Wall Street Journal: What Europe’s Telecom Investors Want

Opinion article published in the Wall Street Journal, written by the president of EUBrasil, who is also chairman of ETNO.

Mobile phones at boothBy LUIGI GAMBARDELLA

A new wave of EU digital policies is about to rise. Jean-Claude Juncker, the president-elect of the European Commission, has put the digital single-market at the top of his list of policy priorities. Mr. Juncker’s headline is clear: Digital is a main enabler of economic growth, and European leaders need to exploit policies on Internet and communication technologies to deliver. But how to get there?

For starters, there will be no growth without investment. An investor’s decision to bet on EU companies can make all the difference when it comes to the Continent’s growth or stagnation. So leaders in search of pro-growth policies would do best to figure out: What do investors want from the European telecom industry?

Let me share my best guesses.

First, telecom investors want reassurance that future regulation won’t restrict business opportunities. We are at the dawn of a new investment wave in the sector, which will require huge capital for 4G and fiber deployment. If Europe wants money to flow into these projects, it needs to take the regulatory load off the capital investment. In other words, the entire regulatory approach to markets must change. Let us favor competitive commercial agreements rather than outdated rules conceived in the 1990s.

Second, investors want telecoms to operate at an efficient scale and, ultimately, they want to see a healthier industry. Interestingly, some think that consolidation will translate into reduced surplus for consumers. I see this as a very narrow view of consumer interests: Why shouldn’t we allow stronger market players to deliver top-level quality for all? Do we not believe that healthier telecoms can also ensure more value-to-consumers in the long run?

We also need to foster the global competitiveness of our companies: Either we allow them to become stronger at home—and therefore relevant on the global scene—or we let non-EU groups shop for shrinking European telecom firms.
The third thing investors want is centralized spectrum management. If we think of spectrum as the lifeblood of the mobile industry, we should then agree that it must be freed from current national inconsistencies—especially if we are moving toward a roaming-free Europe. Lowering barriers on the consumer side is important, but it isn’t sufficient to build the digital single market that we all want. As long as the main input of the mobile industry is dealt with in a fragmented way, there simply won’t be a single market.

My fourth and last guess is that investors see demarcations such as fixed-versus-mobile as being outdated. Such lines simply do not exist anymore in their view, because markets have changed and function in a different way than they used to.

This is why I am in favor of a new regulatory framework and a new set of digital policies. Both need to properly recognize that the digital value-chain has radically changed. The current telecoms regulation mode should be switched off. We need less regulation and more pro-industrial policies, and recognition that “digital” needs to be a horizontal issue dealt with by all European Commissioners.

If we want to digitalize Europe, we need lighter and better targeted policies that boost demand while making the Continent smarter. And, where a regulatory approach to digital still makes sense, we need to make sure it is residual, and find opportunities for actors providing similar services to be regulated in the same way.

As I see it, this is not a shopping-list for the next Commission mandate. Rather, it is a summary of the agenda items that should be shared by all pro-growth forces in the game. The investors’ way might not be the only way, and it will definitely need to be part of a broader political project. But policy makers must listen to them, especially at a time when we are all craving growth.