The Financial Times and European Telecommunications Network Operators’ Association (ETNO (0)) held their annual summit (1) on Tuesday with an event titled “One Single Telecom Market for Europe?” The event included key European dignitaries and a keynote by AT&T CEO Randall Stephenson.
Vice President of the EU Commission Neelie Kroes gathered with leaders of the telecom community and its investors in Brussels to discuss the digital single market. There is a gloomy outlook for the future as telecom revenue and investment are down. Kroes noted that there is an opportunity to add 1% of GDP in economic growth if the EU can harness its capabilities in ICT. This requires a solid telecom sector, but is at odds with the reality of 28 individual markets, heavy-handed regulation and embargoes on consolidation.
Fleur Pellerin, Minister Delegate with responsibility for Small and Medium Enterprises (2), Innovation (3), and the Digital Economy (4), noted that Europe once was leading the world with mobile, but lost its place with web 2.0 and is now being relegated. In 2002 there were six European phone makers making up 50% of the world’s phones, but now with the Microsoft acquisition of Nokia, there are none. Alcatel-Lucent just laid off 10,000 workers. The telecom industry is expected to shed 10% of its workforce because of lack of revenue.
Pellerin noted a number of European failures compared to the US where Verizon has invested some $200 billion in recent years, and American telcos in general invest at twice the rate as European. The venture capital market in the US is some 8 times larger than the EU’s, and there are only 6 European firms in the top 64 of world’s internet companies.
ETNO Executive Director Luigi Gambardella noted that Asia and North America are faster and better in fiber to the premises and LTE than the EU. Given the status quo, there is an investment shortfall of €110B-170B for the EU’s 2020 goal. However, this sad state of affairs may be turned around by allowing consolidation and flexibility to achieve an efficient market structure. He reiterated his commitment to an open internet model with privacy and security and a level playing field for networks, platforms and services.
Fortunately AT&T CEO Randall Stephenson’s inspiring remarks lifted the gloom in the room. He described his company’s leadership over the last five years in which AT&T has invested more in America’s economy than any single company, and second only to Verizon. “The American economy has been consumed by investment. Telecommunications paired with Silicon Valley is a magic combination,“ he said.
There are a number of factors that have made this possible, but most important is spectrum policy. “This determines everything. Not much else matters if you get the spectrum policy wrong. Policy makers need to be mindful of engineering,” advised Stephenson. He offered four lessons for Europe on spectrum.
- The map matters. Spectrum demands a broad footprint. Carving up little countries with bits and pieces of spectrum is not efficient.
- Owners’ economics drive the greatest development and conservation. He advised European policymakers to offer 30 year licenses. “With a 15 year program, you are a renter and don’t steward the spectrum resource properly. There is no better way to get maximum efficient use of spectrum than with a long license.”
- Markets are best suited to drive technological decisions. The government should be technology neutral. European policies that predefine spectrum to 2G but don’t allow a carrier to substitute 4G are not in anyone’s best interest.
- Markets that are efficient are harmonizing spectrum. The US was in the European situation in the past, but made it through because it was allowed to swap and trade spectrum. Allow the secondary market to be fluid.
The US has had a mobile revolution, and Stephenson is bullish that Europe with its demographics–education, literacy, income—can do so as well. He noted that the American telecom industry went through a difficult period in the last 10 years and has emerged stronger. Europe can do these things and come out better.