Broadband Speeds Four Times Higher in Better Regulated Markets, Study

Businesses and consumers are losing EUR 25bn per year and broadband speeds are being restricted due to uncompetitive telecoms markets, reveals a study released by ECTA last week.

As the EU launches its 2020 strategy for Europe’s recovery with a flagship program to deliver benefits from a Digital Single Market, the report finds that competition in the telecoms sector is a key driver for lower prices and substantially more attractive broadband speeds. It claims that the take-up rate of superfast broadband in Germany could double if networks were opened to competition.

The report by Analysys Mason looked at the telecoms landscape in six European markets - Belgian, Germany, Italy, Poland, Portugal and Spain as well as producing a pan-European analysis of business services. It finds that incumbent retail market shares are high, stable and even in some cases increasing and lists a catalog of potentially anti-competitive and discriminatory conduct by dominant firms.

Key findings and conclusions from the report:

  • Many countries show high, and stable or even increasing market shares for the incumbent. In the fixed calls market, incumbents still retain 60-70% of the retail market by value, whilst broadband and mobile retail market shares remain unbalanced.
  • Major competitors remain significantly less financially secure than incumbents with EBIT margins significantly lower and capex equal or higher as a proportion of revenues. Incumbent EBIT margins have been maintained even whilst they are making investments in ‘next generation’ fiber networks.
  • Less concentrated markets consistently deliver better prices for businesses and consumers– and in the case of broadband significantly higher speeds. Where material competition from ‘unbundling’ of the incumbent network exists typical consumers receive 8Mbps instead of 2Mbps.
  • Regulation is not yet sufficiently protecting the interests of consumers. In particular remedies aimed at promoting competition are lagging market realities and competition law enforcement has proved slow and ineffective in preventing abuse of dominance.
  • Evidence from a survey of competitive operators and available data suggests potentially discriminatory conduct by dominant firms including refusal to supply essential inputs to competitors, margin squeeze and substandard service quality.

“The European Competitive Telecom Association (ECTA) will be calling on the Commission and national regulators to investigate competitive failures in the Telecoms sector and to examine the possibility of using new functional separation powers on dominant firms where necessary”, commented Hubertus von Roenne, Chairman of ECTA.

“We also see the forthcoming recommendation on Next Generation Access as a key opportunity for the Commission to address failings and take action that will deliver a liberalized electronic communications market in Europe over the next ten years.”

A 2009 study prepared for the European Commission estimated that effective take-up of broadband across the EU27 would deliver an extra 1.1 million jobs and a GDP increase of EUR 850 billion by 2015. However, findings from the report suggest that take-up of high speed services that are crucial to the digital economy and to jobs and growth may not be realized unless the dynamic benefits of competition can be harnessed.

Looking to the future, the Digital Deficit Study highlights Next-Generation broadband services as a particular concern and cites Belgium where VDSL has been deployed, where next generation speeds are not offered by the incumbent and the service costs EUR 70 per month compared to just EUR 20 in France (where similar speeds are provided over ADSL).

The study suggests that the situation will deteriorate unless measures are taken to prevent discriminatory conduct.

“In the early 2000s dominant firms prevented Europe’s citizens from receiving affordable broadband services by refusing to open their networks to competition. The story has not changed, but the stakes are even higher because telecoms networks now form the basis for the wider digital economy."

"Consumers in many countries will have a more limited choice of providers, experience great differences in prices and quality of service, and investment in high speed Internet will be very limited if urgent action to open networks and enhance competition is not taken. European policy-makers need to rediscover the impetus they had when they initially opened the market if they want Europe to be a worldwide leader in communications”, Mr. von Roenne said.

Read the full press release.

Download the full report or the executive summary.

Source: ECTA

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