Thierry Breton, the EU Commissioner for the Internal Market, unveiled the core proposals of a highly awaited EU telecom legislation, the Digital Networks Act (DNA), where he supported the concentration of telecom operators and the creation of EU telecom “champions”.
The yet-to-be-published telecoms act will redefine the regulation of the EU’s telecoms sector, Breton wrote on Tuesday (10 October), aiming at addressing market fragmentation, attracting investment, and securing the telecom infrastructures.
“Telecoms operators need scale and agility to adapt to the technology revolution, but market fragmentation holds them back,” he said.
The announcement came on the tail of the results of a Commission-led exploratory consultation on the future of the electronic communications sector and its infrastructure.
Almost all of the 27 EU countries have four fixed operators competing per national market, while mobile operators are numerous. This makes the EU a highly competitive market compared to the United States, where only a handful of operators compete.
However, “fair competition must not be confused with ‘market fragmentation’” Cláudio Teixeira, legal officer at independent consumers’ organisation BEUC, told Euractiv.
“The competition-driven EU telecoms market has been a success story for the past two decades. When compared to the US, EU consumers pay less and get better quality of services,” he said.
Largest telecom operators praise Breton
Breton’s message has been welcomed by the largest European telecom operators.
Joakim Reiter, chief external affairs officer at Vodafone, echoed the Commissioner’s view, saying “that market fragmentation and regulatory barriers are holding back a true telecoms single market”.
On Wednesday, the European Telecommunication Network Operators’ Association (ETNO) and the GSM Association welcomed Breton’s position in a joint publication.
They praised Breton’s focus on the issue of market consolidation within member states, and support for adapting the EU’s regulatory framework in order to cut costs and red tape.
The EU is in dire need of creating “a real telecom single market in which operators achieve the necessary scale”, the two wrote.
Smaller telecom operators fear unfair competition
However, the European Competitive Telecommunication Association (ECTA) told Euractiv it feared that “this report will serve as a spurious alibi to open the door to telecom deregulation, to a change in the EU Electronic Communications Code (EECC)”.
ECTA fears that deregulation for the purpose of market concentration would negatively impact smaller and more innovative telecom operators, eventually leading to higher costs for end-users and less innovation.
Teixeira shared this view, saying that Breton’s Digital Networks Act was premature and counterproductive “while the EU is still debating the Gigabit Infrastructure Act and implementing the EU Electronic Communications Code”.
Instead, he said, the Commission should support the Parliament’s push to deliver the end of surcharges for intra-EU communications that EU consumers have been waiting for.
Roaming charges reduction
Innocenzo Genna, a telecom legal expert, told Euractiv that the Digital Networks Act’s focus “should be on pan-European services, not on pan-European operators”.
Breton’s statement appeared to support the concentration of telecom operators within each member state, therefore promoting concentration vertically, in each national telecom market.
Yet, experts say there is no guarantee, that a vertically integrated operator would be able to propose horizontal, or pan-European, services for EU consumers.
“It is rather a barrier to market integration,” Genna said, adding that instead, wholesale roaming charges should be reduced for telecom operators.
Although roaming surcharges are already somewhat abolished for end-users, operators are still paying roaming surcharges.
If wholesale roaming fees were to be reduced to their retail price, Genna said, mobile operators would be able to compete “at a pan-European level with pan-European services”.
In a nutshell, mobile operators would be able to sell SIM cards everywhere in the EU, leading to fair competition between all mobile operators.
From there, concentration “will happen naturally at the mobile [telecom] market level, which will then push for higher fixed [telecom] market concentration”, Genna explained.
Therefore, said Genna, the EU will fairly and successfully create EU telecom “champions” only by keeping a high level of competition within its telecom market.