Cheers and jeers for Draghi's proposals to overhaul EU telco rules

At the behest of Brussels, the former Italian prime minister has published a lengthy report detailing the current state of EU competitiveness – or lack thereof – in a great many important sectors of the economy, telecoms being one of them.

The general gist of the report is that the EU's aversion to dominant players has left it with fragmented markets and a deficit of industrial giants that can compete toe-to-toe with their Asian and American and counterparts.

That of course includes network operators and the connectivity services they offer.

To regain lost ground, Draghi says the EU's M&A rules need to put greater emphasis on ex post regulation that imposes remedies on a dominant player that abuses its position, and focus less on ex ante regulation that prevents consolidation from taking place at all, or at the very least imposes onerous remedies on the merging parties.

Anyone familiar with the European Commission's February white paper, How to master Europe's digital infrastructure needs, will already know where this is going, because Draghi is singing from almost exactly the same hymn sheet.

"Today, the EU has dozens of telecom players serving around 450 million consumers, compared with a handful in the US and China, respectively," the report says.

That's bad, because apparently "EU companies lack the scale required to provide citizens with ubiquitous access to fibre and 5G broadband and to equip businesses with advanced platforms for innovation."

That's interesting, because 5G covers 72% of the EU population, while fibre networks pass 64.5% of premises in the EU plus the UK – according to the European 5G Observatory and the FTTH Council Europe respectively.

In the US – with its fewer, giant telcos that have the scale and the might and the can-do American attitude that's the envy of the world – 5G coverage stands at 62%, and fibre networks pass 53.5% of premises. This is according to stats from comparison service Broadband Now and the Fibre Broadband Association respectively.

Arguing about the intricacies of data collection on one side of the pond compared to the other would take the rest of time, but broadly speaking, as far as network availability is concerned, the picture in Europe is similar to the one in the US.

Draghi's report also notes that in Europe, both revenues per subscriber and capital expenditure per capita are less than half the levels in the US and Japan, but that investment as a percentage of revenues is at the same level as – or even higher than – those other blocs.

But if those aforementioned coverage stats anywhere close to accurate, then networks are rolling out in spite of these supposed financial hardships.

It's almost as if the EU telecoms market is functioning as intended for millions of end users, but not to the satisfaction of a few people who enjoy a nice dividend every year.

Nonetheless, Draghi is sold on the idea of a single telecoms market, and encourages the EU to adopt harmonised rules regarding spectrum allocation, cybersecurity, lawful intercept, and consolidation at the EU level, rather than member state level.

While there is a mention of facilitating cross-border consolidation, there is no explicit nod to in-market consolidation, which is what telcos (Vodafone and Three UK being a case in point) really want.

In addition, despite widespread opposition, Draghi has also bought into the idea of fair contribution – charging content and application providers (CAPs) to use the networks that carry their data.

Perhaps the strangest recommendation concerns APIs and edge compute.

Rather than let the industry continue to draw up and implement standards for edge computing and open network APIs, Draghi is pushing for the establishment of an EU-level body with public-private participation to do it instead.

This, he claims will "ensure that EU players remain at the forefront of new technological developments."

Opinions on Draghi's recommendations vary.

Ericsson – which is becoming increasingly desperate for telcos to start spending on networks again – welcomed the recommendations in an open letter co-signed with 18 other European CEOs.

"The Draghi report is a timely call to action, bringing into sharp focus the challenges Europe is facing and the pivotal role connectivity will play to address its competitiveness gap, as an enabler of innovation and exponential technologies like AI," said Jenny Lindqvist, SVP and head of Ericsson Europe and Latin America.

"The report rightly emphasises the need for facilitating consolidation in the telecoms sector and the harmonisation of spectrum pricing best practice across the EU. Both are key factors in realising a true single market for telecom and to incentivise infrastructure deployment in order to close the productivity gap."

Ecta, the lobby group representing smaller, challenger-brand operators, doesn't see it quite the same way.

Having already voiced its opposition to the February white paper, it has now dusted off broadly the same criticisms and levelled them at the Draghi report.

It argues that Europe "excels with respect to its global peers when it comes to combining the deployment of gigabit networks, their adoption by consumers and professional users, as well as affordability and inclusion."

Far from stifling the market, Ecta claims ex ante regulation drives investment, innovation and consumer benefits.

"We fear that the Draghi report is based on a flawed evaluation of the European model and therefore entails the risk of coming at a high price for consumers, enterprises and public administrations and, furthermore, risks putting the EU's competitiveness in the digital realm in jeopardy," said Ecta director general Luc Hindryckx.

"Reducing competition always comes with a high price and does not foster innovation or investments," he said.

"Let's not forget that the so called big-tech companies are not the fruit of incumbents and all started from zero."

However, with more and more powerful voices pushing for change, Ecta's concerns - and those of consumer advocates - are at risk of being drowned out.