European Competitive Telecommunications Association

European Commission telecoms report calls time on incumbent investment scare tactics - ECTA comments on the main findings of the report

The Commission’s Implementation Report on the Telecoms Framework, released today, challenges claims by incumbents that investment in Europe is stalling. Not only has investment increased for the fifth year in a row, but it is the competitive providers and not the incumbent operators that are spearheading telecoms investment in Europe, proving ECTA’s long-held position.

According to the report, capital expenditure on telecoms in Europe exceeded €50bn in 2007, with competitive providers investing twice as much as incumbents in relation to their size. This is despite the fact that they are competing with incumbents who own 85% of telephone lines across Europe, a very risky investment environment for the competitive providers.

Innocenzo Genna, Chairman of ECTA, said: "The Implementation Report shows once again the repeated scare stories from incumbents about regulation undermining investment are a self-serving attempt to divert policy-makers’ attention from the fact that they are seeking to preserve their near-monopolistic position.”

ECTA urges policy-makers to take note of the findings and approve proposals by the Commission to strengthen the powers and independence of national telecoms regulators to promote competition as well as boosting the role of European institutions to ensure that best practice is followed.

ECTA’s comments on the main findings of the Commission report

In addition to assessing investment, the Report examines a number of other current issues including mobile roaming, calls to mobiles, next generation networks and functional separation.

Lowering the cost of calling mobiles 
ECTA welcomes the Commission’s drive towards lower and more consistent costs for mobile termination, which feed directly into the prices consumers pay to call mobile phones. Innocenzo Genna commented "As well as hurting consumers directly by raising the cost of calling mobiles from a fixed telephone, high termination charges harm competition because new entrant mobile operators with few customers cannot offer attractive prices to compete with their larger rivals who can offer special ‘on-net’ rates.”

Boosting broadband take-up
The Implementation Report highlights that Europe has world leaders in broadband take-up with eight countries having higher penetration than the US, but at the same time there is a wide gap between the most competitive countries and laggards who are amongst the world’s worst performers in broadband. Innocenzo Genna commented "There is no secret to success in broadband. The best performing countries are also those where the regulator has taken the most firm action to open markets to competition. If all countries were equally tough, Europe as a whole could boost its position in world communications.”

Promoting next generation fibre roll-out
The report rightly notes that there has been some progress in platform competition through fibre to the home and wireless technologies – often driven by competitive operators. However, ECTA warns against taking a complacent view of the competitive potential from new technologies.

Innocenzo Genna commented: "Incumbents currently own 85% of European telephone lines, and most customers have only one or two lines going into their house. The fact that today’s copper lines are being gradually replaced with fibre doesn’t mean that suddenly we will all have 4 or 5 lines into our houses. That just wouldn’t make economic sense, and customers will not want to pay for that. So the access bottleneck is likely to remain, and we will have to find some way to share infrastructure efficiently whilst allowing a fair return for those investing.”

Driving down the cost of mobile roaming
ECTA welcomes the Commission’s attention to high roaming prices and shares its concern that customers may be paying too much for data when they travel abroad. However, the solution, according to ECTA, should not be more retail regulation – which is very difficult to apply to data – but rather action to enable more companies to enter the market for pan-European mobile services, through regulation if market forces don’t work.

Boosting competition through functional separation
The Commission’s report acknowledges the important role of functional separation in boosting broadband in the UK. Figures show that the UK is now 5th placed in the EU on broadband take-up with the highest increase in unbundling of the incumbents’ loops – a key enabler for broadband competition.

Innocenzo Genna commented: "The success of functional separation in the UK compared with the previous regime is now unquestioned. We have seen only positive effects on competitors’ willingness to invest and in consumer prices and services. ECTA fully supports the Commission’s proposals that all regulators should have this tool as a possible remedy to address competition issues. But it should not just be a last resort remedy. The UK example has shown that it can provide a positive forward-looking Framework which increases certainty for all investors.”

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