Effective competition the key to Europe's 'Gigabit Society'
- ecta demands that incumbents with significant market power be kept on a short regulatory lead
- Is co-investment between incumbents and their rivals a workable solution?
- Former monopolists not keen on the idea
- Continue to claim they are a special case and are being discriminated against
Speaking in Berlin, Germany, at the annual German Gigabit symposium, Luc Hindryckx, the Director General of ecta (the European Competitive Telecommunications Association) took the opportunity to remind German politicians, the telecoms sector, the regulator and the Merkel administration that only a strong competitive ethos and environment can create the conditions to enable the "Gigabit Society".
His message was echoed by a variety of other organisations representing the German telecoms industry who took turns at the podium to stress the urgent need to deploy more high-performance digital infrastructure based on gigabit-enabled networks. They pointed out that only by following such a well-defined national strategy will Germany and other European nations be able to enhance competitiveness and increase socio-economic opportunities.
Luc Hindryckx told the Symposium, 'To significantly improve the framework conditions for network deployment requires sustained support for alternative operators to allow them to confidently embrace the Gigabit society. This includes full faith in keeping Significant Market Power (SMP) under lock through regulation, where market circumstances so require."
In other words, ecta is lobbying the Merkel administration to keep dominant German operators and services providers on a tight regulatory leash to ensure they cannot abuse their dominant market positions in certain market sectors to the detriment of smaller competitors.
Recently, the German government has been in the vanguard of legislative moves by the European Commission (EC) to devise and introduce the European Electronic Communications Code (EECC) that would provide exception to Significant Market Power (SMP) regulations with the aim of facilitating co-investment between incumbent operators and their competitors. It is a novel strategy (and unpopular with incumbents) not least because genuine co-investment is a real challenge to all operators that do not have significant SMP.
As Luc Hindryckx says, "Investment can reinforce market power and that is precisely why competition needs safeguards. In fact, a Gigabit society requires giga competition to match. That is why the regulatory framework must not trade off competition for investment, but enable competitive investment, so that the largest possible benefits can be realised. Digital transformation requires full attention to its competitive motor to move Germany to the forefront of the digital economy."
Under the provisions of the European Electronic Communications Code, the European Commission will cover both fixed and mobile networks and will mesh with the European strategic action plan for the advancement of 5G. The EC estimates that 5G and Very High Capacity (VHC) network infrastructures quickly will generate some €113 billion of extra revenues in the four key sectors of automative, healthcare, transport and utilities.
Incentivisation of infrastructure investment
Meanwhile, incumbent telcos have historically claimed that regulation prevents them investing when, where and how they want to - which is a debatable argument to say the least of it. The trick will be to incentivise investments while maintaining a even handed approach to regulation and ensuring the maintenance of a level playing field for all actors.
Since 200, one of the key methodologies has been to promote further investment by incentivising former monopolists to engage more actively with delivering next generation of connectivity. Then, as a sweetener to keep the incumbents on-side, in 2014 the EC reduced the number of markets that had been subject to regulation hitherto, from 18 down to five which gave Europe's former monopoly telcos more spaces in which to operate.
However, despite the loosening of regulatory strictures, incumbent telcos have continued to plead that they are a discriminated-against special case and have continued to demand exceptional regulatory relief to provide them with investment incentives.
The claim is that once they are deregulated they will be able to emulate their upstart rivals and invest heavily in VHC infrastructure. That again is a very debatable claim, not least because the slackening of regulatory requirements has actually allowed some incumbents to more or less re-monopolise certain markets and thus escape from the competitive pressures that they claim both to enjoy and thrive in.
That's why ecta has consistently and persistently lobbied for a new European co-investment regime incorporating elements that protect upstart service providers operators either as participants in or users of newly deployed high-capacity broadband infrastructures.
The EECC will eventually show whether or not ecta's stance has been effective or that the organisation has been playing against a stacked deck and, figuratively, been banging it's head against a brick wall of powerful vested interests.
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