At the recent Eighth Parliament and Internet Conference, at which I was privileged enough to be speaking on a panel extolling the virtues of an open internet for ITSPA, one of the preceding presentations had been by the European Commission Directorate General for Communications Networks, Content and Technology (that mouthful is colloquially abridged to “DG Connect“) promoting the Commission’s new idea for a single market for telecommunications.
A slide was shown, seemingly promoting the United State’s competitive landscape of 3 major operators, alongside China’s similar landscape, against the European Union’s 250 major operators. The Commission’s proposals, in summary are “aimed at building a connected, competitive continent and enabling sustainable digital jobs and industries.“.
Hang on a second. I thought the European Economic Community established a single market for goods and services? I thought the Common Regulatory Framework introduced in 2002 harmonised telecommunications regulations and a general authorisation regime across Europe, negating the need to be “licenced” in each country (though as Skype recently found out, it doesn’t prevent “registration” necessarily)? Bluntly, today, if Deutsche Telekom wants to buy Jazztel, it can, subject only to the overarching rules of mergers and acquisitions and competition concerns common to any member state and any industry.
Yet they haven’t. All of these hundreds of telecommunications companies branded “major operators” by the European Commission are economically rational profit maximising entities. That’s regulatory/economist speak for “they’ll make decisions in relation to their resources that will always maximise their profits”, in other words if buying Jazztel was the best thing for Deutsche Telekom to do, that means they would’ve done so already.
We live in an era where mass consolidation led to “too big to fail”. The Banking industry is a shining example of how such growth through acquisition can go horribly wrong; but yet we seem to be promoting a regulatory and legislative framework to repeat it in telecommunications.
Theoretically, consolidation should lead to efficiency savings for the benefit of both shareholder and consumer, but there is empirical proof it didn’t in telecommunications; look at the cost of broadband in New York versus London. Take a moment to compare mobile tariffs across different countries on Google too. Within that article is a quote from a presidential adviser on technology;
“We deregulated high-speed internet access 10 years ago and since then we’ve seen enormous consolidation and monopolies, so left to their own devices, companies that supply internet access will charge high prices, because they face neither competition nor oversight.“
Instead of thinking that having 250 major operators is a weakness in our competitive landscape, or instead of thinking there are barriers to consolidation, maybe the European Commission should embrace what has been created under the framework we already have and the US and China should be looking to them for guidance, not the other way around.
These proposals, to me, are worrying. Unless I have missed the point (which, in all fairness wouldn’t be the first time) they seem to be a solution hunting for a problem. Ill-conceived and rushed (they are trying to get it through before this EU parliament ends) legislation rarely ends well. This is why I was heartened to hear Ed Richards, the Ofcom CEO, challenging this during the conference and have heard rumblings of concern in the Department for Culture, Media and Sport. Of course, there is always room for improvement…. and there are issues with the regulatory landscape across Europe today, but nothing insurmountable – certainly not beyond the odd evolutionary tweak as opposed to a revolutionary approach.
That said, this pack of proposals also contains the proposed Regulation on an Open Internet, a subject close to my heart, so hopefully that at least will survive the legislative process! What does everyone else think – interested in your views, but be kind on my inaugural proper guest post!