European Market Concentration Change Said to Affect Broadband Penetration
European competitive telcos will likely rejoice over a study, published Mon., that links changes in market concentration to broadband uptake. The Strategy & Policy Consultants Network report found that for every 1% drop in market concentration there’s a 3% rise in broadband penetration. The finding will provide ammunition to new entrants that have long complained Europe’s broadband market is far from competitive.
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The study looked at the relationship between competition in all forms of broadband supply and penetration in 13 European Union countries, to see how changing market structures and penetration interrelate. It found a “clear, 40%, correlation between the level of broadband takeup and competition between access modes, including the incumbent’s own ISP, resellers of an incumbent’s bitstream, local loop unbundling (LU), cable and other (mainly wireless, fiber and satellite) modes.” However, analysts said, there’s a 72% relationship between the rate of change in levels of market concentration and the rate of change in takeup as of June 2004.
Germany and Luxembourg’s telecom markets are the most highly concentrated, while Sweden’s and the U.K.’s are the least, analysts said. Nevertheless, they said, Sweden’s market, though less concentrated, has grown more sluggishly over the past 5 years than Luxembourg’s, which has experienced extremely fast growth. When they looked at the change in concentration first quarter 2002-2nd quarter 2004, analysts found that Luxembourg’s market concentration dropped by 38% while its broadband penetration rose over 1,000%. At the same time, Sweden’s market concentration rose 4%, and its broadband uptake increased only 51%, making it last of the EU13.
“It is not the absolute level of market concentration, but the change in concentration over time which appears to drive broadband growth,” analysts said. They recommended that regulators remove the barriers to efficient market entry by, for instance, requiring wholesale DSL and promoting LU. In all but Austria, Portugal and the U.K., the incumbent has more than a 40% share of the retail market, analysts said, and in some countries, “this number has remained stubbornly consistent or even increased.”
The report also urged govts. to spur the efficient entry of new infrastructure by not focusing solely on cable and DSL to the exclusion of other technologies. It recommended reducing barriers preventing consumers from switching suppliers, and closely monitoring market collusion.
The report is “total dynamite as far as the issue of competitive broadband provision is concerned,” said Tom Kiedrowski, regulatory affairs mgr. of the European Competitive Telecom Assn. Its conclusion “trashes all the incumbents’ arguments,” he said.
The findings came as no surprise to the German Competitive Carriers Assn. (VATM). In Dec., the group warned that Germany was last in broadband competition among the EU15 member states, and 3rd from last if all 25 nations are included. VATM blamed the situation on Germany’s reliance on a single technology, DSL, and the govt.’s “unilateral support of the former monopolist,” Deutsche Telekom.
The U.K.’s broadband market won plaudits Mon. not only from Strategy & Policy analysts but from an Ovum report showing the country had the most extensive broadband market in the G7 in the 3rd quarter 2004. (The U.S. was 4th in availability of broadband services and in competitiveness, which is a function of price and regulatory framework). Britain placed 2nd in the Strategy & Policy report, showing a 22% drop in market concentration and a 808% rise in broadband uptake.