Telecommunications: Brussels Pushes for a ‘Connected Continent’

By September 26, 2013

The European Commission has tabled a new package of proposed legislative measures governing the EU telecoms market. The proposals are designed to speed up the arrival of 4 and 5G, get rid of roaming charges, and guarantee Internet neutrality.

The European telecoms market is too fragmented: this is the unambiguous view of Neelie Kroes, Vice-President of the European Commission and EU Commissioner for the Digital Agenda. With over 120 telecoms operators in the European Union, the region comes off badly from a direct comparison with the United States, where major providers such as T-Online and Verizon Wireless have succeeded in virtually dominating the market. With Microsoft’s recent acquisition of Finnish manufacturer’s Nokia's device and services division the issue of an EU telecoms strategy has again come to the fore. Accordingly, the Commission has now proposed an EU Regulation designed to create a harmonised European market, but what does that mean exactly? While the legislative provisions certainly seem to offer substantial benefits to the consumer, they nevertheless run the risk of undermining the business structure of some telecoms operators.

Transparent Internet speed and quality; network access everywhere in Europe

One of the key issues the Commission has set out to tackle is roaming charges. The term ‘roaming’ refers to how phone and Internet users are able to use their devices to link up with destinations outside their own country, going via third-party networks which have agreements with their own local network provider. However, these connections and calls – whether incoming or outgoing – are more expensive than those sent or received within the national area, and the Commission wants to see an end to these extra charges from 1 July 2014. The idea is that consumers will have a free choice of foreign operator, while operators will be able to offer pricing packages for usage throughout Europe. As regards neutrality of the Internet, operators would no longer be able to block traffic; they would only be able to offer a choice of connection speeds. Vincent Grison, a Partner at Paris-based telecoms, media and digital strategy firm Kalane Consulting, describes the potential impact of these measures: “Abolishing roaming charges for calls received from abroad is clearly an advantage for the consumer, but this will be damaging to operators whose turnover and margins are already under pressure. Moreover, the option of offering a range of tariffs on the basis of Internet access service quality could actually constitute a breach of Net neutrality and risk creating a ‘two-speed’ Internet where access will depend on the financial means available to content providers and consumers.”

What impact on innovation?

By opening up the 4G and then 5G market in Europe, the new Regulation should enable more widespread connectivity for people across Europe, especially – as Vincent Grison points out – in countries where networks have not been deployed on a national scale. The new legislation could be a particularly useful tool to help market penetration of wearable devices, a field where we have already seen the potential of the smart watch, by speeding up the rollout of networks of connected objects. However it will primarily be the Commission’s implicit goal of encouraging consolidation among European telecoms operators that is likely to help speed up innovation. By trimming deployment costs and drawing on economies of scale, larger groupings would be in a position to reinvest in network development, as the major US operators have done. The Commission unveiled and forwarded the ‘Connected Continent’ Regulation proposal to the joint legislators at the Council of Ministers and European Parliament on 11 September. This is one of the most far-reaching attempts ever to overhaul the European telecoms market and it will effectively change the relationship between user and network operator. But perhaps the most important aspect of all will be the push to create a strong basis on which to promote innovation. The telecoms market currently accounts for just 9% of European Union GDP and is thus very far from reaching its true economic potential.

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