EC Report Says Regulatory Woes Still Plague European Telecom
Although Europe’s e-communications sector is growing, serious problems remain, the European Commission (EC) said Mon. While competition is increasing in most electronic communications markets, regulation needs improvement in several key areas, the EC said in its 10th annual report to the European Council, European Parliament, European Economic and Social Committee and the Committee of the Regions on carrying out the e-communications regulatory framework. Incumbent telcos said the report showed the time is right for regulatory rollbacks, while new players urged govts. to stop market abuses they said block innovation.
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The e-communications industry, especially the fixed sector, is emerging from a period of cost-cutting and debt reduction, the EC said. Overall growth, estimated at 4.6% for 2004, has stabilized, led by fixed data and mobile services, which grew by 11.5% and 7% respectively. Underlying the general trends are several developments, it said: (1) Traditional fixed line telephony has dropped in value as competition forces prices lower. (2) Broadband penetration has increased dramatically, spurred by lower prices and more infrastructure-based competition as new entrants begin investing.
A 3rd development is the rise in mobile penetration, the EC said. Competition in the sector is up, and mobile termination rates in many European Union (EU) member states have fallen. On the other hand, the EC said, wholesale international roaming charges are still too high, and the Commission and the European Regulators Group are looking into it. 3G launches accelerated in 2004, and the number of broadband access lines rose more than 72%, the report said. An especially noteworthy trend, it said, was the 110% increase in unbundled local loops.
Even the market for fixed voice services, which has been lagging several years, has new players, the EC said. The decline in incumbent share continued across all fixed call segments, it said. Interconnection tariffs are showing a downward trend, as are mobile termination rates. Consumers have more choice in operators and more options for broadband, the report said. However, it said, competition in the local loop and in broadband in some countries remains weak, and the competition situation across the EU is mixed.
Regulatory problems remain a major concern for the EC. Five member states -- Belgium, Czech Republic, Estonia, Greece and Luxembourg -- have yet to enact the primary legislation needed to adopt the e-communications regulatory framework into national law. Eight countries - - Spain, France, Cyprus, Latvia, Lithuania, Poland, Slovenia and Slovakia -- have failed to enact the secondary laws needed to give full effect to the primary legislation.
The failure to fully carry out the regulatory package continues to spark problems in several areas, the EC said. Among them: (1) Some national regulatory authorities are not as independent from their govts. as required. (2) Persistent problems across the EU in the granting of rights to install masts and antennas for mobile services is delaying rollout of 3G infrastructure. (3) Some countries are designating universal service providers without ensuring they don’t automatically exclude any undertaking from providing such service. (4) Concerns remain that competition obligations such as cost accounting and accounting separation aren’t well established, causing margin squeezes on new entrants. “The potential for competition, innovation and investment will be fully realised only if Member States give high priority to transposing and giving full effect to the EU principles already decided,” the report said.
Nonincumbent network operators and service providers “continue to face severe market conditions and an unfavorable regulatory situation, characterized by the exercise of entrenched market power by the ex-monopolies,” the European Competitive Telecom Assn. (ECTA) said. The group said it’s concerned about instances of abuse at the retail level, inadequate migration terms for customers and alternative providers wishing to switch from incumbent offerings. The EC has “a long way to go” before it delivers a level playing field for competitors, ECTA said.
By contrast, the European Telecom Network Operators’ Assn. (ETNO) said the report showed renewed confidence in the e-communications market, reflected by more investment and competition by both incumbents and new entrants. “We now need to build upon this success to further encourage investment by starting to roll back sector specific regulation,” said ETNO Dir. Michael Bartholomew. The group also urged all member states to fulfill the regulatory framework, saying it would give operators an incentive to invest in infrastructure and innovation.