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Is Kroes consolidation package now a dead parrot?

Kroes’ cunning ‘balanced’ approach when formulating her regulatory package to take before the European Parliament, was designed to win over all the interested parties by offering what looked like a lot of give and just a little take. It now appears to have backfired by pleasing nobody.

Her ploy with telcos was to dangle consolidation while taking away roaming revenues; to consumer groups interested in maintaining net neutrality it was about promising Internet openess but allowing discrimination. Both groups seemed unimpressed with the ‘balancing’ act as it applied to their areas of interest once they’d had a chance to think hard about the small print.

But in the end it was probably a combination of the European regulators body - BEREC - and the EU competition commissioner, Joaquín Almunia, which will prove to have dealt the death blow to the Kroes’ plans.

BEREC has, naturally enough, been somewhat negative towards the Kroes plan all along. After all it does involve diminishing national regulatory powers and boosting the commission’s. Joaquín Almunia, Kroes’ colleague and rival over at EU ‘competition’, has also expressed himself unimpressed. In particular he took issue with the Kroes script where it repeated the ‘Europe falling behind the US’ canard - this being the overall Kroes rationale for shaking up the European telecoms regime.

As we’ve pointed out before, far from falling behind the US, Europe’s best mobile telecoms environments are more than their match at less than half the price to consumers.

The ‘average’ European national performance is dragged down by laggard national territories like Germany. But these are the very ‘protected’ markets (just three incumbents at most and no chance of a competitive entry) that Kroes consolidation plans would see repeated across Europe.

On every level, except perhaps spectrum management, Kroes proposals have been opposed strongly. Now it’s agreed that there is little to no chance of the ‘package’ going forward.

The apparent failure is being greeted with dismay in the US where it was hoped that a round of profitable consolidation in Europe involving US money was on the way. Kroes’ plans to ‘modernise’ the European market were supposed to make it an attractive place to invest in telecoms. Well, not so much modernise as turn the clock back to the old monopoly days as the incumbents have managed to do there.

That idea may now be put to bed, for there is a good reason for Europe to have a ‘fragmented’ telecoms environment despite nearly two decades of single market. It’s because Europe IS a fragmented market. National retail organisations (like mobile operators) are the most appropriate commercial vehicles because of language, history and cultural differences. Even where companies such as Vodafone and Telefonica have built across Europe they’ve chosen to keep the national organisations running separately because putting them together at the nuts and bolts level makes no sense.

So there is very little legitimate scale advantage to consolidation because the leaner more agile national telcos can almost certainly run more efficiently than any behemouth covering the same territory. Where there is an advantage from consolidation (a huge one) is in the removal of the disruptive competition.

Getting rid of ‘Frees’ and ‘3s’ is what consolidation is really all about. Expect the big hitters to keep on trying to do that, no matter how the 'Connected Europe' plans pan out.

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