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European Commission Warns Big Telecoms Operators – “Adapt or Die”

Thursday, October 2nd, 2014 (9:29 am) - Score 670
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The outgoing Vice-President of the European Commission’s (EC) Digital Agenda project, Neelie Kroes, had stern words for members of the European Telecommunications Network Operators Association (ETNO) yesterday when she warned against protectionist positions and stated that “sometimes I think the telecoms sector is its own worst enemy“.

Europe’s Digital Agenda project aims, among many other things, to make superfast broadband speeds of at least 30Mbps (Megabits per second) available to every EU household by 2020, with 50%+ subscribing to a service capable of delivering ultrafast speeds of 100Mbps+.

The Digital Agenda also links into another one of Neelie Kroes pet projects, the on-going efforts to foster a Single Telecoms Market, which would be headlined by protection of the Open Internet (Net Neutrality), the abolishment of EU mobile roaming charges and regulatory changes to foster the deployment of faster fixed line broadband services.

Needless to say that some of the moves, not least with regards to roaming charges and net neutrality (i.e. treating all Internet traffic as equal in order to prevent online content providers being unfairly penalised), have received a hostile reception among big telecoms (mobile, broadband and phone) firms, many of which are members of ENTO.

But most recently ENTO appeared to signal a willingness to change when they set out their five key pillars as part of a new “Agenda for Europe“.

ENTO’s Agenda for Europe

1. Developing Powerful Infrastructure by aligning the regulatory framework to the 3rd investment cycle in 4G and fibre.

2. Boosting a Globally Competitive EU Industry through an updated competition approach and by ensuring a level-playing field among actors in the digital value chain.

3. Supporting Digitally Enabled Companies with early incentives for ICT adoption and EU-wide trials in areas as diverse as automation, smart-cities or mobility.

4. Increasing End-user Benefits with consistent privacy and security rules and by allowing the development of innovative services.

5. Promoting Enriched Citizenship and Welfare with strong demand-side policies, solid interoperability practices and a focus on digital literacy.

It’s a more positive wish list than we’ve seen from ENTO before, an organisation that will no doubt be quietly looking forward to a change of leadership within the EC, yet Neelie Kroes has been swift to warn that she’s not gone yet and the future leadership isn’t likely to take a radically different approach.

Neelie Kroes told the ETNO Summit 2014:

You’re probably all looking forward to the very near future, when the Juncker Commission takes office, when you won’t have to put up with me anymore. Well just today you are stuck with me. So allow me to be direct. That is my style.

Your message is clear: that we need to change regulation. But you have to change too. So rather than being critical about the past, let me be positive about the future. I welcome the fact that ETNO appears to be looking at the need to change. The “Think Digital” manifesto announced earlier today should help ETNO to play a positive role in shaping Europe’s digital future. It is a positive vision: but now it needs to be acted on, and implemented.”

Kroes went on to warn that Europe’s future telecoms market wouldn’t be characterised by “protectionism” or “players stuck in gilded national cages” and it won’t be “looking backwards to old business models and dated revenue streams. No, no, no.” Instead she called for a sector that offers convenience, competition and choice.

On Net Neutrality, Kroes reminded members that many of them and the demand for their broadband services would not exist without the likes of Facebook, YouTube, Google and Netflix etc. “OTT players are the ones driving digital demand – demand for your services! That is something you can work with, not against,” said Kroes. She also warned that requests which effectively amounted to “regulate my rival” were “not a general call that will ever find much resonance.”

In general terms Kroes was attempting to signal that the rules which govern European telecoms operators were, come hell or high water, about to change and that related businesses will have to adapt. On the other hand many of these policies have yet to be given the final seal of approval and the possibility for last minute changes cannot be overlooked, although much of what Neelie Kroes has helped to foster will probably survive.

Leave a Comment
8 Responses
  1. Avatar gerarda

    This is the same Nellie Kroes whose state aid guidelines allowed the protectionist BT to become even more dominant?

  2. Avatar Hull_lad

    Interesting. The Internet pre-dates Facebook, YouTube etc, so from a chronological point of view, they could not exist without Internet services. It’s very much the same as how cars would not exist without roads. Each car is taxed, so why isn’t it feasible to tax content providers for the use of the infrastructure that they’re exploiting?

    It’s true though. Unless telcos do indeed adapt, no matter what speeds they tout, broadband will soon be a commodity service that will shrink into irrelvance as a product.

    • The car example doesn’t work as the two “industries” are fundamentally different in far too many ways. Roads, for one thing, are linear and form part of a publicly funded service.

      The thing is that content providers already pay for their links to the Internet, just as I pay a fee to the dedicated server company that hosts ISPreview.co.uk. But the issue with some services, like Netflix, is more to do with their use of commercial peers that ISPs must then pay to access if they want to deliver the best service performance.

      So on one hand I can understand the ISPs side, but on the other this is merely just another cost of doing business and should be reflected in how much customers are asked to pay. The alternative is to have tens of thousands of ISPs in countries all around the world asking a single content provider for money, like a digital mafia, which would be unsustainable and obscenely complex. You’d risk inhibiting the very content that makes the Internet worth visiting.

  3. Avatar Hull_lad

    Fundamentally, both are types of infrastructure that allow traffic to move from one place to another. Roads have to be widened to meet growing levels of traffic; broadband infrastructure has to be upgraded for the same reason; Caching content is the same as building a distribution centre in a strategic location; Large vehicles struggle to access rural outposts, in the same way that rural areas struggle to stream content etc.

    As anything like the Cisco VNI will show, video content is effectively the slow moving wide-loads that cause traffic congestion, that can’t get down narrow country lanes in rural areas. Essentially this has led to network operators having to invest in fatter pipes/widening the motorway to make sure the traffic runs smoothly and that rural areas aren’t left behind. Content providers pay for their access to the Internet, and for their own servers etc, but this does not compensate for the value they are getting from it.

    Network operators are footing the bill for content providers to make billions, whilst at the same time getting hammered by regulatory, consumer and ISP pressures driving retail and wholesale prices down. As more and more consumers pull more and more wide loads down the network, costs go up, margins go down.

    The only viable future for network operators is to re-establish the ‘price/usage’ relationship for broadband. That is, of course, unless you are able to provide a relevant, popular paid-for content service that can be used to off-set losses in core revenues. That’s whay Sky can afford to virtually give their broadband away, and why BT have invested so heavily in content. And, that is why smaller consumer focussed ISPs will curl up and die, or simply be acquired by the behemoths as the market (and competition) consolidates.

    Gartner have covered this extensively in a report that examines the how network operators and communications service providers negate the threat of OTT. Telco 2.0 is also worth looking at. http://www.stlpartners.com/telco2_index.php

    • Avatar Steve Jones

      Excellent summary. Nice to have somebody who has a realistic handle on the economics of the business and doesn’t live in some fantasy world deal in caricatures of ogres and angels.

      It’s a business folk. Companies will (mostly) do what’s rational and, to a large extent, their actions and priorities are driven by the need to turn a buck. That goes for investors too. Nobody is going to put up the enormous sums required unless there’s a chance of a return. The UK has twice gone through telecom fantasies. Firstly, when cable companies splashed out huge sums in the 1980s, the great majority of that investment having to be written off requiring a complete restructuring. Secondly, when a bidding war was over 3G licences was engineered, made much, much worse by state-backed telcos from Europe bidding things up. That little exercise cost £26bn (or roughly the cost of fibre run to every premise in the country). The effects of that (and similar bidding wars in Europe until the banks called a halt) were felt for long after and made enormous holes in telco balance sheets.

      (I suppose I could add the dot-com bubble to this too). Anyway, the point is that companies have to deal with hard facts and commercial prospects. When they don’t, disaster can ensue and, unlike the banks, there’s no state bail-out. The investors will just lose all their money.

    • Avatar Chris C

      That breaks the fundamentals of the internet.

      Netflix already pay for their traffic to their own provider, once their provider has took the traffic it is no longer netflix traffic, it is the ‘provider’ traffic.

      So e.g. lets say Netflix have an agreement with cogent and they pay cogent for connectivity, that means the traffic is cogent’s up until the point cogent hand it to a new provider which might be e.g. level3, then it becomes level3 traffic, and then level3 might be the one that delivers it to the broadband isp, at that point it is not netflix traffic it is level3 traffic delivering data that the broadband isp’s own customer has requested.

      Your argument is very silly e.g. lets say you send some photos via email to your son who is 100 miles away, would you like if you pay for your broadband connection but then got a bill from your son’s isp for the traffic he used to download your email/photos?

    • Avatar GNewton

      “It’s a business folk. Companies will (mostly) do what’s rational and, to a large extent, their actions and priorities are driven by the need to turn a buck. That goes for investors too. Nobody is going to put up the enormous sums required unless there’s a chance of a return”

      This certainly is not the case with BT, BT has no common business sense, and often acts as a beggar for taxpayer’s money, where the public funding agencies have virtually no ROI, hence the BDUK farce. Scrap the BDUK, and break BT completely, and let them become a genuine business, not a pension fund nor a blackhole for taxpayers.

    • Avatar FibreFred

      But that IS the case with BT, like any other business that wants to stay in business they invest in something that gives good returns not just throw their money away, hence why it is being partially funded in the first place.

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