At this week’s ‘State of the Union’ address in Strasbourg, President Juncker is expected to try to re-inject energy and purpose into the troubled European project. The arguments among the European family of nations show no sign of abating and he will want to show leadership and purpose.
Perhaps the crown jewel of the European project is the single market. This common set of rules makes it easier for companies to buy and sell across borders and for consumers to access more offers at better prices. It makes us all richer. So successful is it that the Commission has been seeking to update it for the digital age by building a digital single market.
It is therefore both peculiar and worrying that the European Commission may soon propose new telecoms rules that could fragment the European market yet further, thus going in the opposite direction to its declared strategic objective of building a digital single market.
Readers well-versed in EU telecoms policy know that it covers areas as broad as spectrum, regulation of telecoms networks and services. Readers will also know that telecoms markets have traditionally been national markets and that it has long been a wish of the EU to stimulate cross-border markets. So why would the Commission propose something that fragments the Digital Single Market rather than completing it?
The answer lies in the pressure by some to include next generation communications services that are offered online like Viber, Skype and Apple’s iMessage within the rules. Currently these services are governed by many areas of European law, but not telecoms law, a situation that should continue as there is no ‘problem’ that telecoms law would resolve.
Most notably, pressure comes from some national telecoms authorities wishing to extend obligations to online services.
Today these services are the embodiment of the Digital Single Market. They operate cross-border without friction and without any need for regulatory intervention. Most of them are free to the user; those that are not are very low cost. Demand for these services stimulates demand for broadband, thus funding 4G rollout. If problems emerge they are dealt with by competent courts or enforcement bodies. Policymakers could not have wished for more.
The consequence of bringing these services under telecoms rules will be that instead of complying with one cohesive set of rules throughout the EU, these proposals will mean complying with 28 different sets of rules. There is a cost of complying with national rules (on e.g., lawful intercept or emergency calling obligation). Given that these services are offered free of charge, or at very low cost, that compliance cost will often be higher than the money earned. This will drive some services to exit certain Europe markets. It will also make it next to impossible for the next generation of innovators who need to employ engineers rather than lawyers — another contribution to Europe’s innovation problem so clearly identified by the Economist magazine.
Less competition in the provision of services will rob European users of the kind of services they use and love today and potentially inhibit the next generation. For a continent that needs growth this is particularly problematic. Looking to China, the success of WeChat shows how these communications services are evolving. In fact, WeChat is no longer really a communications service: it is a peer-to-peer application that lets people send each other money, messages, book taxis, buy flowers and much more. Is this something that should be regulated by 20th century telecoms rules originally tailored to apply to traditional providers of wired and wireless telephony? Probably not. In fact, it is rarely clear what is a ‘communications’ service given that communications is a feature of many online services from dating apps to house rental sites. To reinvigorate growth we need more such innovations, not fewer.
When the European Parliament and the Council of Ministers begin their scrutiny of these proposals they should insist on more single market and more choice, not less.
When it comes to telecoms networks, the Commission is right to be ambitious about having high speeds for more households. However, if it truly wants to improve broadband speed and penetration, it should be open-minded about the technology and investment choices that will get us there. The approach should be clearly technology-neutral, meaning it doesn’t matter if telecoms firms deploy cable, copper networks, fibre or wireless. The key is getting them rolled out as quickly as possible and at the best possible price while preserving competition.
There is work to be done. Some of the Commission’s choices lack evidence. It will be up to the Parliament and Council to improve on where we are. If we are to preserve the single market the Commission will need to be brave; to advance it further will take even more courage. Let’s hope President Juncker will show this courage when he stands up in Strasbourg.