Regulators seem to be forgetting telcos are commercial organizations

Another letter to the European Commission from the major telcos has emerged today, raising the questions whether regulators believe telcos should be philanthropic organizations not money-making machines.

The letter, seen by the FT, is a complaint from the bosses of some of Europe’s most powerful communications organizations, bemoaning the direction of new rules governing the digital economy. According to the telcos and major kit vendors, changes to the Electronic Communications Code could disincentive organizations to invest in infrastructure to power the connected era.

This is not the first letter or complaint from the telco space over the direction of new rules. Changes do need to be made, but it is critical these changes are justifiable and create an appropriate environment for the industry. While it is easy to forget about the telcos when companies like Google and Amazon are tearing up trees all over the place, the telco sector will be the foundation of any and all success in the digital economy; we can live without Facebook or Spotify, but without the telcos the whole pyramid collapses.

The emergence of these letters and complaints suggests regulators are not appreciating what telcos are. The attitude of governments, regulators and bureaucratic bodies like the European Commission, seems to be the communications companies and their assets are servants of the nation. It appears the view is these organizations should serve the economy, the citizens and the organizations who build services on top. It looks like it has been forgotten the telcos are no longer nationalised bodies and the infrastructure is not a government owned asset. There are of course examples where governments have notable stakes, but the objective here is to make money for shareholders.

It is a difficult situation to manage. The importance of the digital economy to countries on the whole cannot be underappreciated. Emergency services are becoming increasingly reliant on the infrastructure, so are children’s education, as well as the majority of businesses. There is a need to make the telcos accountable, but the decision to privatise the industry was made and it was the right one. Rules and regulations need to reflect this, unfortunately it looks like public servants are taking the attitude the primary objective should be to bend to the will of the government and the people, not shareholders. Profit margins are being squeezed and new rules are focusing on everything which sits on top of communications infrastructure.

General feedback from the telco space is the status quo is looking preferable to the new rules, which many have described as a disincentive to investment in the sector, scaring away new investors. For years, the technology industry has been biting the hand that feeds it, with the OTTs collecting the lion’s share of profits and only allowing crumbs to fall to the bottom; new rules cannot fuel this trend. The more rule makers look at telcos as the servants of the economy, the worse the problem will become.

Building communications infrastructure is a very expensive business. Billions are spent every single year to improve mobile signal, download speeds and broadband connections, but this is viewed as something which the telcos should do because they have to, not because they are searching for new ways to make money. No other industry, or section of an ecosystem, is held in such disregard by the government. This indifference makes it even more dangerous that the telcos will define the next era.

The telcos love to complain, but there has to be some sympathy here. It seems some have just forgotten their mission is to make money not to act as a philanthropic provider of connectivity. Rules need to reflect this, otherwise we could be heading down a very worrying path.