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Bringing back growth and employment to Europe is possible with a pro-investment Telecoms Regulation Reform

Just when the European Commission is working on a Legislative proposal to accelerate the completion of a Digital Single Market, a new study from Boston Consulting Group gives some light to the root causes of the bad health of the European telecom sector.

 

The study arrives to some impressive figures: the European economy could receive in the middle of the crisis an injection of up to 750 billion Euros and create 5.5 million of jobs by 2020 just by following the deregulatory path suggested in the study. This is mainly due to the spill over effects that investments in the digital sector have in the whole economy.

 

The good news is that the European Commission is fully aware of the importance of the problem the sector is facing and also of the urgency to take appropriate actions. If many people share the view that changes are needed in Europe, it is maybe now time to find the right solutions to boost the European ICT sector and catch up on the growth and employment possibilities highlighted in the BCG’s study.

 

The study, published by Boston Consulting Group, “Reforming Europe's Telecoms Regulation to Enable the Digital Single Market” proposes a new plan to build a Digital Single Market. The plan should contribute to avoid the current regulatory-led market fragmentation across the EU and make the sector return to the growth path. It is based on five pillars, with one key call for action for a deregulatory approach to promote investments in ultra-fast broadband and avoid current distortions of competition.

 

According to this report, current telecom regulatory framework in Europe is at the root cause of EU underinvestment and has led Europe to lag behind other regions. BCG has found the European industry is losing revenues and overall market capitalisation is shrinking, in stark contrast with the US and East Asia, where the sector is growing.

 

BCG highlights that a new deregulatory approach is urgently required to ensure the long-term sustainability of the sector and its competitiveness at global level and proposes the following five key measures:

 

  1. Substantial deregulation of fixed-line wholesale access
  2. Ensuring a level playing field between network operators and "over-the-top" (OTT) service providers
  3. Harmonised spectrum policy ensuring efficient allocation and use of scarce spectrum resources
  4. Permitting healthy consolidation in mobile
  5. Harmonising rules and procedures to unlock cross-country synergies.

 

This action program is in line with what investment players have been asking for long time. Currently players using other’s networks have better average return on capital employed than players who invest.  The study clearly identifies the reasons for the lack of investment in both fixed and mobile in Europe.

 

The opportunity ahead is significant: either Europe is able to find the way to create the virtuous circle of investment and growth, or Europe will lag behind the rest of the world in the future digital infrastructures aggravating the consequences of the current financial crisis.

 

Click here to access the BCG’s report.

 

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Lourdes Tejedor / @madrid2day

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