Donald Trump’s willingness to change his stance against the proposed AT&T-Time Warner merger is a sign of realism. US President should take a clear position in favor of the country’s digital industry. This is the only possible approach if the US is to maintain its leadership in the digital market.
President Trump demonstrated a welcome realism towards the economy last week, declaring that he had not yet “seen any of the facts” regarding the risk of monopoly associated with the merger between AT&T and Time Warner.
The new US President put the US Telco operator’s offer for the TV market leader under the spotlight in October during a campaign speech in which he warned about the risk to competition linked with creating a group that was too big.
While this type of risk is a significant factor to consider in a liberal economy such as the US, it is important to understand what “too big” actually means in the telecoms and digital market.
If we look at the new digital market, which includes huge internet groups (Google), logistics groups (Amazon), content producers (Netflix) as well as traditional telcos and TV operators, it is easy to see that the definition of “too big” has dramatically changed.
Today we must understand that competition is not confined to a single country, but that we have a real global digital market.
When AT&T bought DirecTV it was clear that the Americas was being treated as a single area, but it is equally easy to understand that an OTT such as Netflix aims to reach a global market.
The latest financial results of Netflix underlines this, showing that the non-US markets will soon form the largest part of its revenues.
The competition in the digital market is not just vertical (Google enters several markets), but it is more and more horizontal in terms of geography. There is a new challenge, clearly recognized and outlined by President Trump: the rise of Chinese companies.
The two leading countries in terms of the number of mobile connections are China and India, with over 1 billion subscribers each. Last week, Chinese President Xi Jinping advocated for an open economy and the end of protectionism at the World Economic Forum. It was a nice speech, but in reality Chinese competition is difficult to fight given the many barriers to entry in its market.
The big players from China are targeting digital markets globally with companies such as Alibaba or WeChat operating in a number of markets, not just in Asia but worldwide. It is becoming clear that operators such as AT&T in fact risk becoming too small to compete on this global stage..
So, would the merger between AT&T and Time Warner create too large a player?
AT&T realized several years ago that it was impossible to compete in a digital market without content. The decision to buy Time Warner following DirecTV is the right strategy to ensure continued competitiveness in a global world, especially when considering the expanding Chinese companies.
President Trump’s outlook on the economy is clear and it should lead to him taking a position in favor of US operators. This is the only possible approach if the US is to maintain its leadership in the digital market together with the high value-added jobs associated with it.
To make America great again, the US needs realism from its President on this AT&T and Time Warner deal.
Picture credits: Jack Skipworth
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
The combined efforts of promoting the digital sector and a sound tax policy appear to be stimulants that are helping Spain’s economy recover. The new European Commission should look closely at these simple pioneering approaches.
Investments require a good framework to restore growth. Valdis Dombrovskis, Vice President of the European Commission and ex-Prime Minister of Latvia, accurately pointed this out during the Martens Centre’s annual Economic Ideas Forum in Slovakia.
Europe is in desperate need of restoring growth across the Member States. The International Monetary Fund has warned there is now a four in ten chance the Eurozone will slide into a third recession since the financial crisis. The triple dip is already a reality for some countries in Europe.
Two months ago, a new European Commission took office. It’s an opportunity for a fresh start and to find ways we can improve economies across the region. We know there are solutions to the similar problems faced in different countries.
We need to look to the digital economy. We need to think digital in everything we do. The Internet economy will impact every business and industry over the next few years. The success of Europe’s economy will, in large part, depend on how we promote the information and communications sector.
Our regulatory model desperately needs modernization if the private sector is to be encouraged to invest in the networks needed to support a European renaissance. Only a future-focused regulatory framework that embraces technological change will facilitate the much-needed investment in infrastructure, technology and research.
Creating a digital single market is the unique solution for the development of investment, making it possible to attract more money from the private sector to push the recovery and to decrease the high level of unemployment. According to its priorities, the new European Commission will soon present an ambitious plan to achieve a truly connected digital single market. It may draw some inspiration from Spain.
Last year, the Spanish government approved the Digital Agenda for Spain, which, among other goals aims to boost the digital economy; improve e-Administration and adopt digital solutions for an efficient rendering of public services; boost research and development; and promote digital inclusion and literacy and the training of new ICT professionals.
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According to data gathered by Venture Watch, startups in Spain raised €158 million for the third quarter of 2014, a 187% increase compared to the same period in 2013. Google recently announced it’s opening a new campus for entrepreneurs in Madrid “because of the thriving entrepreneurial spirit in Spain.”
Adding to that initiative, Spain has also announced a package of income and corporate tax cuts in an effort to increase investment and consumption across the country. Spain’s corporate tax rate would drop from 30% to 25% by 2016. Overall income-tax rates will drop by 12.5% over the next two years.
The combined efforts of promoting the digital sector and a sound tax policy appear to be stimulants that are helping Spain’s economy recover.
Digitalization permits simplification of procedures and the Doing Business 2015 of the World Bank shows improvement of the Government with a progress of 19 positions in the rankings.
The benefits for the economy are already clear. The unemployment is decreasing from the top levels of the last years and the economy is one of the most well performing in the Euro Area.
To break out of the present negative downward spiral and avoid economic freefall and stagnation, President Juncker and his team during their first 6 months must look closely at Spain’s simple pioneering approaches and bring forward an agenda that opens markets, encourages investment and propels entrepreneur led growth and employment creation.