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European regulator club challenges Kroes' consolidation fixation

Perhaps if something is said over and over again enough times it will eventually end up in a European Commission policy document - even though it is almost total rubbish.

The big canard to which I refer is being spouted by Neelie Kroes - Europe's Information Commissioner. According to Kroes, Europe has somehow fallen behind the US and Asian telecoms markets and this is suddenly so serious that nothing less than a complete restructuring and consolidation of Europe's telecoms market will do anything to address the 'problem'?

That'll be the 'problem' of having higher smartphone penetration and lower mobile pricing than the US.

That'll be the problem of our suffering multi-megabit broadband at a fraction the cost of overpriced US broadband.

That'll be the problem of having - in our pro-competitive territories at least - a highly competitive telecoms market in comparison to the US which languishes under a near duopoly.

Naturally enough, the organisations - the national regulators - that have done most to bring about European competition are more than slightly put out by the Kroes line, especially, one supposes, as Kroes is apparently pushing to centralise regulatory powers in Europe (and downgrade the authority of the country regulators).

Now BEREC has hit back at Kroes and her mystifying policy in the run-up to the European Parliament's consideration of her telecoms package which is intended to bring it into force.

This week the regulators put out a blast directed straight at Kroes: "BEREC is concerned that the proposed regulation is being rushed through the European legislature without proper explanation and full exploration of its potential consequences, given that the proposals represent a shift away from the current approach (based on pro-competitive regulation) towards one that favours market consolidation.

"BEREC is [also] concerned that the draft regulation will jeopardise the integrity of the EU framework and its achievements, in terms of investment, competition and consumer benefit. In this respect it is also important to bear in mind that the state of the sector in Europe is not quite as bleak as has been suggested."

In other words, "Come off it Kroes!"

Kroes seems to have an LTE fixation. Europe has (overall) adopted LTE less enthusiastically than the US and this is partly to do with the recession, partly to do with spectrum issues and partly because the lack of competition in some markets hasn't required that operators there do so.

The US, on the other hand, at a later stage in its mobile investment cycle, embraced the latest iteration of 3G (which is what it is) and demanded that it be called 4G to hyperbolise the marketing. Then other US operators demanded that other iterations in 3G - various flavours of HSPA+ - also get the 4G hype stamp.

So successful was this hype upgrade that lobbyists have even apparently fooled the European Information Commissioner into believing that because her networks don't all have an LTE designer label stuck on them she should hang her head in shame. The irony is that the consolidation approach is exactly the wrong way to go about getting the labels she wants.

According to Pal Zarandy from Finnish consultancy, Rewheel, which has carefully researched Europe's competitive dynamics in telecoms, "the EU's citizens and economy need not more consolidation but much more competition in the mobile market."

Zarandy thinks the answer lies in more independent and properly competing mobile network operators that could drive up 4G and NGA investment.

"Today half of the member states lack competition in mobile and many three-player markets behave like a duopoly," claims Zarandy.

Zarandy continues, "Policy makers and regulators of the Nordic member states, the Netherlands and the UK should be regarded by other national regulators and Brussels as the role models on how to incentivise old as well as new players to start selling what consumers of the digital world truly need: affordable, unconstrained mobile data access. The example of the Nordic member states also clearly shows that safeguarding effective competition in the national markets is the best tool to end cross-border roaming rip-offs."

Europe is, in fact, two distinct telecoms environments. There are pro-competitive countries with multiple operators that, by-and-large, are delivering high-speed, low-cost mobile and fixed data access services. Then there are the markets dominated by one or two big operators, usually an incumbent and one other big pan-European player. Almost without exception the latter territories are delivering high-priced services. And that means prices at US levels and in some cases even more!

The policy choice is clear enough, so why is Europe considering going off in completely the wrong direction?

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