Ho ho ho – Telco Xmas List calls on Europe to end net neutrality
As little children write hopeful letters to Santa, oblivious to the supply chain issues that could anchor his reindeer, 13 of Europe’s big names in telecommunications have crafted their own Christmas wishlists – intended not to Lapland but to a government speech in Brussels. Their demands will come as no surprise to EU Competition Commissioner Margrethe Vestager. After all, they’ve wanted the same things for most of this century.
Topping the list is the routine call for a laissez-faire regulatory approach to mergers. Regional and national authorities loved standing in the way of consolidation, determined to protect highly competitive markets. The incumbents, unsurprisingly, want this to stop. They also do not want to pay exorbitant fees for spectrum or see it cut for new entrants, their second request says.
But the item that grabbed Reuters headlines earlier this week is a real throwback – the complaint that tech giants are moving freely over telecommunications networks. Investments, say operators, “can only be sustainable if these large technology platforms contribute equitably to network costs.” To many observers, this argument will smell worse than the Stilton left to rot after last year’s abortive Christmas celebrations.
The signatories include the bosses of all the major incumbent telecommunications operators in Europe, as well as a few smaller ones. Its author is not clear, although it was published on the ETNO website, a kind of country club for operators. Maybe during a game of golf, whether physical or virtual, a CEO came up with the petition and no one objected. Or maybe shopping carts got the idea. Either way, it is both a surprising example of group thinking and an admission of failure.
Fail, year after year, to convince authorities of their case while struggling under the apparent misconception that regulators are to blame for all their problems. Look at the United States and China, they say, where telecom oligopolies have been allowed to serve hundreds of millions of customers. But AT&T, which is only worth a fifteenth of that of Microsoft, is also threatened by major American technologies. Amid bad decisions, its long-term debt has grown from around $ 60 billion to over $ 150 billion over the past decade. Meanwhile, the Chinese government-led 5G rollout has cost billions and produced little real value.
Whatever the big bosses of European telecommunications may say about the exorbitant cost of building networks (300 billion / 340 billion dollars are needed in additional investment for gigabit services, according to them), there is a great appetite of investors for them. infrastructure assets. Private equity funds have crammed into the industry, chasing down fiber builders and mobile towers. The share price of Cellnex, Europe’s largest tower specialist, has jumped 163% since early 2019, valuing the company at nearly $ 36 billion ($ 41 billion). That’s about $ 13 billion ($ 15 billion) more than the value of Telefónica, whose assets are getting smaller and smaller.
The sustainability of this model can be questioned if returns are reduced by competition and if operators are not allowed to merge. But that’s no excuse for the poor service innovation record of companies that are still very profitable. Too many “service providers” are doing the same thing, and not particularly well. Billions have been wasted on ill-conceived content and media companies that Amazon, Disney, and Netflix have quickly overtaken. Instead of innovation in telecommunications, it is the begging letters to Europe.
Doublethink appears to be another telecommunications affliction, judging by the content of the latest missive. Telecom operators love or hate big tech, depending on the circumstances. They back it up with deals with public cloud providers one minute and complain to regulators about its increasing power the next minute. They insist that there is no rivalry with big tech when partnerships are on the table. However, there is no doubt “that the telecom operators compete face to face with the services of major technologies”, they say in their letter. One thing is certain: links with telecom operators will not reduce big tech.
The snow is falling
It’s hard to be totally unsympathetic given all the regulatory loopholes. Spectrum auctions have clearly been designed by some governments (see Italy’s 5G price) to extract as much profit as possible from the private sector. The dedication to preserving four-player network markets is probably not always in the consumer’s long-term interest. Paperwork abounds. Europe’s position on net neutrality – the principle that prevents operators from charging big tech for network use – is unfathomable.
What then will Vestager and his little helpers do from the last wishlist? Telecom chiefs are often caught thinking about improving the regulatory climate, usually on calls with financial analysts. But there hasn’t been a marked change in a decade of daydreaming. While she appears less openly hostile to the investment community than previous officials, Vestager is unlikely to change course completely – welcoming consolidation in the country and relinquishing any commitment to net neutrality.
Gift seekers might be reassured by the government’s backlash against big tech on both sides of the Atlantic. Designed to restrict it, the new EU digital markets law, hopes Timotheus Höttges, CEO of Deutsche Telekom, would prevent a company like Microsoft from buying smaller providers from operators and thwarting efforts by telecom operators to diversify the market. . But it is far from completely rethinking net neutrality.
Maybe it’s one of those high-purpose letters, like Christmas wishlists asking for a first car or a diamond encrusted Xbox. Let the giveaway know that expectations are high and settle for the compromise of a half-decent bike or some PlayStation games. Stay silent and risk a knitted sweater or a new pair of socks. Even the luckiest recipients usually realize that the most generous gifts don’t change their fortunes.
?? Iain Morris, International Editor, Light Reading