Europe's telco bosses do harmonized moan at MWC 2024

The bosses of Europe's four big telco groups have apparently never "performed" together on stage at Mobile World Congress. When they did this year, then, it was presented as a seminal moment, like the first time De Niro and Pacino ever shared the silver screen (Michael Mann's Heat, in case you wondered). Disappointingly, the drama in Catalonia was the equivalent of a box-office dud, a badly acted affair full of hackneyed lines.

Europe's big telcos are huge fans of remakes, and the all-too-familiar story goes something like this: Telecom networks are super important, sales growth has stalled, markets are overly competitive, Europe faces a €200 billion (US$216 billion) investment gap, and regulators need to help. If that final act can be likened to any movie scene, it is surely the "Please, sir, can I have some more" bit of David Lean's Oliver Twist – only the boy here scrubs up rather well.

The support they want is a confusing jumble of interventionist and laissez-faire regulation. Even so, one can sympathize with telco annoyance at the dogma of four is better than three, especially after Barclays recognized in a report last year that numerous mobile operators in Europe do not cover their cost of capital.

"The problem we are facing is this problem of multiplying parallel infrastructures," said Margherita Della Valle, Vodafone's CEO. "In the 5G world, it is absolutely impossible to have economic returns on so many networks built in parallel." Four-to-three mergers are typically blocked. When allowed, as recently happened in Spain with Orange and Másmóvil, authorities usually open the door for a new network.

Similarly on spectrum. The government approach here is that of a protection racket, where officials allow the business to survive in exchange for regular hefty payments. "In the US, spectrum gets sold … you own it for your life," said Timotheus Höttges, Deutsche Telekom's CEO. "In Europe, every 20 years, we run into an auction. Germany since 2000 has taken €65 billion [$70 billion] out of our ecosystem – Vodafone, Telefónica, Deutsche Telekom – to get it as a tax for the government."

Fair share nonsense

Unfortunately, telcos rather spoil the script elsewhere. By far the worst act is the one about "fair share," the notion that a few big Internet companies should pay operators because they are largely responsible for "exponential" (the word used on stage by Orange CEO Christel Heydemann) and costly traffic growth on networks. If this were a screenplay, it would have been shredded by any sensible director as implausible.

"Orange CEO trots out the falsehood of 'exponential traffic growth,'" said Dean Bubley, the founder of analyst firm Disruptive Wireless, in a tweet. Data compiled by William Webb, the chief technology officer of Access Partnership, another analyst firm, points toward an S-curve slowdown, a flattening out in the next few years. Telcos, moreover, have failed to show much correlation between traffic growth and costs. Telefónica's headline operating costs have fallen substantially in recent years. Its capital intensity – capex as a percentage of sales – is also down.

Identifying traffic growth as a problem and then blaming that on the application developers who create demand for telco services is truly bizarre, like holding the makers of blockbuster movies responsible for wear and tear at cinemas. Should Warner Bros have paid Cineworld for new seats because Barbie flooded movie theaters with people? The analogy ends with pricing. More bums on seats equals more revenue. More gigabytes of data typically doesn't. But that problem is not of Big Tech's making.

If telcos want less regulation when it comes to mergers and spectrum, they clearly want more of it here. Otherwise, why bring it up with regulators at all? Why not just negotiate directly with Big Tech? Probably because, despite what they say, operators see a contradiction with net neutrality, the legal principle that forbids operators from blocking and throttling Internet content and services, and that also warns against any online "paid prioritization" of one company over another.

If the few Big Tech companies being charged refuse to pay up, will telcos be allowed to block them? If regulatory fines go unpaid, will authorities take them offline? This is no defense of net neutrality, ill-defined and nonsensical as many of its sub-clauses are. But fair share and net neutrality are an oil-and-water mix, whatever anybody says.

The pointlessness of 5G

Dialogue about Europe's €200 billion investment gap and falling behind China and the US is also weak. China clearly dominates 5G spending and rollout. Unlike other countries, it is an enthusiastic builder of private 5G networks for its enterprise sector. Yet to what end? Its economy has been struggling and faces contraction this year, according to experts.

US operators, meanwhile, appear even less inclined to spend than Europe's. Nokia's sales tumbled a third in North America last year compared with 12% in Europe. Ericsson's North America revenues were down 41%, while sales at its Europe and Latin America division fell 9%. And the only other big 5G kit vendor active in North America is Samsung, which does not disclose these figures.

"What is the point of 5G?" It's a question on the lips of numerous people who routinely attend MWC even as telco CEOs in Europe chunner about funding gaps and falling behind. Behind whom? Someone else investing in a pointless tech? Of course, 5G is not pointless, just a disappointing generational upgrade that has made zero difference from a customer perspective and merely brought more capacity for operators, paid for in those hefty spectrum fees and new equipment.

While European CEOs see the need to hurl another €200 billion at telecom infrastructure, their chief technology officers hope 6G will not require another infrastructure splurge. "Please let's not make it a hardware refresh," said Howard Watson, the chief security and networks officer of the UK's BT, during an interview with Light Reading. "There'll be different spectrum that will need to put new radio units out there. And I think it's probably the catalyst for open RAN at scale, so there'll be some changes there. But let's not make it an essential part of launching the capabilities that we have to go and rebuild the macro network."

Company CEOs paid millions should be able to come up with some fresh ideas instead of playing the same old tune. That said, Deutsche Telekom's Höttges deserves some credit for his leading-man performance, full of snappy soundbites and colorful allusions. "You can't ride on a dead horse," he said, using an unfavorable metaphor about European market structures.

He had previously asked generative AI to produce an image representing European telecom as a star that lost its shine and is now trying to recover. The resulting image, featured soaring above his head, was a winged humanoid in uncertain health. "Is it Icarus, who is at the end of the day dying, or is Phoenix, which is needed to succeed?" he said. Today, the Phoenix comparison seems optimistic.