketplace is willing and able to make efficient decisions about broadband.
A smart vision for broadband realizes that no one network can do it all and embraces a variety of network solutions and innovations that depend on the market. [Tweet “The broadband market, if allowed to operate freely, can meet the demands of today and the future”]
2) Creating a single market. The creation of a digital single market would permit the consolidation of broadband providers across borders, reduce costs through economies of scale, and create a better business case for operators to invest in broadband infrastructure.
It would also permit a more effective and continent-wide spectrum policy, the removal of inefficient national divisions, and the introduction of more comprehensive secondary markets to allow more efficient usage of the limited resource.
Harmonizing tax regimes across the continent would also reduce the burden on consumers and businesses.
3) Simplifying and reducing regulation. Regulatory reform is another necessary step in resolving Europe’s broadband challenge.
Removing the open-access mandate would encourage investment by market incumbents in next-generation infrastructure without fear of being undercut by non-investing new entrants.
Reducing the current regulation may encourage more independent investment in upgrading existing infrastructure.
And the most important is to remove national restrictions on consolidation across countries. This would allow operators to find the cost savings across borders and build a business case for infrastructure deployment.
Recently, the European Commission’s vice president for the digital single market, Andrus Ansip, said he is “worried” about the direction that negotiations over the Telecoms Single Market package have taken in the European Council, where member states appear divided on the issue.
We need to continue trying to convince them and focus on the overall keys to success that I have outlined above.
More help is required on this.