Competition, consistency and creativity are vital for a single telecoms market
Two other key themes that emerged were the importance of access to content and the harmonization of spectrum policy. As demand for bundled telecoms services continues to grow, content is becoming an increasingly important input for providers. Ensuring access to it at the wholesale level for providers from any country helps ensure competition downstream. Harmonization of spectrum policy, however, may not be a means of achieving a single market. Some member states are ahead of others in terms of auctioning and rolling out LTE, and harmonizing policy within the EU might only serve to hold back the region as a whole.
A pan-European market requires competition and consistent regulation
The importance of competition as a key driver of growth, investment, and the formation of a single market was a recurring theme at this year’s ECTA conference. The telecoms sector is a territory of innovation and change; however, undertakings must have the opportunities to compete, be creative, and develop new services for consumers to enjoy anywhere in the EU. Technological progress is also a stimulus for price reductions. Neelie Kroes, the vice president of the European Commission, compared the telecoms industry to airline markets, which were once dominated by a single carrier in each country. Proposals for their liberalization were opposed, but have since yielded significant consumer benefits in terms of intracontinental travel. Competition between premium and budget firms has flourished and investments have been made by both sides; the same will occur in the telecoms industry.
To this end, equivalent wholesale access products will need to be made available, meaning a more consistent application of the regulatory framework. The EC has estimated that the untapped potential of a single telecoms market amounts to €110bn ($143bn) per year. The EU is often seen as an example of one size not fitting all, although it was argued at the conference that operators are often disincentivized from making investments, while potential telecoms investors are confused by the framework’s varied application. Providers face different obligations from one member state to the next, which is not conducive to cross-border operations. Regulatory interest and intervention vary between countries, and more must be done to improve consistency so that barriers can be eliminated, fragmentation removed, and benefits exploited.
Content is king for alternative operators to compete effectively
Access to pay-TV content was another major theme of this year’s ECTA conference. In recent years, the demand for bundled broadband, TV, and fixed voice services has increased substantially; 43% of households within the EU now take one of these “triple-play” bundles, while “quad-play,” which includes mobile voice services, is also gaining popularity. Broadband might still be the most important element of such bundles for now, but content is quickly becoming a crucial input for alternative operators in some markets.
There is currently no market for wholesale access content, which the EC has identified as being susceptible to ex-ante regulation. The EC has consulted on a revision to its Recommendation on Relevant Markets, and will issue a statement later in 2013. Making content available to all providers, regardless of the country in which they are based, is an issue that will need to be considered by the EC and national regulators. The example that the EC should look to is Belgium, where obligations for access to cable TV have been imposed in order to open up the networks to competition. Draft wholesale price caps based on retail-minus costing have been proposed, and a final decision is expected to be published soon.
Harmonization of spectrum policy may not help form the single market
If the session of the conference related to spectrum policy is anything to go by, the harmonization of spectrum policy will not be a cornerstone of establishing a single telecoms market. At the moment, spectrum plans are often developed in isolation, and there remain huge differences in the valuations of spectrum, reserve prices, and auction formats between countries. The EC is expected to publish a draft spectrum policy framework in the very near future; however, a more coordinated approach to the allocation of spectrum might, in fact, slow the growth of the European mobile market. Within the region, auctions for 4G spectrum have occurred at different times – the Netherlands and Germany conducted auctions of the 800MHz and 2.6GHz bands in 2010, but other member states such as the Czech Republic, Greece, and Hungary are yet to do so.
In order to harmonize spectrum policy, countries at the front would have to align themselves with those at the back. The UK, for example, was slightly ahead of Germany in awarding 3G spectrum, but has fallen behind in terms of 4G. Agreeing a date by which all countries must have auctioned a certain spectrum band presents a number of challenges; for instance, operators in countries in which spectrum has just been auctioned will not have cash to spend, and will be focusing on network investment. At the time of writing, 90% of 4G/LTE networks are outside of the EU, and so arrangements such as network sharing should be considered more strongly a means of achieving scale and reducing cost in order to improve superfast mobile broadband coverage across the region.
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