One speech does not a policy make, but European Community officials continue to plow ahead with plans to create a more-unified “single” telecom market within the EC region, on the model used for a unified market for trade, though many important details remain unsettled.
It isn’t yet clear, for example, how regulatory authority will work. Some think a single EC telecom regulator is required, though that does not seem to be in the offing, immediately. Others say there is no way 28 national regulatory bodies will cede their authority, so pushing for a change that drastic would certainly fail.
Nor is it clear how EC goals of reducing roaming costs will be achieved. Mandatory reductions already have been enforced, but there is some confusion about whether policies to reduce tariffs further ultimately will be enforced by regulatory fiat, or whether there are other mechanisms to achieve those results.
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EC officials probably will insist on such continued rate reductions. But service providers are sure to continue resisting such reductions. And it remains unclear whether the proposed rules will include roaming rate reductions.
There has been concern that the big reductions in wholesale rates, intended as a way of encouraging the creation of a single EC communications market, would further depress service provider revenues and so hinder investment in next-generation networks.
Service providers were concerned about, among other things, the opportunity for arbitrage opportunities. That typically happens in communications when there is a wide disparity between wholesale rates and retail rates in any market.
Some had estimated that as much as £7 billion a year could be earned by wholesalers taking advantage of the rate spread. Such arbitrage discourages investment in facilities on the part of incumbents and over the top or wholesale-based competitors as well.
Analysts at Bernstein Research had estimated the rate reduction proposals would allow non-facilities-based rivals to undercut major network operators by between zero and 65 percent, depending on prices in each country.
The biggest potential impact, they say, would be in some of Europe’s biggest markets, Bernstein Research argued.
“We need to extend the same formula to other areas: mobility, communications, energy, finance and e-commerce, to name but a few,” said José Manuel Durão Barroso, European Commission president.
“We will formally adopt a proposal that gives a push towards a single market for telecoms,” Barroso said. “Isn't it a paradox that we have an internal market for goods but when it comes to digital market we have 28 national markets?”
For European service providers, perhaps the biggest issue, aside from the possibility of drastically lower roaming revenues, is whether the “single market” will extend to a single market for service providers, in terms of easier ability to merge and consolidate national entities.
Many would argue that European service providers are experiencing financial difficulties because their operations are too fragmented and lack scale. In principle, a single telecom regulatory framework could clear the way for relatively rapid consolidation that would improve operator finances.
Edited by Alisen Downey