Posted on 27/Apr/2015
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EU Commissioner Margrethe Vestager may have been a little too excessive in cautioning about the risk that more consolidation in the European telecoms sector would lead to uncompetitive situations. In fact, the integration between operators is as much necessary as it is a normal market process.

Almost 60 years after the Treaties of Rome were signed the main European weakness remains the lack of a true single market. This is the case in the telecommunications and digital markets, as well as in the railway sector, where different technological standards coupled with national barriers are still preventing a true integration as much as the resulting economies of scale that in these “capital intensive” markets are essential. The consequence, as everyone knows, is that Europe runs more than ever the risk of falling behind competitors that are emerging in the global arena.

The European telecommunications sector, for instance, has seen a far lower growth in investment than in the United States, where in spite of the recent FCC’s decision on Net Neutrality, operators have been able to exploit the very opportunity to have a single market.

Not surprisingly, almost all the large companies in the digital world are based in the US or at least in the Chinese market.

With this in mind it is also obvious that the creation of a proper single European market would entail and favour a certain degree of consolidation within the telecom sector. This is not a bad thing and the EU Commissioner for competition Margrethe Vestager may have been a little too excessive in cautioning about the risk that it would lead to uncompetitive situations. In fact, the integration between operators is as much necessary as it is a normal market process.

In the European market, if a wave of mergers takes place within a true single market, there will be a few European “champions” competing with each other across the borders.

These operators could finally begin to think in a European perspective, taking into account that the competition in the digital market will be both vertical and horizontal. A horizontal competition, in a geographical sense, will take place with the increasingly large Chinese operators, and at the same there will be more vertical competition with all those companies resulting from the tech boom (vd. Google, Facebook).

It is clear that the only way to increase investment in the telecommunications relies on more market integration. In a digital market without less national silos, the presence of larger cross-border players competing with each other should not be feared but is the key to have more investment in place. The digital single market is the only chance for Europe not to miss the train of technological development.

 

photo credits: Andrea de Poda

  • fedepoggi

    Wow, this is really the poorest attempt of deception on the topic that I ever happened to read. No justification whatsoever is given pro consolidation. We just learn from the article that this is a “normal market process”. Then, I might be stupid, but I really don’t get the horizontal competition from large Chinese operators concept. What is the author trying to say?

    Europe has already giants in telecoms, larger than US counterparts (we cannot be China, we don’t have the same scale and numbers). Vodafone (UK) has more than 445mn subscribers, Telefonica has 252mn subscribers globally, about the same than AT&T and Verizon together. http://en.wikipedia.org/wiki/List_of_mobile_network_operators

    So, what are we talking about?

    Isn’t in the interest of the entire EU economy to foster fierce competition between telecom operators for the benefit of their customers? Don’t we need low access prices and infrastructure competition leading to innovation? Do we want to end up like the US that only features scattered local monopolies and price levels discouraging take up?

    Please, read this informative rebuttal recently published by professor Susan Crawford about US consolidation and deregualtion. http://rooseveltinstitute.org/susan-crawford-responding-distorted-op-eds-published-new-york-times