The way the telecoms industry is represented in Europe is still too weak and fragmented, says Proximus CEO Dominique Leroy in a conversation with The Digital Post on the sidelines of the iMinds annual conference. Her main suggestion for the revision of the telecom framework: more regulatory focus on services than technology.
The Digital Post: Let’s start from Internet of Things. Proximus is the first operator in Belgium, and one of the first in Europe, that launched a network for Internet of Things. What is it about?
Dominique Leroy: Historically, telecoms were always about connecting people. More and more in the future, they will also play a key role in connecting things. Against this background, what we did is not so much building a simple network, but setting up a whole end-to-end ecosystem to enable the Internet of Things. We are providing enterprises, consumers as well as developers an end-to-end system equipped with sensors and based on LoRa networks, a long-range and low-power type of networks that connects sensors without SIM cards.
The purpose is to get small packets of data from the sensors through the LoRa networks and store them in our data centers on a platform called MyThings, where we already provide data analytics. The idea is then to open the platform to developers so that they can develop new applications. There are certain domains where we would like to go all the way up to creating applications, mainly in the mobility field, where we think that we can really bring an added value through Internet of Things.
So as you see, the Internet of Things opens up a whole new ecosystem. It is more than a utility provided by telcos. We want to offer solutions, partnerships, we are opening up to other players and therefore we are creating innovation. We are also one of the first companies in the sector moving in this direction.
DL: That’s probably where telco operators have a real added value considering their knowhow: We already provide end-to-end security over our infrastructures, from your phone to the applications you use, all the way to our datacentres. This expertise is very important for tomorrow’s connectivity in cars, home automation and health. LoRa networks come already with a triple encryption key. They secure the sensor identification, the payload and the network. In general, when it comes to using certification, identification and authorization technologies I believe that is where we provide a lot of added value.
TDP: How do you see telecoms operators capitalizing on the Internet of Things in, say, five years from now?
DL: Data consumption today is driven mainly by millions of people connecting with each other. Data consumption will increase dramatically in the coming years as billions of connected devices go on-line. This new reality will create huge volumes of data traffic. IoT will thus become an important piece of the telcos ecosystems, leading to more investment in infrastructures, stimulating more innovation, value, and opportunities for new revenue streams and profit.
TDP: The European commission is working on new proposals to implement greater coordination at European level of radio-spectrum policies. Unfortunately, in the past similar legislative moves were met with strong scepticism from member states. Why this time should be different?
DL: I don’t think member states want to give to Europe their powers on spectrum policy. But they very much understand that if they want to develop a coherent European digital market, there needs to be some coordination. The repurposing of 700 MHz for Wireless Broadband Services should be done within a certain timeframe all over Europe, otherwise it wouldn’t work. If tomorrow we need much higher frequency bandwidth, for instance to be able to develop 5G and self-driving cars, some sort of European coordination is essential to get there.
Moreover, a more consistent policy all over Europe should be applied to the length of licenses. These actions are all feasible, and I think member states will in a way or another agree that’s the right path. However, what they won’t allow is that the EU decide on the prices for the spectrum. In any case, I think that we have an opportunity to have more coordination in terms of timing of the auctions and duration of spectrum licenses.
TDP: What should be the main priorities of the forthcoming proposal on the revision of the EU telecoms framework?
DL: We definitely need less regulation to be able to catch up with more competitive markets. In the last 20 years, Europe has been very effective in overseeing the liberalization of the industry securing a high level of competition. However, today if you look at the big players in the industry, either they come from America, or more and more from Asia. Regulation is certainly one of the root causes of not having strong European digital players.
So, let’s make sure that we deregulate as much as possible, and let competition drive investments and spur innovation. Levelling the playing field is also another important aspect. It is not acceptable anymore that telcos are subjected to obligations on, say, privacy, data usage, or interoperability that are not applying to players operating the same services. The problem today is that regulation is focusing too much on technology and not on services, which produce lot of inconsistencies between cable, telecom, OTT operators providing the same services. So my recipe could be summarized in three elements: less regulation, more level playing field, more regulatory focus on services than technology.
TDP: A word on the increasingly tough stance of Margrethe Vestager on Mergers & Acquisitions?
DL: I think we as an industry need to articulate better what we want, what are the risks of preventing telcos from growing in scale, and what is acceptable and what not. We are not very well-structured and every too often we shy away from speaking with one voice. That also explains why it is easier for regulators to take their own direction: we do not make enough efforts to be listened. We can blame regulators or politicians but I think we should also look at ourselves and see how we can be more united to defend our industry. The way we are represented in Europe is still too weak and fragmented.
Picture credits: Matt Brajlih
Joe Smithies, spokesperson for the UK telecoms regulator, defends the recent reform of Openreach, illustrates UK priorities for the review of the EU telecoms framework, suggests caution on bringing in more harmonisation in radio-spectrum policies.
The Digital Post: BT competitors lamented that in its long awaited Strategic Review of Digital Communications, Ofcom did not go far enough in regulating Openreach. How do you respond to this criticism?
Joe Smithies: We made a clear decision to reform Openreach’s governance and strengthen its independence from BT. We want Openreach to a more independent say on its budgets, investment and strategy. We also want Openreach to consult with all its customers, not just BT, about how it develops and invests in its network.
These decisions are important not only for BT, but for the wider industry. Now we are working on the best way to bring that about, and we will set out detailed plans later this year.
The Digital Post: How does the review ensure that Openreach improves its record in repairs and invests more in infrastructures, i.e. two of the main criticisms it has been collecting over the years?
JS: Currently BT Openreach is obliged to deliver a range of minimum standards. The majority of people encountering a fault must see it repaired within two working days, and the vast majority of those requiring a new line must receive an appointment within 12 working days.
We plan to set out detailed proposals about more demanding minimum standards for Openreach in the autumn.
On investment, we want Openreach to consult with all its customers, not just BT, about how it invests in the network. But more widely, we will encourage investment from other operators by requiring BT to open up its physical network, allowing rivals to lay their own fibre connections. That can create more rivals networks to Openreach, and in turn incentivise BT to invest.
The Digital Post: What should be the main priorities to be addressed under the upcoming review of the EU Telecom Framework?
JS: Concerns have been raised that the framework may not be sufficiently flexible to allow for the regulation of markets where there is a limited or shrinking number of players – in other words, an emerging ‘oligopoly’.
The framework allows regulators to take action to address damaging market features that could harm consumers, before that harm materialises. So it offers greater flexibility than, for example, remedies imposed during a merger.
But we feel the framework sets too high a bar for regulating cases where no one company has market power, but the market is still highly concentrated. To address any concerns, the framework requires regulators to show that the market structure is likely to result in a degree of coordination between operators. This may require demonstrating ‘tacit collusion’, which by definition is hard to prove.
BEREC, the European body of telecoms regulators, raised this issue in detail last year. We’re pleased that the European Commission is also considering the issue as part of the framework review. We hope to see changes that mean regulators have the full range of tools to respond to a changing market.
Any new powers would need to be applied proportionately, and with care. Checks and balances should be built into the system to ensure that happens. But with a change in the framework we could do more to encourage new operators into the market, and keep prices low.
The Digital Post: The framework review will also put forward proposals to promote better coordination in spectrum at EU level. What is your view?
JS: Spectrum is a finite resource, so coordination is important for using it effectively. Generally speaking, any form of harmonisation should be justifiable, proportionate and deliver tangible benefits. It should equally respect national sovereignty.
The UK works productively with the EU on spectrum matters, and we believe that the current system works well.
Picture credits: Kainet
The FCC’s decision to adopt utility-style regulation to the Internet is resulting in less investment and reduced deployment and it will inevitably lead to less robust competition in the broadband market, argues Brendan Carr, legal advisor to FCC Commissioner Ajit Pai.
The Digital Post: You suggested that the FCC decision to reclassify broadband as a utility could undermine the US telecom success story. What are the main negative consequences?
Brendan Carr: The FCC’s decision to apply heavy-handed, utility-style regulation to the Internet is putting the U.S.’s success story at risk. It is already leading broadband providers to cut back on their investments and put off network upgrades that would have brought faster speeds and more reliable broadband to consumers.
And the decision to put the U.S.’s success at risk was an entirely unnecessary one. In the 1990s, American policymakers decided on a bipartisan basis that the Internet should develop unfettered by government regulation.
Regulators applied a light-touch regulatory framework that led to unparalleled levels of investment and, in turn, innovation.The private sector spent $1.3 trillion over the past 15 years to deploy broadband infrastructure in the U.S. That level of investment compares very favorably when you look at the International context.
A study of 2011 and 2012 data shows that wireless providers in the U.S. invested twice as much per person as their counterparts in Europe ($110 per person compared to $55). And the story is the same on the wireline side, with U.S. providers investing more than twice those in Europe ($562 per household versus $244).
Consumers benefited immensely from all of that investment. On the wireless side, 97% of Americans have access to three or more facilities-based providers. More than 98% of Americans now have access to 4G LTE. Network speeds are 30% faster in the U.S. than in Europe.
The story is similar on the wireline side: 82% of Americans and 48% of rural Americans have access to 25 Mbps broadband speeds, but those figures are only 54% and 12% in Europe, according to a 2014 study that looked at 2011 and 2012 data. And in the U.S., broadband providers deploy fiber to the premises about twice as often as they do in Europe (23% versus 12%).
Facilities-based intermodal competition is also thriving with telephone, cable, mobile, satellite, fixed wireless, and other Internet service providers competing vigorously against each other.
But unfortunately, the U.S. is now putting all of this success at risk. At the beginning of 2015, the FCC decided to apply public-utility-style regulation to the Internet over the objections of two FCC Commissioners.
I fear that we are already seeing the results of that decision. Capital expenditures by the largest wireline broadband providers plunged 12% in the first half of 2015, compared to the first half of 2014. The decline among all major broadband providers was 8%. This decrease represents billions of dollars in lost investment and tens of thousands of lost jobs.
And the decline in broadband investment is not limited to the U.S.’s largest providers. Many of the nation’s smallest broadband providers have already cut back on their investments and deployment. Take KWISP Internet, a provider serving 475 customers in rural Illinois.
KWISP told the Commission that, because of the agency’s decision to impose utility-style regulation, it was delaying network improvements that would have upgraded customers from 3 Mbps to 20 Mbps service and capacity upgrades that would have reduced congestion.
These and many more examples all point to the same conclusion. The FCC’s decision to adopt heavy-handed Internet regulation is resulting in less investment and reduced deployment. It will inevitably lead to less robust competition in the broadband market and a worse experience for U.S. broadband users.
But I am optimistic that the U.S. will ultimately return to the successful, light-touch approach to the Internet that spurred massive investments in our broadband infrastructure. Efforts are underway in both the courts and Congress to reverse the FCC’s decision. And following next year’s presidential election, the composition of the FCC could be substantially different than it is today.
The Digital Post: What is your opinion about the Net Neutrality legislation due to be adopted by the EU? What are the main differences with the Open Internet order?
Brendan Carr: I think the FCC’s decision to adopt utility-style regulation should serve as a cautionary tale for regulators that are examining this issue. FCC Commissioner Ajit Pai, who I work for, has described the FCC’s decision as a solution that won’t work to a problem that doesn’t exist.
When the FCC acted, its rulemaking record was replete with evidence that utility-style regulation would slow investment and innovation in the broadband networks. And the evidence on the other side of the ledger? Non-existent.
Net Neutrality activists have trotted out a parade of horribles and hypothesized harms, but there was no evidence whatsoever of systemic market failure. The FCC adopted utility-style regulations even though it presented no evidence that the Internet is broken or in need of increased government regulation.
In the absence of any market failure, consumers are far better served by policies that promote competition. Utility-style regulation heads in the opposition direction—it imposes substantial new costs on broadband providers and makes it harder for competitors, particularly smaller broadband providers, to compete in the marketplace. After all, rules designed to regulate a monopoly will inevitably push the market toward a monopoly
The Digital Post: Next year the European Commission will propose a major revision of the EU current framework on telecoms. From your perspective what should be the priorities?
Brendan Carr: When I met with government officials and industry stakeholders in Brussels, one point kept coming up: the need to increase investment in Europe’s broadband markets. And I agree that embracing policies that will spur greater broadband investment is a key priority. According to a Boston Consulting Group report that just came out, Europe will need an additional €106 billion to meet its Digital Agenda goals.
Historically, the U.S. embraced a number of policies that led to massive investments in broadband networks. For one, U.S. regulators embraced facilities-based competition. We rejected the notion that the broadband market was a natural monopoly.
Therefore, we pursued policies that encouraged broadband providers to build their own networks, rather than using their competitors’ infrastructure. For example, we eliminated mandatory unbundling obligations, which were skewing investment decisions and deterring network construction.
We also made it easier for facilities-based providers from previously distinct sectors to enter the broadband market and compete against each other.
For instance, by making it easier for telephone companies to enter the video market and cable companies to enter the voice market, we strengthened the business case for those carriers to upgrade their networks, since offering a triple-play bundle of video, broadband, and voice was critical to being able to compete successfully. Because of these policies, capital flowed into networks, and consumers benefited from better, faster, and more reliable broadband infrastructure.
We also took steps on the wireless side to promote investment and competition. We embraced a flexible use policy for wireless spectrum. Instead of mandating that a particular spectrum band be used with a specific type of wireless technology, the government left that choice to the private sector, which has a much better sense of consumer demand.
This enabled wireless networks in the U.S. to evolve with technology and to do so much more quickly than if operators had to obtain government sign-off each step of the way. Having license terms and conditions that are relatively consistent across spectrum bands has also made it easier for providers to invest in the mobile broadband marketplace.
The Digital Post: The EU is still grappling with a fragmented and somewhat rigid approach to spectrum, despite the efforts of the European Commission. What can Europe learn from the FCC policy on spectrum?
Brendan Carr: The FCC’s spectrum policies have led to a tremendous amount of innovation and investment in our wireless networks. I would like to highlight a few of those here.
First, the FCC has embraced a flexible use policy for wireless spectrum. Instead of mandating that a particular spectrum band be used with a specific type of wireless technology, the government left that choice to the private sector, which has a much better sense of consumer demand.
This has enabled wireless networks in the U.S. to evolve with technology and to do so much more quickly than if operators had to obtain government sign-off each step of the way. For instance, nearly 50% of all mobile connections in the U.S. are now 4G, whereas that figure is only 10% worldwide.
Second, the FCC makes spectrum bands available on a nationwide basis with relatively uniform license terms and build out obligations. So rather than auctioning licenses that cover only part of the country one year and then auctioning other licenses in another year, all of the licenses for a particular spectrum band are offered in the same auction.
This approach gives broadband operators greater certainty and helps them plan their deployments while minimizing transaction costs. It also makes it easier for operators to obtain handsets and other equipment that will operate on their spectrum bands. All of that ultimately means that consumers get access to the spectrum faster and at lower costs.
Third, the FCC tries to keep its eye on filling the spectrum pipeline. It takes years for new spectrum bands to be brought to market, and so waiting for consumer demand to increase before starting the process of allocating more spectrum for consumer use is not an efficient approach.
The U.S. has engaged in a continuous process of reallocating spectrum for mobile broadband. We auctioned AWS-1 spectrum in 2006, 700 MHz spectrum in 2008, 65 MHz of mid-band spectrum earlier this year, and we’re set to auction our 600 MHz spectrum in 2016. To date, our spectrum auctions have over $91 billion for the U.S. Treasury.
Fourth, the FCC has embraced policies that make it easier for operators to deploy their spectrum. One way we’ve done that is by adopting what the FCC calls “shot clocks.” These require state and local governments to act on an operator’s request to construct a new tower or add an antenna to an existing structure within a set period of time, say within 90 or 180 days.
Another step the FCC has taken is to streamline the process of obtaining the historic preservation and other approvals that are required when an operator deploys broadband infrastructure. Combined, these actions have allowed spectrum to be deployed faster and have meant that consumers get quicker access to new mobile broadband offerings.
photo credit: Eris Stassi
The European telecom sector is faced with significant challenges in terms of rapidly emerging new technologies and new forms of competition and business models driven by these technology changes. 2015 will be a pivotal year for European policy makers, regulators and competition watchdogs to improve the environment for the European telecom sector.
Regulation is the single most important driver in the telecoms sector. HSBC’s Global Regulatory Heatmap report aims to take the regulatory temperature globally and to identify those countries where regulation is most and least supportive of investment, and then to assess how the world’s largest operators are exposed to these conditions.
The report shows, that the European region has faced the harshest regulation, although there are now encouraging indications the environment here is starting to improve.
The telecom sector is widely regarded as an enabler of innovation, productivity growth and international work sharing in the context of an increasingly competitive and globalised economy.
Academic research indicates that economic progress in any given country is driven less by the mere arrival of new technologies, and more by the speed, breadth and depth of their adoption.
Consequently, it is tremendously important that network operators invest heavily so as to ensure that the latest telecoms technologies are available on as ubiquitous a basis as possible.
Network investment is important for another reason also: as set out in HSBC’s Supercollider report, it can be clearly demonstrated that the primary driver of lower prices in telecoms is CAPEX.
In deploying more of the most modern systems, operators take advantage of new technology that is the basis for innovation, capable of handling traffic with greater efficiency, and thus at lower unit cost.
Lowering unit costs and prices should be a primary policy goal, as it is this that enables the development and adoption of novel applications and contributes towards productivity growth in the broader economy. However it has to be mentioned that there is a Babylonian confusion in the public debate on “price” meaning either the monthly bill or the price per unit (MB, text, minute voice).
This obviously raises the question of what might induce operators to raise their CAPEX, and here the empirical evidence is plain. The most effective driver of higher network spending is higher EBITDA margin for MNOs and competition, as this gives MNOs both the means and the incentive to invest.
The central challenge facing regulatory policy makers is therefore how to best to secure a benign investment environment, in which healthy margins support heavy CAPEX. To this end it has to be kept in mind, that regulation is the single most important driver for securing EBITDA margins.
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Therefore it should be fundamentally overhauled in the course of the next framework review process.
To name only two examples of obsolescence:
(1) The current framework is too narrowly focused on legacy apps, still centered around traditional voice telephony, text messages and broadcast TV, now just legacy applications of a much bigger space: i.e. the digital services.
(2) The current framework is inherently slow, leading to inappropriate multi-year/multi-step iterative procedures that fail to keep pace with market and technology evolution.
Along the future regulatory trajectory in Europe, there are a series of challenging issues and required steps for regulatory modernization to be dealt with.
When defining the trajectory of regulatory modernisation, Europe should avoid going for incremental improvement and rather aim at an ambitious scenario and step in a “Virtuous Circle”, based on innovation, investment and smart regulation (“Regulation 2.0”).
The following listing of issues is not comprehensive; the order of listing does not indicate priorities:
(1) From traditional telco services to internet-based ecosystems – SMP regulation: In the telecom legacy world, telcos acted as gatekeepers aiming at monetizing single products or integrated value chains. Now, ecosystems controlled by the internet giants (OTT players or ‘edge providers’) are the new competitive engines that capture and deliver value.
These competitors were never foreseen by regulators, and yet have amassed customer bases that dwarf those of even the largest telecoms companies (for example the merged Facebook – WhatsApp conglomerate).
The emergence of such powerful forces does prompt the question of whether conventional regulation of the sector, stratifying the industry between incumbents obliged to provide wholesale capacity and resellers able to obtain this capacity on favourable wholesale terms, still remains appropriate.
(2) New regulatory bottlenecks: driven by the changes described earlier, traditional regulatory bottlenecks, like access to infrastructure will become less important or even become obsolete whereas access to the huge data collection and processing capabilities of the OTTs will be (or is already!) a crucial bottleneck for all players in the digital services sector to be dealt with.
(3) Market definitions: Will the current set of ‘recommended markets’ (even the most recent revised list of recommended markets) be a future proof instrument for regulators and competition authorities?
Looking at the Facebook – WhatsApp merger, access to data collection and processing, the ‘machine room’ of the internet giants seems to be a relevant topic for market definitions.
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They may also be either extended beyond national borders, or defined at a sub-national level.
In other words, will we continue to differentiate among separated vertical markets and spend considerable time and resources for their definitions and updates, whilst cross-subsidized business models exploit and profit shifts?
(4) Definition of services and categories, SMP-based regulation: The names and definitions of the current regulatory categories of “Information Society Services” and of “Electronic Communications Services” used in the European regulation, have become obsolete. The obligations associated with these categories should be reorganized as well as the legal instruments to be used.
Luisa Rossi (Orange) recently pointed out that, “…the old rules are no longer adequate and yet still apply, while new issues are not addressed and require action. This is why it is now important for the legislative framework and regulatory practices to embrace this phase of development…The starting point for the reforms should be the creation of a digital services categorywith the reclassification of traditional communication services, followed by the reorganisation of the associated obligations such as transparency and non-discrimination, security, privacy, data retention, emergency services, interoperability and portability. Hence, digital services would be subject to a common set of rules enshrined in a new horizontal European legislation, whichever the provider or the technology used. Such an approach should be preferred to sector specific rules.“
(5) Reciprocal regulation: Corporates from neighbouring areas of the economy such as payTV – to give just one example – have the right to purchase telecoms infrastructure, without there being the reciprocal right of telecoms operators to purchase exclusive media content on a similar basis.
(6) Preference for investments in infrastructure: While it may be desirable to address bottlenecks, such as in the access to fixed-line or even mobile infrastructure (via measures such as unbundling and MVNOs respectively), is it really desirable that those reselling the capacity should have an advantage over those building it? The consequence of this tilt to the competitive landscape will be that less infrastructure is deployed.
(7) Modernizing Competition Policy: DG COMPETITION statements referring to Austrian consolidation discuss the lack of an entrant as if it was a failure – on the contrary, it was a successful experiment to determine whether there was economic viability for a fourth player, and the answer was clear: there was not.
A negative outcome from an experiment is not a failure (Karl Popper on ‘Falsifiability’). Let dynamic efficiency gains work! Current competition policy and practice obviously overlooks that a growing part of the entire digital services market (OTTs) is completely unregulated and the remainder – much smaller part of the digital services sector – is strongly micro-regulated.
A recent set of papers by Papai and Csorba casts doubt on the assumption that introducing more mobile competitors into a national market is necessarily better for consumers. Forget the mantra of the crucial importance of the famous ‘forth player’, there is no special magic in the number “four”!
(8) Regulator’s dilemma and challenges: Legislators and regulators have two principal choices in this debate; full de-regulation or continued (selective) regulation. Key issues are: is regulation really capable of specifying how markets should function?
Most would concede this is something that is easier to achieve in industries subject to a slower pace of technological change and disruption, such as utility businesses.
By contrast, in telecoms the scope for disruptive technologies to transform the industry (for example, mobile, WiFi, voice over IP, OTTs, etc.) makes the system far more chaotic.
Given this inherent unpredictability, one group argues that there is an argument for allowing the market to take its natural course and that the competitive dynamics of an industry subject to Moore’s Law are perfectly sufficient.
On the other hand, those who do wish to see continued regulatory intervention argue that the question is rather how better to identify those areas that would benefit from it.
The so-called ‘three criteria test’ remains the preferred yardstick (the presence of sustained barriers to entry, the absence of effective competition, and the inadequacy of existing competition law to deal with the issue).
In any case,
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and innovations on a global level to understand better the markets on the move and to base their decisions on these insights.
(9) Spectrum Policy: Europe’s method of allocating spectrum is one of the least harmonised and least efficient on a global scale.
Most industry parties agree that there is an urgent need to harmonise this process, in terms of awarding methods, coordinating the timing of awards, the duration of usage rights and the conditions on which spectrum can be traded.
One possibility could be the creation of pan-European licences. However, any such proposals (as per those in the “Connected Continent” (or “Telecom-Single-Market”) proposal seem bound to raise concerns amongst the member states.
Stronger instruments for the harmonization of timetables and awarding methods, license durations when assigning new spectrum are urgently needed.
In particular, Europe should be quick and harmonized in allocating and assigning spectrum for mobile broadband in the 700MHz band (2nd digital dividend).
Measures should include: (1) No – or significantly higher – spectrum caps, (2) Perpetual usage rights with ‘use it or lose it’ rule imposed, (3) Fostering secondary spectrum market.
(10) Net Neutrality: The EU legislation on net neutrality should allow operator innovation with specialized services, which will be a key for 5G, subject to transparency and other appropriate safeguards. This is also a question relevant for the competitiveness of the European industry.
If the US will be allowing for the equivalent of specialized services in the future (which is an open issue for the time being), so if EU operators are not able to innovate with specialized services, such innovations will likely happen outside the EU, in places like the US.
An example would be the Connected Continent proposals on net neutrality, which initially amounted to a very judicious compromise in the eyes of many industry experts, but which was subsequently heavily modified in the European Parliament.
(11) Change process in EU: Perpetual regulatory intervention tends to necessitate more and complex legislation, and the legislative process is itself fraught with risk, since there may be a tendency for positive proposals to be diluted or even reversed when these highly complex topics are debated.
(12) Benefits of scale: Scale already plays an important role within the industry, and in future there will probably be opportunities to extend scale effects still further: for instance, as platforms standardise around IP technology, greater cross-border synergies should become feasible.
This is welcome, since many recent regulatory reforms (such as with regard to termination rates and roaming charges) have arguably reduced the incentive for cross-border consolidation.
(13) License to fail: In a dynamic and competitive market, there will, by necessity, be companies that fail. Indeed, the very fact that there are losers actually indicates the success of competition.
However, European regulation has often shied away from recognising this. For example, it has been particularly difficult to use the ‘failing firm’ defence to justify a merger – including in those cases where financial investors would have concluded that the target company could not sustain the level of network and customer investment required to be able to compete effectively.
Even those industry observers looking for regulatory reform rather than programmatic de-regulation agree that the consolidation of smaller players (thereby creating stronger entities with margins better able to support investment) would be a powerful positive – hence the widespread support for four to three in-country mobile consolidation.
In conclusion, there is much agreement amongst industry experts that the current regulatory framework in Europe shows clear signs of obsolescence and should be without further delay fundamentally overhauled.
All sides call for a more cohesive approach, and the formation of a coherent industrial policy for the telecoms sector, so that it is better able to compete against its global rivals – in terms of investment ability, innovation adoption, network capability and attractive unit pricing.
This post was originally published on www.serentschy.com