Regulatory fragmentation prevents telecoms innovation, says EU

The European Commission has criticised four EU member states for not implementing the new EU telecoms rules which were agreed in 2009.

In its report 2011 Telecommunication Market and Regulatory Developments published last week, the Commission blamed Belgium, Poland, Portugal and Slovenia for failing to introduce more competitive markets for consumers and businesses, as well new rights for citizens such as switching their phone operator in one day without changing the number or being informed without delay when their personal data is stolen online. The Commission has issued infringement proceedings against the four countries that are likely to result in huge fines for their taxpayers.

New rules

The revised EU Telecom Framework (Citizen's Rights and Better Regulation amending Directives) was adopted by the European Parliament and Council of the EU in November 2009. It amends five different existing EU Directives (Framework Directive, Access Directive, Authorisation Directive, Universal Service Directive and the e-Privacy Directive). The deadline for transposition into national legislation was 25 May 2011. A new Regulation setting up the European Body of Telecoms Regulators (BEREC) was also adopted. The BEREC office was established in Riga and became financially autonomous in September 2011.

The UK implemented the Better Regulation Directive and the Citizens Rights Directive within the allocated time.

High compliance costs

However high regulatory compliance costs in the European Union's telecommunications industry are driving down investment in the sector, according to a recent report in The Financial Times.

The article refers to a recent survey conducted by Credit Suisse which included responses from fund managers overseeing roughly 1.8 trillion euros in total. It suggested that the European telecoms industry is struggling under current regulatory compliance costs.

The survey found overall support for the E.U's approach to telecommunications, with the strong expectation that increased access to faster communications networks will prove a net gain for the region.

However, government control of the price of copper combined with expectations for investment in new broadband infrastructure could force companies to invest at a loss. While this would lead to some improvements in the broadband access, it would ultimately lower profitability in a sector traditionally seen as a safe, reliable investment with high returns.

More importantly, nearly 90 percent of respondents suggested that the regulatory compliance structure for the industry remained unclear.

Key trends in the EU Report

The EU report outlines several key trends and achievements:

  • Demand for data is exploding: 95% of Europeans have access to a fixed broadband connection, while the use of mobile internet has gone up by 62%. The huge potential growth for data traffic volumes opens up new business opportunities for the telecoms sector and online service providers. Data represents 7.6% of total industry revenues for individuals and households with revenues from mobile data services up almost 10%.
  • A significant amount of radio spectrum was freed up during 2011 to support mobile services: Belgium, Lithuania, Slovenia, Greece, Malta, Spain and Portugal opened up the 900 MHz and 1800 MHz bands ("GSM bands") to new mobile services, while the 800 MHz band was assigned to mobile broadband in Spain, France, Italy, Portugal and Sweden.
  • Consumers got better deals for mobile services. The average revenue per user (ARPU) dropped in many Member States with the average EU level decreasing from 244 in 2009 to 221 in 2010. Thanks to progress in implementing the EU rules on termination rates, the fees networks charge other networks for delivering mobile voice calls, mobile termination rates went down to 3.87 cents per minute in 2011 compared to 5.47 cents per minute in 2010.

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