Operators cry wolf over investment?

A report by the Financial Times says large telecom groups in Europe feel burdened by EU regulation. So much so, claim the region’s big guns, it is hampering network investment. There is a general feeling among them that current regulatory practices, because of their unpredictability and bias towards resellers, is doing a rather fine job of discouraging investment.

In particular, telcos want regulators to stop lowering prices on wholesale copper access. Constant price tinkering, they say, is making them think twice about investing in high-speed fibre-optic access. How can they have clear visibility of the broadband business case if regulators can butt in whenever they feel like it?

We can see where this argument is going. It seems if regulators don’t back off, then the political and socio-economic objectives set by the EU’s Digital Agenda will unlikely be met. OK, the 2013 target, to bring basic broadband to all Europeans, may well be on track. The 2020 goal – providing all Europeans with internet access speeds of at least 30Mbps – is another matter. Europe’s big telcos want regulators and national governments to believe this target will be jeopardised if things continue as they are. Cuts in network investment will surely make their point.  They can argue the case, in other words, by not putting money where their mouths are.

What’s happening on the ground?

Telcos may well have a valid point about regulatory uncertainty, and they have been making it for some time. Even so, it doesn’t look to be a network investment showstopper. According to a recent report from ETNO, a lobby group representing Europe’s largest telcos, capital expenditure – on both fixed and mobile networks – is in fact increasing (and this at a time when overall EU telecoms revenue is declining).

Figures from ETNO reveal that total investment in the EU telecoms sector reached €44.4bn in 2010 (€24bn on wireline, €20.4bn on mobile), which is a 2.3% increase on 2009. And though ETNO members’ revenue decreased more than the average during 2010 (which takes into account revenue from smaller telcos), the lobby group is at pains to point out that investment by its members increased by 4% against 2.3% for the sector as a whole. ETNO adds that network investment went up again in 2011, by an estimated 5%.

Underlining the extent of ETNO membership commitment to next-generation networks, the share of revenue it allocates to investment increased from 12% to 13.1% in 2010. ETNO members now account for around two-thirds of total sector investment.

Despite all the financial difficulties and regulatory uncertainty, European telcos (albeit reluctantly) are still investing heavily in networks. This is a triumph for EU regulators and governments. The threat of competition has been sufficiently great to spur on capital expenditure by private investors, even though the broadband business case looks opaque. The big telcos may well moan and make veiled threats, but until regulators see hard evidence that network investment is on the wane, they are unlikely to ease the competitive pressure on Europe’s telecom giants.

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