Business

15 July 2014

Telecoms Balancing Act 

Europe’s telecom regulators want to encourage competition and protect consumers, while the continent’s telecom giants want to merge operations and fend off ruthless discounters.

The complexities of these competing priorities were made plain earlier this month when European Union regulators approved the merger of Telefonica’s German unit with E-Olus, a unit of Royal KPN. To win approval, Telefonica agreed to sell up to 30% of the merged company’s network capacity to maintain competitiveness in the German market.

EU telecom regulators oversee a patchwork of cellphone service providers scattered across the continent. Mindful of the need to protect consumers, they have held prices low and moved to reduce roaming charges Europeans pay to use their phones outside their home country.

Large telecom operators, meanwhile, are being squeezed on the other side by low-cost providers that relentlessly cut into profit margins by tempting consumers with bargain rates.

Europe’s cellphone consumers pay about half of what American customers pay. But Americans, and Asians as well, also enjoy far greater access to high-speed "fourth-generation" data and voice networks, the wave of the future.

Telecom firms and regulators agree that Europe needs what are rapidly becoming essential services for businesses and consumers alike. Upgrading cell networks to accommodate faster Internet connectivity will be expensive, and the big providers insist they need more flexibility on prices to build them.

EU regulators came under fire earlier this year when prices seemed to rise after they approved mergers in Ireland and Austria. Despite the temptation to please consumers in the short run, Europe’s 500 million cellphone consumers are best served by access to the best technology, especially if it’s available to competitors around the world.