Friday, May 16, 2014

Who Wins, Who Loses, Always Matters for Communications Policy

Perhaps significantly, there seems to be a growing belief within the European Union communications community--including some regulators--that a new balance between policies fostering “competition” at the expense of “market power” must be struck.

For the most part, such discussions center on the need for greater scale in the European Union communications industry.

But European Commission regulatory authorities and member national governments do not appear to agree on how to create a more-unified communications market for the European Union.

German Chancellor Angela Merkel, for example, has called for a reform to EU competition law in the telecom sector, allowing the formation of bigger pan-European service providers, even when that reduces competition.

"A balance needs to be achieved between market power and competition so that we can score internationally," Merkel said. Jean-Claude Juncker, a candidate for European Commission president, has also recently added his voice to the growing political support for cross-border mergers of telecom groups.

EC competition authorities, including Joaquin Almunia, European Commission vice president for competition policy, oppose easing merger restrictions.

In large part, the differences of opinion reflect national thinking, as opposed to “European” thinking, Almunia seems to suggest. But the differences also reflect traditional "bureaucratic" squabbles over where power and authority resides.

Almunia notes that national regulators are unwilling to cede authority in key areas such as spectrum allocation, in large part because auctions of such spectrum are significant generators of governmental revenue.

“These governments don't want to allocate spectrum at EU level because they are not willing to forgo the billions raised in auctions, which go directly to their respective national coffers,” Almunia said. “Unfortunately, they prefer to keep spectrum allocation and regulatory decisions in their national hands.”

At some level, the differences also reflect bureaucratic (“bureaucratic” in the analytical sense, not the derogatory sense) dynamics.

It never would be out of place or unusual for a higher authority to argue it is better placed to conduct regulatory operations than lower authorities (again, in the sense of geographic scope, not relevance or value).

Rarely do regulators or officials at any level, in any domain, voluntarily argue their mission is finished and that the agency should be abolished.

Still, those issues aside, there are now new arguments about the objectives of communications policy within the European Union. Traditionally most concerned with fostering competition, at least some regulators now say that cannot be the exclusive or primary focus, given the need for massive investments in next generation infrastructure.

Also, even the proponents of consolidation have nuanced views. National governments often oppose takeovers of major domestic companies or industries, even as they support their own national firms being the buyers of companies in other nations that would increase communications service provider scale.

Almunia, Merkel and Juncker all seem to agree that one key difference between communications markets in the EC and the United States and China, for example, is sheer scale.

But Almunia and Merkel differ on the amount of consolidation that should be encouraged. They also disagree about a transfer of decision-making authority. Almunia bluntly argues that what is required is a “fully-fledged EU telecom regulator, EU-wide spectrum allocation, and no roaming charges.”

Perhaps more significantly, Almunia also argues that competition rules that would speed up market consolidation are unnecessary.

“As to competition rules, they would not have to change for enforcement to adapt to this scenario,” Almunia said. “In an integrated EU market, the definition of relevant markets would automatically change,” with mergers considered on their pan-EU impact, not national impact.

“Therefore, if our political leaders want to be rigorous when they talk about the telecom industry in the EU, they should start thinking as European leaders, rather than giving precedence to their respective national priorities,” Almunia said.

Ironically, all parties seem to want a single EU telecommunications market. But what that means, who benefits and who might lose, is the issue.

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