Mid June, 2023, the European Parliament voted on the “2022 Annual Report on Competition Policy” by the Parliament’s Committee on Economic and Monetary Affairs. It contained the latest note on what has become known as the ‘Fair Share’ debate. Specifically urging the commission establish a policy framework where large traffic generators contribute fairly to the adequate funding of telecom networks. This is perhaps surprising as the Commission’s  consultation on “The future of the electronic communications sector and its infrastructure” had just closed its most recent call for viewpoints on May 19^th and is due to provide feedback.

In different forums this has been characterized as ”fair-share” or “Sender Pays” debate between telcos and large internet and content players. The focus being on large traffic sources/generators paying a contribution for the network, while in the US the topic is seen as a “forced payment” from big tech to ISPs. In a recent submission to the consultation the US National Telecom and Information Administration (NTIA), highlighted that “forced payment” would distort competition and access in Europe. However, the characterization of this debate as a single issue is not 100 percent accurate, as exemplified in the recent submission to the EU by a coalition of European Telecom Network Operators (ETNO) – from their perspective it is also about regulation, a single market, and sustained investment. In a sense it is about a level playing field as well.

For context, it is important to see what is driving change and why the temperature in this debate is heating up. In simple terms the fact that data demand is increasing is irrefutable, with for example, the UK regulator, Ofcom, predicting a 20X average increase by 2030. This should be good news for Telcos but average revenue per user is flat, again exemplified by Ofcom report, prices have decreased by 22 percent in real terms since 2015. In response, telecom organizations have been pursuing an agenda of reducing cost, increasing efficiency, exploring new business models (e.g. network as a service) and increasingly divestment of assets like radio towers.

In other words, the European network operators are already re-aligning and transforming their business. The GSMA/ETNO submission further highlights the creation of a real single European market for telecom, with simplified regulation and harmonized implementation of regulation – making it easier to do business and increasing the potential to merge businesses. There are thirty-eight mobile operators in the EU with over half a million customers, the comparative with the US would be seven. The submission highlights the comparison to emphasize the point that cost savings and scale can also be developed by merger and acquisition activities as well.

As customers and businesses, the key expectation of mobile data access is that it is fast, open and reliable. The challenge is to provide this service competitively and sustainably. In a sense, the European telecom network operator coalition is asking for more regulatory freedom, which will enable further investment and innovation. Otherwise, they may consider that they are unfairly encumbered by regulation in face of obvious and increasing demand.

As noted, the consultation submissions closed in May and we will watch for the EU Commission response; whether the vote on approving 2022 Annual Competition report will be a signpost for this response only time will tell.

References:

[1] EU Parliament – 2022 Annual Report On Competition Policy https://www.europarl.europa.eu/doceo/document/A-9-2023-0183_EN.pdf

[2] Regulatory submission: https://www.gsma.com/gsmaeurope/wp-content/uploads/2023/05/Summary-of-the-Joint-Telecom-Industry-Response.pdf ; Joint Telecom Industry Response to the EU consultation on “The future of the electronic communications sector and its infrastructure” from European Telecom Network Operator

[3] Ofcom Feb 2022: https://www.ofcom.org.uk/__data/assets/pdf_file/0027/231876/mobile-strategy-discussion.pdf