Patchwork Enforcement Said Hurting EU Telecom Sector Growth
Progress toward a single European telecom market is “disappointing,” Digital Agenda Commissioner Neelie Kroes said Tuesday. The 15th annual European Commission report on the state of the electronic communications sector showed consumers and businesses are missing out on the benefits of a unified and competitive market because telecom rules are applied inconsistently, the EC said. There are also questions about the independence and effectiveness of some national regulators and major differences in wholesale and retail prices across Europe, it said.
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The economic downturn weakened user spending in 2009, but the telecom market’s zero growth was better than the 4.2 percent decline in the overall European economy, the report said. Cost-cutting and business models based on flat-rate products meant continued profitability, but investment declined, it said. Growth in the maturing fixed and mobile telephony markets is slowing, and new services and business models will be needed, it said.
The average fixed broadband penetration rate hit nearly 25 percent in Europe last year, but deployment of high-capacity broadband is still limited, with about a quarter of lines offering more than 10 Mbps, the EC said. “Europe is falling behind” in next generation access via fiber-to-the-premises, which could hamper rollout of new access networks, it said. The mobile communications sector, which drove much of the sector growth in recent years, is “at a crossroads” as voice communication traffic declines in favor of data, putting pressure on network capacity, it said.
The independence and resources of national regulatory authorities (NRAs) remain a problem in several countries, the EC said. Latvia, Lithuania and Romania were cited for not adequately separating telecom regulatory functions from activities associated with ownership or control of operators, it said. Revised EU telecom rules require that NRAs be given the resources to perform their jobs, but this is an issue in several nations, it said. Another major challenge is the time and money consumed by appeals of regulatory decisions, it said.
Some regulators take so long to carry out required market reviews that their competition condition studies are outdated by the time they're available, the report said. Competition in some broadband markets has stagnated or gone backwards, in part because of lax enforcement, it said. Consumers saw better broadband prices and higher speeds in 2009, the report said. Mobile roaming costs are way down, although fixed voice call tariffs rose, it said. Number portability is available in all 27 countries, but the average porting time in October was 4.1 days, a far cry from the one day required by the revised telecom rules, it said.
Shrinking revenue and investment in the sector are “worrying when crucial investment is needed in high speed broadband access networks,” said European Telecommunications Network Operators’ Association Director Michael Bartholomew. Preliminary data for an ETNO report due in September shows total telecom revenue dropped 3 percent and investment 7.5 percent in 2009, and overall revenue is expected to remain negative this year, he said.
The report criticized the German NRA for a “slow and reactive response” to next generation access developments and a “passive regulatory approach” that creates a “first-mover advantage” for incumbent Deutsche Telekom. The German Competitive Telecommunications Association VATM agrees with those findings, said Bingham McCutchen telecom lawyer Axel Spies on its behalf. The EC comments also jibe with the results of the 2010 USTR Section 1377 review of telecom trade agreements, where alternative carriers complained that restrictions on access to DT’s network is creating market access barriers.