Single telecoms market by 2015? Be very afraid

May 22, 2013

Neelie Kroes, the European European Commissioner for Digital Agenda, has committed herself to the development of a single European telecoms market by 2015 - it's to be her legacy.

Oh joy. That may well mean consolidated telecoms groups competing across Europe with what look like single networks, so all good? Not without some real competitive safeguards.

It's easy to see how this nirvana is going to be sold to the holidaying European public. No more unnecessary roaming charges, they'll say. You can stay on your home network right across the continent. Plus, consolidation will mean bigger organisations, greater efficiency, more reliability and lower prices.

No it won't. It will probably mean several large telcos being very careful not to hurt each other in terms of pricing or disruptive business models, and it will mean small, challenger networks without European scale finding it hard to break in to compete.

Think of the US and its sky-high pricing on both fixed (broadband) and mobile/wireless services. That could be what's waiting for Europe if consolidated pan-European networks are allowed to line up without being counter-balanced by a continuing influx of challenger networks with new technologies and different business models to maintain indiscipline (sic).

In Europe we have literally hundreds of telcos and, despite the obvious scale inefficiencies, prices are still far lower than those in the US.

But guess what? The best performance/lowest pricing in Europe comes not from the large, close to being full pan-European giants, but the small "challenger" networks. That won't be a surprise, I suppose. But the sheer difference between the incumbents' and challengers' pricing will.

We're not talking marginal. Finland based consultancy, Rewheel, has just completed a study: EU27 mobile data cost competitiveness report, which should be required reading for anyone interested in the dynamics of European telecoms competition.

One example: the "EU’s single telecom market needs pan-European retail operators that offer borderless tariffs," asserts Rewheel. "Why there are none today? Clearly the multinational incumbent telco groups have no incentive to end the roaming feast or offer Austrian a malevel prices to Germans." As an example, it points out, T-Mobile Austria charges €17 while T-Mobile Germany charges €96 for the same smartphone tariff allowances.

Rewheel reels off a catalogue of enormous price and condition differences between the best and worst performers, which usually aligns with the difference between progressive and protected markets. Smartphone tariff prices are up to 33x difference (between lowest and highest); Smartphone tariff data volume allowances are up to 500x; Data-only tariff volume allowances are up to 100x difference.

Asks Rewheel: Should the future EU single telecoms market be tailored to the German template (EU’s largest internal market, served by Deutsche Telekom, Vodafone, Telefonica and KPN E-Plus) or rather be simply allowed to evolve to something similar to the Finnish, Swedish, Danish models where none of those four “European Champions” are present and, despite being “sub-scale” internal markets, smartphone tariffs are up to ten times cheaper and radio spectrum utilisation is ten times higher?

Two-letter answers only please.

Rewheel's report, by the way, has not been sponsored or commissioned by anyone (it's anxious to point out). It can be downloaded here:

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