The event provided a good opportunity to hear from Europe’s access seekers and challengers on the recent connectivity white paper. Evolution not revolution was the overriding message
ECTA outlines four key areas for change
On 5 March 2024, the European Competitive Telecommunications Association (ECTA) launched its manifesto. According to Luc Hindryckx (Director General, ECTA), the region’s regulatory landscape – the “European model” – has delivered competition, which has resulted in investment, affordability and quality for consumers. He made a pointed remark to some of Europe’s largest operators saying “for those that complain, there are those who get on and build”. Nevertheless, ECTA has identified four areas of improvement it would like to see from policymakers:
Ensuring a pro-competitive spectrum allocation, with greater harmonisation across EU Member States;
Accelerating the rollout and adoption of VHCNs (particularly fibre) while ensuring stable wholesale copper prices;
Establishing sovereignty in cloud, data and edge computing, including a “Buy European tech Act”; and
Positioning Europe as a green leader, incorporating the principle of eco-design.
The EC acknowledged its white paper was somewhat rushed, with there being less time to draft it than the time available for public comment
In the subsequent panel discussion, Kamila Kloc (Director, DG CNECT, EC) focused her remarks on the EC’s recent digital infrastructure white paper, which she sees as bridging the gap between the current Commission and the next (that will ultimately decide on the future regulation of the sector). Suggesting the white paper was at least slightly rushed (“it took less time to draft than people have to comment”), Kloc nevertheless considered it another opportunity for the EC to seek external input after the previous exploratory consultation in February 2023. She acknowledged that the Gigabit Infrastructure Act would not deliver everything that industry would have wanted but through the white paper there is an opportunity to evolve Europe’s telecoms regulation, simplifying it in some ways while broadening it in others – a specific nod was given to more concrete dates for copper switch-off. When questioned about a potential EU-wide access product (Scenario 5 in the white paper), Kloc said that nothing is set in stone and she welcomed an open-minded and positive discussion with stakeholders on what that might look like.
Iliad cautioned against reliance on EU-US comparisons, preferring to maintain a certain level of optimism of the sector’s collective achievements
Thomas Reynaud (CEO, Iliad) considered that Europe found itself in an important moment with elections upcoming, but was not convinced there is now a need to “change the regulatory paradigm”. Compared to the US, he argued that Europe has been a success, with higher fibre coverage (56% versus 49%) and no digital divide based on pricing. Reynaud also stated that there are lots of investors willing to invest in European fibre rollouts, with Iliad’s deals in France and Poland providing two relevant examples. However, he felt there is a need to drive adoption of fibre, for example through a strict deadline for copper switch-off supported by wholesale price stability. With incumbents inclined to use copper networks as a cash cow, price increases would only drag the shutdown process out. In response to a question about his views on consolidation, Reynaud stated that market conditions in France in 2012 (i.e. high prices, low data penetration and low investment) demonstrated a need to move from three to four operators. However, he was more pragmatic than other panellists about in-market mergers – perhaps unsurprising given the two attempts Iliad has made to acquire Vodafone Italia. Reynaud stated that there is no magic number of operators in a market, but the merits of consolidation depended on whether a market failure exists.
1&1 called on the German regulator to maintain a competitive market by rethinking its approach to spectrum licensing
On the issue of M&A, Michael Martin (CEO, 1&1 Mobilfunk) highlighted a deterioration in mobile network quality in Germany following the O2/E-Plus merger in 2014, which he considered presented an opportunity to drive infrastructure competition and improve quality of service. He applauded BNetzA’s move to open up the market to competition in 2019 (making parallels with the situation in France in 2012), with the prospect of 1&1’s entry prompting the three incumbents (three of Europe’s largest operators: Deutsche Telekom, Telefónica and Vodafone) to invest in 5G (and fibre). However, Martin was concerned that BNetzA is now considering extending incumbent spectrum licences beyond 2026, which he warned could put 1&1 at risk of exiting the market. Given the reaction to the threat of competition, he stated that BNetzA shouldn’t stop halfway and consider its job done (just by creating market entry), but that it has to let 1&1 “finish the job” and nurture the operator where needed. More than once an analogy of house building was used whereby you’re given permission to use the land, but then are prevented from putting on a roof and completing the build.
Europe’s umbrella consumer organisation BEUC lamented the lack of interpretation in the white paper on what it all means for consumers
Ursula Pachl (Deputy Director General, BEUC) agreed with ECTA that the EU’s regulatory approach has worked for consumers, with ex-ante rules and competition leading to more choice, lower prices and better quality. However, she felt there was still a long way to go, with the telecoms sector still characterised by poor customer service and beset by delays to implementation of the EECC (important given the number of provisions for consumer protection it contains). In light of comments of Thierry Breton (Commissioner for Internal Market, EC) that appear to favour consolidation and deregulation, Pachl expressed worries about the white paper, stating that there was no standalone chapter focused on consumers. Kloc appeared somewhat irked by this comment, later responding that consumers could be found “on every page”. Pachl also raised concerns about a trend of market concentration, stating that merger rules should not be softened despite the calls of some operators at MWC24. She argued that consumers suffer from relatively high prices in “concentrated” three-player markets (citing Belgium, Czech Republic, Greece and Slovenia), although felt that it was unclear whether the EC was alive to this. She sensed that there’s a difference in opinion between Breton and Vestager when it comes to merger rules, and was concerned by his attempts to “demystify what is the right number” at MWC.
While we await BEREC’s opinion on the white paper, there were suggestions it supports a regulatory evolution, rather than a revolution
Robert Mourik (Commissioner, ComReg and Vice Chair, BEREC) began with a caveat that BEREC had not reached a position on the EC’s white paper and welcomed the healthy feedback window in order to think about all the issues properly. Still, he considered that it provides a good analysis of problems in the sector and that it is a “sensible time to think about where we want to go”. After 20 years of the SMP regime, Mourik recognised lots of changes, including to technology, networks, markets and the role of the traditional telecoms regulator. Despite the apparent appetite for deregulation, he considered the EC pragmatic enough not to “throw the baby out with the bath water” (and potentially re-monopolise the market). He sees the current regulatory framework as exceptionally well designed with progression built in, so it doesn’t need too much tinkering. He noted that regulation is a tool to increase competition, investment and customer service improvements. If you take that away, what can be used?
Mourik was unclear on the perceived philosophy of the white paper when it comes to levelling the playing field between telecoms operators and ‘OTTs’ – “is it that we all adopt the telecoms way of working?” He seemingly agreed with Pachl that the focus on consumers is thin and needs work. He was pleased that the spectrum section was more comprehensive and did not include a push for pan-European auctions – but argued there could be greater harmonisation with how auctions were organised. With his ComReg hat on, Mourik welcomed the increase in upstream broadband competition he was seeing in Ireland, with four separate fibre networks now offering wholesale access (including from cable). Returning to consolidation (and Hindryckx’s opening remark), Mourik suggested there was a correlation between “those operators that complain” and those that have experienced failed mergers somewhere in the EU. He said that some operators in Europe have 50% EBITDA margins and they’re the ones that have tended to stay in their home markets.
