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08/12/2016

EU member states agree to deregulate voice markets

Digital

EU member states agree to deregulate voice markets

Image of skype homepage [Shutterstock]

EU regulators are set to remove limits on the prices that leading telecoms firms such as Orange and Telecom Italia can charge smaller operators for accessing their networks, a European Commission source said on Tuesday (23 September).

The European Union’s member states approved the measure on Tuesday, the source said, paving the way for its formal adoption by mid-October.

The move will be welcomed by big industry players, while the smaller firms say it will hurt their margins and lead to price increases for consumers.

The EU’s existing recommendation on relevant markets defines the telecommunications markets that are subject to regulation at the EU level, in order to ensure that there is enough competition among operators. If national regulators can show that a particular market is not dominated by one player, however, then they can deregulate it.

Under the new recommendation, given that the expansion of new online-based services such as Skype has slashed prices and enhanced competition, national regulators do not need to provide proof to remove limits on wholesale prices.

Incumbent telecoms operators said this move would boost investment in broadband infrastructure and help them catch up with their peers in the United States, where the rolling-out of network infrastructure is more advanced than in Europe.

“Competition from alternative platforms and over-the-top service competition are today well established, and this recommendation is the right instrument to adapt regulation to the new market reality,” said ETNO, a telecoms lobbying group.

ETNO members include Deutsche Telekom, Orange, KPN, Telefonica, Telecom Italia and TeliaSonera.

Revenues eroded

Years of falling prices for calls and text messages have eroded operators’ revenues as consumers have switched to services such as Skype and WhatsApp, which allow them to call and text over an Internet connection.

In 2012, revenues from fixed telephony at major telecoms companies dropped by €5 billion to €59 billion, according to ETNO data.

Under the new recommendation, the final decision on whether to open a market rests with the national regulators. The German regulator, for example, signalled in July that it would continue to regulate prices for fixed calls.

Opening up the wholesale market could hurt margins for smaller players that must rent capacity on networks from incumbents to allow their customers to make fixed-line calls.

Their view, shared by the EU’s group of national telecoms regulators, BEREC, is that such deregulation is still premature and that price hikes will be passed onto consumers.

“In the vast majority of member states, end-users will have very little choice – often only one, the incumbent – if fixed voice regulation is removed,” said ECTA, a telecoms lobbying group representing TalkTalk, Wind and E-Plus, among others.

“Such premature deregulation will harm competition and thus ultimately the users, be they consumers or businesses.”

Background

The European Commission proposed in September 2013 a wide reform of the telecoms sector intended to kick-start the underperforming European telecoms sector and incentivise investment in ultra-fast broadband networks.

The legislative package, called “Connected Continent”, proposed to create a single market for telecoms in Europe. The sector still operates largely on the basis of the 28 national markets.

>> Read: 'Connected continent' plan seeks harmonised EU telecoms market

Under the Commission's plan, the single market for telecoms will by ending roaming surcharges for mobile services abroad, better coordinating radio spectrum allocation, protecting the neutrality of the internet (although granting higher discretionary power to internet service providers) and raising consumer protection.

In April, the European Parliament approved the reforms with a few amendments, especially aimed at increasing protection of net neutrality. It also voted to suspend roaming charges by the end of 2015.

On 1 July, web browsing costs were halved and calling costs were cut by a quarter.

>> Read: Commission cuts mobile roaming charge: one step closer to abolishment

Further Reading

European Commission

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