Denmark, according to the rationale of Europe's moany telecom bigwigs, should be a backwater for mobile connectivity. It is a tiny country, home to fewer than 6 million people, and yet it hosts four mobile network operators, making it far too competitive for the average telco boss. Assets can be shared within Denmark, but not easily with networks in other European countries. The same "core" network, for example, could not serve customers of the same telco group across national borders, one telco executive recently complained. Denmark should, by rights, be a subscale casualty of Europe's fragmentation, a telecom dystopia of Nokia phone users and aging antennas.

Yet it beats the supposedly high-flying US, often held up in Europe as a paragon of 5G, on various measures scored by Opensignal, an independent monitor. Telia, the fastest network in Denmark, clocked 5G download speeds of 421.9 Mbit/s in February, while TDC, the slowest, managed a zippy 204.7 Mbit/s. That was close to the speediest American operator, T-Mobile US, with 226.7 Mbit/s in July. AT&T, the worst performer, crawled along at 142.1 Mbit/s. With 5G availability scores ranging from 9.1% to 17.1%, all four Danish operators trailed T-Mobile US, with its impressive 67.9%. But they all beat Verizon's score of 7.7%, and only Telenor, the laggard, was behind AT&T's 11.8%.

This is not the something-rotten-in-the-state-of-Denmark story one might expect after reading "The future of European competitiveness," a doom-and-gloom take on Europe's predicament written by Mario Draghi, a former Italian prime minister, at the behest of Ursula Von der Leyen, the European Commission's president. Europe is behind targets for 5G deployment and invests markedly less per capita in networks than operators do in the US, it grumbles. With 34 "mobile network operator groups," compared with a handful in the US, the EU is blighted by "fragmentation," a favorite word of Draghi's that turns up 16 times. "Fragmented" is used another 14.

Twaddle and more twaddle

The example of Denmark somewhat undermines the telecom part of the Draghi report, which advocates closer integration and a full capital markets union as remedies for Europe's various industrial problems. Returns on investment might be worse in Europe than they are in the US, but this is not the same as saying that Europe has missed 5G and fiber targets and needs to plug a €200 billion ($US220.5 billion) investment gap. Fiber penetration is much higher in some EU countries than it is across most of the US. The connectivity experience varies dramatically between European nations. A single formula to explain the region's ills looks inappropriate, albeit convenient.

The European perception that US telecom is in great shape looks misguided, too. For one thing, T-Mobile US, the most successful operator in recent years, is majority-owned by Deutsche Telekom, Europe's biggest telco, and largely responsible for the 70% increase in the German company's share price over the last five years. By contrast, AT&T's share price is down 25% over the same period, and Verizon's has dropped 29%. Burdened by debts, they have slashed tens of thousands of jobs to protect margins. After strategic blunders in content, their combined annual revenues have dropped 15%, or $45.3 billion, in the last five years.

What's more, Draghi's cursory telecom analysis seems to ignore cost-of-living factors. Yes, the US invests more per head in capex, but the chart included in the report shows that Europe outspends China, seen by Ericsson, one of Europe's main kit vendors, as a 5G leader. Perhaps this is because "fragmentation makes the fixed costs of investing in networks relatively more onerous for EU operators than for continent-scale companies in the US or China," as the report says. But Draghi surely can't have it both ways?

Europe should spend more on 5G, says 5G vendor

The bosses of Ericsson and Nokia seem to love all this, putting their names to a letter from "industrial leaders" that welcomes Draghi's conclusions about 5G underinvestment. This is obviously self-serving: Ask Nvidia CEO Jensen Huang if companies are buying enough of his expensive chips, and the answer would probably be no, despite the 122% year-over-year growth in Nvidia's revenues for its most recent fiscal quarter.

Telecom-sector consolidation that produces stronger and more profitable companies might lift spending on 5G equipment. But under the normal rules of the game, a slump in competition has the opposite effect. When Bjorn Borg unexpectedly quit tennis in 1981, chief US rival John McEnroe could barely motivate himself for a "you cannot be serious" outburst. Telcos in huge countries with few networks and massive economies of scale have also cut spending this year. China's big three telcos invested 135.1 billion Chinese yuan ($19 billion) in capital expenditure for the first six months of 2024, a 10% drop compared with the year-earlier figure. In the US, capital expenditure by AT&T, T-Mobile and Verizon fell 21%, to $22.3 billion, over the same period.

In other words, telcos everywhere have cut back. The reasons are not identified in Draghi's report, which features the usual platitudes about AI requiring faster connections. But they can be easily summarized: operators, after investing billions in 5G already, have seen no material revenue gains; no applications have appeared that work on 5G but not 4G networks; and those networks are coping with data traffic growth, the rate of which has slowed.

Draghi undoubtedly has a point when he complains about European red tape and lengthy decision-making processes. But this seems an unavoidable consequence of a union that has tried to stitch together 27 democratic countries without trampling too heavily on their individual freedoms. The alternatives, surely, are Chinese authoritarianism and a laissez-faire US system with its ruthlessness on healthcare and disregard for workers' rights. Neither would be acceptable in Europe. But in the political climate that has followed Brexit, nor would a closer integration between member states.

Many of Europe's problems are endemic. It has too many old people, determined to enjoy long retirements, and its workforce is shrinking as a percentage of the total population. Parts of it disconnect entirely in the summer, flocking to the beach while the engines of US and Asian industries still hum. Country-specific initiatives are ripped up by successive governments to a degree that does not even happen in the increasingly polarized US. It is certainly "fragmented," as a collection of relatively small countries with different languages, but not in a way that can easily be fixed.

When Huawei was first struck by US sanctions, and facing calamity, it likely told staff to work around the clock or face exile to the Gobi Desert, laughed one telecom expert discussing the Chinese company's revival. It was a joke, of course, and yet Chinese companies probably can extract more from workers than any business could in Europe, given the region's strict employee rights and cultural norms. Few ordinary Europeans would want that changed. As for Europe's telecom bigwigs, they would be advised to cease the perennial whining about forces they cannot directly control – and focus more on what they can.