Over the past year, telecom lobbyists have been busy repeating their calls for deregulation, simplification and consolidation of markets, which stand to benefit only a few major players. By putting an end to the state monopolies of companies like Telefónica and Deutsche Telekom, the EU has opened up these markets to more competition and innovation.
Liberalisation has allowed challengers to rise and scale up, and provide more innovative services and lower prices to consumers, all signs of a healthy market. So much so that today, somebody in Porto or Hamburg is on average getting better services and spending way less on their mobile, internet and TV subscriptions than somebody in Chicago or New York, where a handful of providers dominate a much more concentrated market.
Over the past decade, EU telecoms operators have started to consolidate again, reducing competition and diversity of offers for consumers. Fortunately, thanks to resilient EU merger control rules, larger mergers championed by the telco industry have either been prevented or mitigated.
But the bigger telcos have never given up their desire to turn the clock back to their previous market dominance in order to boost their profit margins.
Connectivity problem, really?
The main argument of the big telecoms companies is that they are unable to invest in improving Europe’s overall connectivity unless there is “in-market consolidation…to ensure that European telecom operators can be globally competitive,” and they are less regulated. But where is the compelling evidence that Europe is lagging behind in terms of top-quality infrastructure?
In reality, the majority of EU countries, such as the Netherlands, Romania, Portugal or Spain are already past 80% rollout of Very High Capacity Networks (fibre or DOCSIS cables) on which the digital economy of connected products and services relies. Although the EU average is at 78%, this percentage is misleading due to a small number of EU countries with extremely low rates, such as Greece (below 40%), the Czech Republic and Italy (below 60%). The same is true if we look only at fibre deployment: while the current EU average sits at 64%, most EU countries are well above 75%, and Germany and Belgium rank the lowest at below 30%.
The more consolidated and less competitive markets in Europe tend to be the ones lagging behind on fibre deployment and copper switch-off. The large yet highly concentrated German market lags significantly behind other EU countries in fibre connections and copper switch-off despite having one of the EU’s biggest, most profitable operators.
Evidence instead suggests that improving connectivity goes hand in hand with open, competitive markets. Having more operators leads to higher overall investment, and more networks getting built, across a wider area, in a bid to capture market share from incumbents.
Having more operators leads to higher overall investment, and more networks getting built, across a wider area, in a bid to capture market share from incumbents.
For example, the Portuguese telecoms regulator ANACOM showed that after just five months in the market, DIGI already deployed more 5G stations than the incumbent, former monopolist telco operator MEO ever did, contributing to an increase of 24% in the deployment of 5G stations in Portugal.
Above: The majority of EU countries are already past 80% rollout of Very High Capacity Networks on which our digital economy of connected products and services relies.
Consumers deserve better service
The time has come to move on from stale repetition of telcos’ pleas for market consolidation.
National consumer groups frequently find telecoms to be among the sectors where consumers have the most complaints. All too often, consumers report difficulties when switching operators, billing problems, unilateral price hikes, lack of transparency or poor customer service. However, our members report that consumers are often more satisfied with smaller, challenger operators than with dominant telco operators. For example, a recent consumer survey from our Spanish member OCU found, for the second year running, that consumer satisfaction was substantially higher with smaller operators.
The regulation the big telecoms lobby wants to water down is precisely the set of rules which could improve the situation. The European Electronic Communications Code includes measures such as transparency on contract information, protection against abusive penalty fees, and the ability to quickly port phone numbers when switching providers.
The EU should concentrate on ensuring the rules are well implemented and respected so consumers can reap the full benefits of telecom services.
The EU should concentrate on ensuring the rules are well implemented and respected so consumers can reap the full benefits of telecom services.
Support more competition, not less
If the European Commission were to follow the logic of Big Telecoms, past experience shows that there would be less infrastructure investment rather than more, while consumers would likely face higher prices and poorer quality services.
The Commission’s forthcoming proposal for a Digital Networks Act could fundamentally reshape the telecoms sector. The Commission must ensure it delivers for consumers in terms of choice, quality of service and prices. New rules should not end up being a shopping list for incumbent operators which pushes competitors out, reduces incentives to invest and harms consumers in the process. What we need is more, not less competition in telecom services to drive innovation and investments.