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By Joe Kirwin
Sept. 18 — As the European Commission forges ahead on its Digital Single Market initiative, battle lines have formed among telecom players who are pushing for different regulatory answers to some thorny policy questions.
Bigger, more established companies are vying with smaller new market entrants to influence the effort. Large and small operators alike face growing competition from over-the-top providers that do not bear the cost of operating their own infrastructure in order to deliver services. Meanwhile, broadcasters and mobile operators disagree over the best uses for scarce spectrum, and politicians and regulators are debating whether the EC or individual countries should manage spectrum allocation.
The EC on Sept. 11 launched two separate consultations on the modified DSM plan, asking consumers and businesses to weigh in on the current telecom regulatory framework and guide ongoing debate over the future of broadband in the European Union. The consultation period for both is open until Dec. 7. It’s not clear how soon the EC will settle on any particular approach.
“The current (telecom regulatory) framework has been instrumental in ensuring that markets operate more competitively, bringing lower prices and better quality of service to consumers and businesses,” the European Commission said in a September 11 document announcing the public consultations on the DSM market reforms. “Yet it is questionable whether it has sufficiently promoted the transition towards high-capacity Next Generation Access (NGA) networks fit to meet future needs.”
Large telecom operators such as Deutsche Telekom AG, Orange Telecom S.A. (formerly France Telecom), Telecom Italia S.p.A and Telefonica S.A., want deregulation on multiple fronts in order to boost investment for new high-speed networks.
“In the electronic communications sector regulatory incentives are key to determining investment decisions,” Alessandro Gropelli, a spokesman for the European Telecommunication Network Operators (ETNO) organization, which represents the dominant telecom operators, told Bloomberg BNA in an e-mail. “A more investment friendly and forward-looking regulatory environment is a top and urgent priority.”
ETNO insists that market deregulation is essential because of the rapid growth of over-the-top operators such as Skype Technologies S.A., Google Inc., Yahoo Inc. and others that provide communication services over the Internet but do not have to abide by the same regulatory rules as telecom operators. Given the effect those companies have had on the competitive landscape, ETNO says, the EU antitrust authority should relax its approach to merger regulation. The organization highlighted its position in submissions to the Commission in the lead up to publication of the modified DSM plan published in May and is certain to repeat its calls for less stringent regulation during the current consultation period. ETNO also says that the European Commission must ease proposed access rules for next-generation access (NGA) networks by reducing the number of regulated wholesale products and eliminating price caps.
Smaller, new-entry European telecom operators that have been working with limited success for two decades to gain EU market share have different regulatory priorities. Noting that the legacy telecom operators still have a 86 percent market share in VDSL-based broadband network access services, the European Competitive Telecommunications Association (ECTA), which represents smaller telecom companies, insists that there is no trade-off between ongoing regulation and investment.
“On the contrary competitive pressure has a triggering effect on efficient investments and is the best way to ensure high-quality services for end-users at affordable prices,” ECTA official Aurelie Bladocha told Bloomberg BNA in an email. “The most important challenge of the next regulatory framework is to enable investments also by innovative and agile telco start-ups and not to favor the old monopolies when it comes to market access issues.”
A year ago ETNO and the big legacy EU telecom operators appeared to be on the verge of breakthrough in their pursuit of relaxed regulation. Incoming European Commission President Jean-Claude Juncker signaled a willingness to allow cross-border market consolidation that would put EU telecom companies on an equal footing with AT&T Inc. and Verizon Communications Inc. and position them to compete against over-the-top providers
However new European Competition Commissioner Margrethe Vestager is taking a tougher stance on deregulation and consolidation. Vestager recently rejected a merger between two Danish mobile operators that market analysts saw as a test case for the direction of commission policy in coming years.
Vestager’s consumer-first approach seems to have the support of the Body of European Regulators for Electronic Communicators (BEREC), which was created in 2009 to serve a role similar to, but less powerful than, that of the U.S. Federal Communications Commission. BEREC has raised concerns about telecom “oligopolies” in EU member states – a position that drew a prompt rebuttal from ETNO but was backed by ECTA.
The EU telecom sector is also closely watching as regulators weigh spectrum policy changes. The 2013 Digital Single Market reforms included a proposal calling for a “coherent” approach to spectrum auctions. But that was among the most high-profile failures of the plan, as member states have insisted on keeping spectrum allocation under national control. A number of were proposed by the European Commission as part of the 2013 proposal. Roaming and net neutrality were the only two spectrum-related issues that were legislated–both of which were finalized in May 2015 after compromises between the EU member states and the European Parliament.
Disagreements over spectrum extend beyond issues of sovereignty, however. One of the toughest policy questions is whether to repurpose spectrum in the 700 MHz band from broadcast uses to support 5G mobile network deployment.
The powerful European Broadcasting Union is opposed to reallocating the 700 MHz band for next-generation telecom services. The EBU insists the release of 700 MHz for telecom services would endanger the broadcast of free-to-air digital terrestrial television.
Aside from the issue of 700 MHz use, some telecom market experts say that the EU must adopt a spectrum allocation approach similar to the United States and assign licenses in different geographical areas through a single auction.
“This would reduce aggregation risks for bidders willing to purchase spectrum in multiple EU countries by reducing the amount of guesswork needed for their bidding strategies,” argued Mario Mariniello and Francesco Salemi in an August 2015 paper published by Bruegel, a Brussels-based think tank.
Speaking on one of the few issues that both large and small telecom operators agree about, BEREC Vice-Chairman Lidia Kozlowska summed up the importance of spectrum reform in the achieving the EU’s digital single market goals in a a June 15 speech in Brussels.
“Our economy depends on connectivity and connectivity depends on spectrum,” Kozlowska said. “If we want to boost the European digital economy, if we want e-health, e-education and cloud computing services, if we dream about smart cities and interactivity, if we want rich audiovisual services and so on, we need to focus on the deployment and take-up of fast and ultra-fast broadband.”
When the European Commission unveiled its DSM framework in 2013, proponents hailed it as a generation-defining telecom regulatory reform that would catapult the European Union into the digital future and revive the market-leading position the bloc held in the 1990s when it settled on a single mobile technology and enabled roaming across borders on the Global System for Mobile (GSM) mobile phone network.
The messy compromise on modifying parts of the 2013 plan that the EC reached in May 2015 will reduce cross-border roaming fees in 2017 and establish an exemption-laden definition for net neutrality, but much of the harmonization effort will not take effect until 2020.
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