Pundits question EC telecom proposals

This article was authored by Michael J Carroll, and was originally posted on telecomasia.net.

Analysts predict Deutsche Telekom, Telefonica, Vodafone and Orange will cry foul at European Commission (EC) proposals to start abolishing roaming rates from 2014.

The plan is one of several proposals revealed by EC vice president for the Digital Agenda Neelie Kroes last week that aim to kick start deployment of next generation fixed and mobile networks in the region. Plans for net neutrality, improved consumer rights, and cuts to long-distance call charges were also announced.

While Kroes painted a grim picture for Europe’s economy and security if the plans were not adopted, IHS Electronics and Media analyst Peter Boyland says the region’s operators are likely to rail against the plan. “Larger European players…will still decry the loss of revenue, which they say they can ill afford as profits fall due to the economic downturn, and while they are expected to bear the burden of expensive 4G rollout.”

Smaller carriers are also likely to object, seeing the move as “discriminatory, since they will not be able to offer network coverage in as many markets as cheaply as the major operators,” Boyland adds.

Stefan Zehle, chief executive of Coleago Consulting, says the region needs “regulatory certainty” to encourage the investment needed to achieve the EC’s goals for fiber and 4G deployments, because mobile operators aren’t making the return on investment needed to sustain rollouts. “For the past three years, the return on invested capital made by Europe’s telcos was below the cost of capital of around 8% to 9%,” Zehle states, citing recent PwC research. “[T]he Commission conjures up an image of ultra-profitable telecom operators which fleece consumers,” he adds.

Arguing for the zero roaming proposal is Luca Schiavoni, telecom regulation analyst at Ovum.

He notes the plan provides a “significant incentive” for operators to strike pan-European deals to avoid the “decoupling that will come into force in July 2014,” while disincentivizing “alternative roaming providers” from entering the market.

European operators will also still be free to increase prices for roaming to non-EU markets, “which has already happened in many cases,” Schiavoni adds.

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