Will EU "Connected Continent" Plan Spur Investment, or Not?

European Union Connected Continent legislation ending all roaming charges within the EU, creating a network neutrality framework and also circumscribing the ways Internet service providers advertise and market their services are part of a package approved by the European Parliament.

The legislation faces another vote in Parliament, and then must be approved by member states, so the final version of the rules could change.

There are questions large and small, though. The specific proposals, which might be further modified, are easiest to explain.

For mobile service providers, the biggest change is the complete ban on roaming charges within EU countries. For application providers, the biggest consequence is anti-blocking rules, referred to as network neutrality, but arguably better described as prohibiting any Internet service provider from blocking lawful apps.

Among other consumer protection provisions, ISPs will have to modify their marketing, refraining from using “up to” clauses when referring to access speed. Instead, ISPs will be required to supply information on the “average speeds” they actually provide to their customers during normal and peak times.

The long-term questions are harder to assess. The legislation is supposed to unlock investment in next generation networks. But some do not believe this will happen, in part because the rules make reliance on wholesale access to new markets even easier.

Strand Consult thinks the EU communications market will face greater business risk as a result, in part from arbitrage of prices between high-cost and low-cost markets.

The vote will need to be approved by Council of Ministers, which is unlikely before the EU Parliamentary elections in May 2014.  

“The package raises more questions than it answers and exacerbates the challenges that the EU and the telecommunications industry have and will have the next four to five years, Strand Consult argues.

“We believe that the telecommunications market in Europe will be somewhat similar to a free fall over the next four to five years,” Strand Consult predicts.

Nor will the new rules spur needed investment in next generation infrastructure, Strand Consult argues.

Consumers will be able to terminate their contracts if there is a significant and non-temporary discrepancy between what they were promised and the service they actually get, in terms of access speed.

That will be a bit of a statistical challenge, since actual speeds experienced by any user, at any time, will depend on what other users sharing access resources are doing. Additionally, access speed will hinge on devices used with the access connection, as well.

The legislation also helps harmonize spectrum allocation across the EU, and simplifies regulations in ways that will make pan-EU services easier to create.

Service providers will have the chance to operate in all countries through a single EU authorization, and the chance to deal with that one authority on other licensing issues, instead of being required to get separate licenses in each member nation.

In other words, service providers would gain pan-EU legal certainty and equal regulatory treatment.

Spectrum policies also will be harmonized, a move that is expected primarily to benefit 4G Long Term Evolution mobile networks. Wholesale access policies likewise will be standardized to a greater extent across borders, and essentially making it easier for competitors to enter new markets using wholesale access mechanisms.

Service providers, as you would guess, are not happy with many of the new rules. Service providers probably are resigned to the end of roaming fees, but the network neutrality rules, which would prevent creation of new quality assured services, likely will get more resistance as the rules are considered by each of the national regulators who must also agree.
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