Dialing ‘C’ for competitiveness will boost signals for telecoms across EU

Date: 25/03/04

The telecoms sector in 2004 does not need the bad medicine of European intervention, writes Malcolm Harbour

THE year 2004 will be very significant for the European Union's 'knowledge-based economy', as we should be seeing the full impact of the new EU policy framework, approved by the European Parliament at the end of 2002.

Many more mobile operators will roll out third-generation, or 3G, mobile voice and data services. Interactive digital television services will continue their rapid growth. E-commerce should be benefiting from a big rise in e-enabled businesses and households, as broadband penetration climbs to significant levels.

Real results should also be apparent from a range of other programmes that have been strongly promoted by the European Commission and member states.

E-government might really start to streamline administration and improved customer services. Health services will see the benefits of improved information flows and far more effective use of patient records. Traffic flows and vehicle safety could be enhanced by e-safety initiatives.

Enlargement will offer excellent opportunities. In many new member states, information services are already well developed.

These governments, in constructing their democratic, free market economies after the communist collapse, have stepped straight into the IT era. Without a legacy of former paper-based systems, they have been able to take fresh approaches.

Estonia, for example, is recognized as one of the top e-government performers. The new EU members will be seeking major investors to expand their communications infrastructure, with mobile services playing a key role.

So the outlook for the information technology sector looks good. The policy framework is in place - and there is optimism that it will deliver results. The 'knowledge-driven' element of the Lisbon Agenda could be a major success. But what could go wrong?

2004 will present a real test of determination to let the market work. The legal framework under which EU electronic communication is regulated is widely regarded as a global competitive advantage. Europe has the huge plus of one policy framework for all communication technologies: a policy framework that should allow new market entrants market access on non-discriminatory terms and one designed to move communications away from state intervention to open- market competition.

During 2004, the new framework should become fully operational across all 25 member states. Each country should have an independent regulator, applying the framework regulations in a consistent way.

State-owned monopolies will be regulated, as a transitional measure until they are fully 'privatized'.

This is the view of the Commission and Parliament, but some member states don't quite see it that way.

The establishment of truly independent regulators, especially in the key markets of France and Germany, is already way past the agreed deadline of mid-2003. The Commission is starting proceedings to force the pace.

At the same time, many 'incumbent' monopolies are still exercizing market control. New entrants are finding it difficult to enter markets and are being discouraged from investing by squeezes on profit margins.

Many regulators are not adopting 'light touch' policies and are micro-managing the sector with excessive intervention. Some member states want state aid rules relaxed so that they can invest directly in competing communications networks.

The Commission must use its powers to intervene and stop this over-regulation. Member state regulators must be kept under control.

European intervention and over-regulation are absolutely the last medicine that the sector needs. Investors need a stable, long-term regulatory climate to encourage them to invest. Consumers must be allowed to drive the market, not regulators.

2004 can be a great year, provided that politicians have the courage to support what they have done already and keep their hands off!

• Malcolm Harbour is a UK Conservative MEP on the legal affairs and the internal market, and industry, external trade, research and energy committees.

The EU is over-regulating and under-implementing in the telecoms market, argues Piia-Noora Kauppi

THE telecoms industry, especially the mobile telecoms industry, is a significant contributor to the European economy. Estimating the net economic benefits from Europe's mobile industry last year at some l105 billion, the industry compares well with the EU's annual budget of l98.6 bn. On average, mobile communications constitute roughly 1% of national GDP. Hence changes in the sector have a major impact on the national economic outlook.

So far, market liberalization and standardization in the case of mobile phones have demonstrated positive effects in terms of productivity, employment and GDP, not to mention the social benefits citizens and organizations are experiencing.

The Nordic countries paved the way with their NMT-system. An open standard was created and markets were opened up to competition. Through this experience, companies gained technological advances and market understanding - competitive advantage was then created.

Liberalization and the deregulation of the telecoms sector is a good example of opening up an internal market. The market has reacted encouragingly due to increased competition, lower prices and bringing new services to the customers.

Open markets and fair competition as well as established standards create favourable conditions for business and consumer benefits.

However, when we look more closely at the telecoms sector, the US is leading Europe in all other fields except mobile telecoms. The Lisbon Agenda targets have not progressed as well as hoped and the US has kept its advance in economic development. In addition to the US, Europe must look to key growth markets, such as China, India and Brazil - these are fiercely competing for investment.

To tackle the problems of competitiveness and growth, Europe must continuously challenge the barriers to trade to guarantee efficient functioning of the internal market.

The new regulatory framework aimed at developing and reinforcing the single market, promoting competition and safeguarding public and user interests in the electronic communications sector was adopted two years ago, but implementation is still under way in many member states.

According to Commerzbank, the UK, the Netherlands and Italy are expected to finish their regulatory framework this year, whereas Spain, France and Germany won't be ready until 2005.

The commonly agreed goal was to transpose the directives into national legislation by summer 2003. The delays cause legal uncertainty to market operators, increase risks and hence harm investment, development and the profitability of the sector.

In the telecoms markets especially, operators need to make continuous investments in new technology. To maintain the attractiveness of the sector, we need to ensure that it becomes worthwhile for the investors.

The clear focus of the member states should now be implementation. The Commission should monitor progress closely and not hesitate to bring infringement proceedings and sanctions for non-respect of the commonly agreed timelines.

The post- enlargement Commission will be larger and it is my view that more efforts should be devoted to monitoring efficient implementation of EU-legislation.

Unfortunately, the EU is over-regulating and under-implementing. Both the consumers and the industry suffer from poor implementation, whereas we should endeavour to provide an efficient single market.

However, the industry is not at a standstill. Present day telecoms are

about providing services, not only connections. In the mobile telecoms sector the focus should be on service deployment.

For the EU to achieve its goals, especially in internet penetration and broadband deployment, it is necessary to ensure full and open competition in the telecoms market. This will result in further choice and innovative products for consumers.

• Piia-Noora Kauppi is a Finnish Christian Democrat on the committees for economic and monetary affairs, legal affairs and the internal market.

Two MEPs discuss the role of European legislation in keeping the communications industry in good shape.