* How to regulate
– With a new Commissioner the EC has started a review of its Telecoms Regulatory Framework. Most notably, Brussels has started to review formally whether European telecoms regulation should change to reflect both the gradual loss of dominance by European telcos (to cable) and the increasing consolidation of the mobile market. Both markets are
becoming more oligopolistic, leaving big decisions for telecoms regulators
o Should incumbents become deregulated as cable market share grows, or cable become more regulated?
o Should mobile operators become regulated as markets consolidate to three or two mobile network operators?
* BEREC proposes to regulate more.
The EC has in the past described a process of gradual de-regulation of the sector. However BEREC, the body of
national regulators, last week came out with their initial view on the topic and suggested regulation should be extended rather than withdrawn, i.e. that incumbents/cable, or concentrated mobile markets should be treated as instances of 'tight oligopoly' and assessed for potential market failure, with the same menu of potential remedies applied to incumbent telcos today. This would be a much worse regulatory regime than investors are hoping for currently, and could be very negative in extreme instances. Indeed, the biggest shocks to the sector have
* Commission stance unclear.
The European Commission has the lead on proposing how to reshape the regulation, and its decision will have bigger
implications for the industry than the debates about roaming and net neutrality that make the headlines. The DG Connect Commission has in the past supported a de-regulatory direction, so adopting the BEREC proposal would be a large U-turn. Furthermore, new Commissioner Gunther Oettinger is expected by most to be relatively measured in balancing investment incentives against competitive intensity. Oettinger also recently questioned a proposal by the Dutch regulator (ACM) to continue to regulate KPN as a dominant operator. But where the EC stands - whether its wants ACM, and NRAs in general, to regulate less or more is unclear. Meanwhile, the Competition Commission led by Margrethe Vestager may be sympathetic to regulating mobile in consolidating markets.
* It is too soon to draw a conclusion but investors should follow this oligopoly debate, which could impact the sector long-term if BEREC's view prevails.