The FT-ETNO 2018 Summit gathered policymakers, regulators, industry executives and investors from Europe and beyond to discuss and debate the current regulatory challenges facing the industry. While the narrative has now become familiar among this particular set of stakeholders, the ferocity of the messages delivered was perhaps different. More than once Europe was described as being an uncertain place when it comes to regulation with some recent decisions even referred to as being toxic. Despite recognising the shortcomings, regulators called for pragmatism, saying that a complete overhaul of the regulatory model is off the table. In many ways next year’s event will be the more telling, once a number of recent reforms and a new set of policymakers in Brussels are in place.
The same narrative as in previous years, but incumbents conveyed it more powerfully than ever
Those who are familiar with the history of the European telecoms sector, and those who have attended the FT-ETNO event in previous years, will not be surprised that this year saw operators lamenting heavy-handed regulation as the cause for declining revenues and lack of investment. The debate in Europe has developed along these lines for many years now, and the FT-ETNO summit has been the most prominent occasion of the year for incumbent operators to make their voices heard.
This year, in particular, there was general consensus that such voices have become even more powerful and explicit in pointing at regulation as the culprit for the difficulties of the industry. This became particularly apparent when the CEO of Deutsche Telekom, Tim Höttges, took the stage after the lunch break to expose lack of profitability of investment in Europe compared to the US. “I would like to invest patriotically”, he said, “but the reality is that the profits for my group come from the US, not from Europe”. Höttges went as far as linking the current political wave of populism in Europe to the flawed regulatory environments for telecoms, speaking of a “broadband populism” taking place in EU member states which results in regulation costing millions of euros, at a time when telcos need to invest in their networks.
Incumbent operators see the industry as exceedingly fragmented. Dominique Leroy, CEO of Proximus, noted that there are more than 400 operators across the whole EU, thereby arguing that regulators should not see any looming risk of monopolies, and that Europe already has “the lowest prices for telecoms in the world”. For example, Leroy pointed to the possible entry of a fourth MNO in Belgium, saying that “it makes no sense” in a country with 11m people – less than the size of a Chinese city. The way forward, she argued, is to look at other models. If the US model is too different from Europe, “let’s look at Japan”.
5G sparked some optimism, but things need to change to if Europe is to be a leader
As hype around 5G has intensified, the debate at the event summit inevitably made numerous reference to it. A mix of optimism and concern emerged: operators recognise the opportunities in 5G, but also warn about the level of investment it requires, which in turn can only flourish within a favourable regulatory environment.
Johan Dennelind, CEO of Telia, noted that Europe was first on 1G, 2G, 3G, and 4G, but “we will not be the first on 5G” as the necessary investment faces limitations. Amos Genish, CEO of Telecom Italia, conceded that the company paid a high premium for 5G spectrum (the recent 5G auction in Italy was particularly costly for MNOs) but also noted that the newly acquired spectrum will allow them to reduce the cost per GB by 50% to 70%. “5G remains a game changer”, he said, confidently adding that telcos will find higher-value business models than we have today, and that 5G offers opportunities of network slicing for the first time. To this end, some speakers warned of possible limitations to network slicing coming from net neutrality rules; however, regulators currently see no need to amend the existing framework. Roberto Viola, Director General of DG Connect within the European Commission, argued that “nothing in Europe’s net neutrality framework prevents network slicing”; Johannes Gungl, CEO of the Austrian regulator RTR, and current Chair of BEREC, noted that BEREC sought stakeholders’ inputs on this point, and that no one has so far indicated 5G use cases that could be hindered by net neutrality rules.
Regulators acknowledge the need to be pragmatic, but cannot promise a regulatory overhaul
With so much concern voiced by operators around the limitations of the European regulatory environment, representatives of regulatory authorities were hard pressed to reassure the industry and defend the work they have done so far. “This is always a difficult conference for me”, started Roberto Viola; stressing that EU regulators do not subscribe to a model of appropriation of investments” made by private investors, and noted that, after all, “this is a season of change”, referring to initiatives such as the rules on copyright, and to the newly approved European Electronic Communications Code. This will carry new rules for the release of spectrum across all bands, and for co-investment in broadband networks. He opened up to a new approach, saying that there are now the conditions in Europe to regulate less and leave more room for agreements between operators, and reassured that it is possible to look at models for fibre networks other than the typical access framework. “We will pass on that message. It is already happening in some countries”.
To this end, Alexandre Fonseca, CEO of Altice Portugal, referred to the Portuguese model as one to follow. ANACOM has never regulated fibre access, and as a result today there are co-investment agreements in place, and Altice itself leaves capacity for third-party access, on a commercial basis. However, as Gungl noted it is not only a matter of pro-investment regulation: demand needs to be encouraged at the retail level. “I envy my Swedish colleagues who say users are prepared to pay 2000 Euros for fibre connections”; elsewhere, the picture is different, and there seems to be almost no appetite for superfast connections. If regulators are convinced that demand still needs to be stimulated, it is likely that Europe will continue to see pro-competitive regulation for some time.
