Telecom reform loses power and time

Michael Hedges July 14, 2008

Members of the European Parliament effectively thwarted Commission plans to bring big telecoms to heel. With less than a year before the next European Parliament elections and a new Commission before the end of 2009 telecoms have little to fear from increased European regulation. For media content producers it means more competition as telecoms keep consumer prices up and continue to invest in content.

Two committees met last week (July 7) and streamlined over 1000 proposed amendments to the draft telecoms package. The Industry, Research and Energy Committee (ITRE) voted to “not create a cumbersome body which lobbies for its own existence,” in the words of critic MEP Pilar del Castillo. The Internal Markets and Consumer Protection Committee (IMCO) concurred.

Info Society and Media Commissioner Viviane Reding proposed establishing a powerful pan-European telecom regulator. The intention was to overrule national telecom regulators when they fail to deregulate and continue their well-established cozy relationships with incumbent (read: the not so formerly State owned) telecoms. Instead the Industry Committee voted to create BERT: Body of European Regulators of Telecommunications. BERT, if finally approved by the European Parliament, will be comprised of the 27 Member States telecom regulators. BERT and the European Commission, primarily Commissioner Reding’s office, will jointly advise on national regulators ‘misinterpretation’ of EC rules, the last word remaining with BERT.

National regulators will also keep control over that digital dividend spectrum. Redistribution of radio spectrum as analogue broadcasting gives way to digital will not need Commissioner Reding’s blessing, keeping those auctions at home.

Completely separate, but related, the EC Radio Spectrum Committee approved a pan-European WiMax allocation plan (July 12). WiMax technology (‘WiFi on steroids’) is a new generation wireless internet platform, potentially competing with existing mobile phone technologies so beloved by big telecoms. WiMax also has the potential to bring interactive digital broadcasting through building walls and into automobiles. 

The Industry Committee did approve forcing big telecoms to ‘functionally separate’ network and retail operations, one of Commissioner Reding’s core proposals to force down consumer costs and help facilitate access to networks, for fee, by new operators. BT (formerly British Telecom) implemented functional separation last year. The usual suspects, incumbent telecoms such as Deutsche Telekom, Telefonica (Spain) and France Telecom, oppose the measure as a disincentive to investment. In reality, they don’t want anything to get in the way of the free cash flow from retail operations.

European broadcasters, public and private, generally take a dim view of a market-based approach to spectrum management, particularly auctions for ‘digital dividend’ frequencies. They also prefer national rather than pan-European spectrum management, noting, too, that the International Telecommunications Union (ITU) negotiates big, global spectrum issues by treaty. Mostly, broadcasters oppose any kind of spectrum management that might lead to higher costs. While big telecoms in the UK have ‘functionally separated’ networks and retail operations, broadcasters still face a disincentive to further invest in digital broadcasting because of high transmission costs, often set by infrastructure providers affiliated with big telecoms.

Broadcasters and publishers would benefit from tougher regulations on big telecoms. Limiting telecoms vertical expansion – an element of ‘functional separation’ – forces telecoms to make mobile platforms more competitive (read: affordable) and more attractive for the content created by broadcasters and publishers. Left to their own devices (so to speak) telecoms will forge ahead with expansion into content production and exclude broadcasters and publishers from an important platform.

Political winds are blowing against more power and authority for the European Commission. The reform European Union treaty faces the hot breath of Member States’ politicians tacking toward national interests. Most incumbent telecoms remain partially State owned and, like national regulators, filled with political appointees and cronies. That’s a big boat to rock.

Under the direction of the French EU presidency, the telecoms package will reach the full European Parliament in September and votes from the Member States by November. By then MEP election campaigning will be in full swing, the election of MEPs set for June 2009. After that a EC President will be selected along with, potentially, shifts in Commissioners.