EU regulators expected to axe fixed call price caps

EU telecoms regulators reportedly want to rid the industry of price caps on fixed calls in an attempt to open up and boost the European sector, which is considered weak compared to the US and Asian markets.

Welcomed by (ex-) incumbents, the proposal, which would allow carriers to set their own tariffs, is not being received so well among the smaller telcos, such as TalkTalk and Sky, who fear the move could lead to higher prices and worse margins for them as they heavily rely on the bigger players’ networks by renting out capacity.

It has been reported that carriers like Telefónica, Orange and Telecom Italia have said the move would provide a much needed boost to decreasing fixed call revenues not only reduced by the current price caps but also by the overall decrease in the use of landlines, as well as OTT services such as Skype and various conference call services and messaging apps, leading to fewer mobile calls and texts, and ultimately fierce competition and price cuts. According to the European Telecommunications Network Operators’ Association (ETNO), the major telcos’ fixed telephony revenues dropped by €5 billion in 2012 alone.

The new plans put forward by EU regulators could come into effect as soon as next month, depending on the European parliament’s approval. However, EU member states will still have the right to decide for themselves whether to abolish price caps or not. While incumbents have apparently said scrapping the price caps would allow more investment to high-speed broadband infrastructure, helping to catch up with the US market, the German national regulator has been reported confirming it would continue to operate within the current price parameters whatever the EC’s decision on price caps.

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ETNO, whose members include such big players as Deutsche Telekom, Orange, KPN, Telefonica, Telecom Italia and TeliaSonera, has voiced full support to the EC’s recently started ICT and telecoms overhaul in Europe. “We share [EC] President-elect Juncker’s view that if we are to build a stronger economy for Europe, we need a stronger digital sector. We believe it is time for a new approach: more growth-enhancing policies and less traditional regulation to benefit both European citizens and businesses,” Luigi Gambardella, ETNO Chairman said.

The new rules could come into effect pretty soon but it remains to be seen which of the 28 EU countries’ own regulators will actually adopt the freer approach to fixed call pricing. With all the other pressures telcos are facing in the form of European mobile call, text and data pricing caps, as well as the increasing use OTT services, it  remains to be seen how much of a difference the removal of fixed call price caps can make.