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Telecom Sector 'Its Own Worst Enemy' – KroesTelecom Sector 'Its Own Worst Enemy' – Kroes

Neelie Kroes ends her tenure as the European Commission's vice president for the Digital Agenda with a blistering attack on Europe's telecom operators and advises them on the future.

October 2, 2014

11 Min Read
Telecom Sector 'Its Own Worst Enemy' – Kroes

Given her track record, Neelie Kroes, the European Commission's vice president for the Digital Agenda, and scourge of Europe's mobile operators, was never going to step down from her post quietly.And she didn't.Having had responsibility for the Europe's "digital economy," including regional telecom and online regulations, since early 2010, Kroes has implemented a series of regulations and made numerous decisions that have directly affected the business, operations and strategies of communications service providers, mostly notably the reduction of mobile data roaming charges, announcements on net neutrality and marketing transparency, and her quest to introduce a single telecom services market. (See Eurobites: Red-Letter Day for Roaming Charges, Continental Shift, EC Nixes Pure Net Neutrality and Reding Replaced as Europe's Telecom Watchdog.)Figure 1:Neelie Kroes: Going out with a bang, not a whimper.Now a new set of commissioners are rotated in for a new "term" at the European Commission, Kroes bid the telecom sector farewell on Wednesday, and did so with a verbal kick to the collective cojones of Europe's telcos.She attended a conference organized by European Telecommunications Network Operators' Association (ETNO) , the industry association that represents the region's major telcos, and witnessed the unveiling of ETNO's "Agenda for Europe," which calls for an "ambitious reform of current policy." (See ETNO Unveils 'Agenda For Europe'.)For more coverage of the strategic pressures and opportunities facing operators and vendors in the communications market, see our business transformation content channel here on Light Reading.Then Kroes took to the stage and fired thunderbolts into the crowd, starting her speech -- "Adapt or die: What I would do if I ran a telecom company" -- by noting that "sometimes I think the telecoms sector is its own worst enemy," before adding that the telecom sector's representatives in the room were "probably all looking forward to the very near future ... when you won't have to put up with me anymore."Cue uncomfortable shuffling in seats...She told the telcos that they "have to change" and be ready for a world set to be dominated by the cloud, the Internet of Things (IoT), big data and 5G. "What is the telecoms sector's relationship to that digital future?" she asked. "Will you be leading us there? Or will you be dragged along behind, against your will, resisting until the last?"And while the telcos were still smarting at that virtual dig in the ribs, Kroes proceeded to tell them "how I'd steer a telco through dynamic digital developments."So, what did she have to say? It's worth reading her speech, even though she didn't actually tell the telcos exactly what she would do if she was running a Deutsche Telekom AG (NYSE: DT) or Vodafone Group plc (NYSE: VOD).Read the Kroes speech in full on the next page.Next page: The Kroes speech in full.— Ray Le Maistre,  , Editor-in-Chief, Light ReadingHere is the Neelie Kroes speech in full:Adapt or die: What I would do if I ran a telecom companyFT ETNO Summit 2014 -- The New Digital Agenda: Towards a European RenaissanceBrussels, October 1, 2014"I am very pleased to be here. You will know this is among our last moments together. You know, I will be replaced by three men. Including two ex-Prime Ministers. Günther Oettinger, Andrus Ansip, and Jyrki Katainen: because there is no economic growth without digital.Sometimes I think the telecoms sector is its own worst enemy.You know I want a telecoms sector that looks forward to the future.In fact -- you're probably all looking forward to the very near future, when the Juncker Commission takes office, when you won't have to put up with me anymore.Well just today you are stuck with me. So allow me to be direct. That is my style.Your message is clear: that we need to change regulation. But you have to change too. So rather than being critical about the past, let me be positive about the future. I welcome the fact that ETNO appears to be looking at the need to change. The 'Think Digital' manifesto announced earlier today should help ETNO to play a positive role in shaping Europe's digital future. It is a positive vision: but now it needs to be acted on, and implemented.I'm looking to the future too. But a little further ahead: to a future Europe which I hope is bright and digital. Which is connected, open, and secure. There is no other choice.Europe today is about getting the economy back on track -- about finding jobs for the next generation of young people. Digital is central to that challenge.Soon we will see everything connected. Cars and classrooms, homes and hospitals, communities and cities. Everyone crying out for cloud computing, big data, 5G, the internet of things. These are all around the corner -- or already here.So I want to ask: what is the telecoms sector's relationship to that digital future? Will you be leading us there? Or will you be dragged along behind, against your will, resisting until the last?I often ask, "What would you do if you were me?"You're probably bored of hearing me ask that. So today I'm going to change it. Here's what I would do if I were you. Here's how I'd steer a telco through dynamic digital developments.Let's be clear. That future market won't be characterized by rent-seeking, and protectionism. It won't feature players stuck in gilded national cages. It won't mean looking backwards to old business models and dated revenue streams. No, no, no.No. It needs a strong sector. A sector that is diverse and dynamic. Able to explore new services and new business models. With operators working across borders: large, strong pan-European players alongside smaller niche players.A sector that offers convenience, competition and choice. Offering citizens and businesses tailored products they are prepared to pay for. In the way they are prepared to pay for -- and queue for -- the latest smartphone.A sector able to invest and innovate. With the economies of scale to think big, beyond borders, and compete globally. With the fast network capacity to support a digital future.And I am glad that you recognize, in your manifesto, the role of public investment too. I hope that support can flow, where the market cannot provide, thanks to structural funds and revised state aid rules.That is my vision. But how we get there?Ultimately: I can give you the ingredients. But I'm not the cook. Nor will Günther Oettinger be, or Andrus Ansip, or Jyrki Katainen. We don't prepare the menu: you do.You discussed that menu earlier today, including the ingredients that we bring to the table such as regulation. Here we are on the same page -- I absolutely agree that we need all players to be dynamic and adaptable. Policy makers and regulators -- but also operators! -- need to be swift and responsive to deal with digital developments.But let me react to what I heard in the first panel discussion earlier -- it's all very well to talk about deregulation, but not if that's a code-word for keeping protected national markets. You can't have consolidation on national markets without having a single regulatory framework contributing to a genuine single market. And then of course we can ensure that that framework is open and flexibleSo when you ask me about consolidation in the mobile sector -- which sometimes appears to be the only thing you wanted to talk about -- here's my response. It's the same as the response I gave on day one. On the one hand we want consumers to enjoy genuine choice, a real range of services and suppliers. On the other, you have markets that are too small to justify multiple operators, with too few economies of scale for that to be efficient.Competition and consumer choice matter; they matter now and they matter tomorrow. That is a focus of EU competition policy and I can't see that changing.So how do you square that circle? The fact is: any competition assessment is made within a particular market. Change that market, and you change the assessment.That is why our goal has been to bring down barriers, bring down borders, and change that market! Move towards a telecoms single market, where telecoms companies can think European to compete globally. Why is this one sector still excluded from our crown jewel, a single market?And when you ask me about competition from over-the-top players: yes, a changing market impels us to examine our framework. But I am also clear: the current situation of European telcos is not the 'fault' of those OTTs.Today, all EU homes have broadband coverage; 76% have a connection; almost half can access it on their mobile. They are demanding greater and greater bandwidth, faster and faster speeds, and are prepared to pay for it. But how many of them would do that, if there were no over the top services? If there were no Facebook, no YouTube, no Netflix, no Spotify?In fact: OTT players are the ones driving digital demand -- demand for your services! That is something you can work with, not against.So here's my advice to you. If you think rules are incorrect or unfair: then tell us, and tell us why.In many areas, I agree. I agree, for example, that rules on reporting data breaches should not be for the telecom sector alone, and that is why we proposed extending them through the network and information security directive. The chain is as strong as its weakest link. Internet platforms and cloud services are vitally important to economy and society: they need to be within the scope of that Directive. Risk management and reporting major incidents is not an unusual thing to ask nowadays. Cyber security needs to become the 'New Normal'.That's one example of where we need to up our game. But more generally: I am clear that the general solution is not to erect new barriers, or just make life equally hard for everyone: that isn't the answer to any problem.So if you're making those complaints: be specific. 'Regulate my rival' is not a general call that will ever find much resonance.I know you also argue for deregulation. In a competitive market, you do not need ex ante market rules -- you can rely on competition rules. Who knows, maybe the telecoms sector itself will one day reach that level of competition and won't need ex ante regulation. In the meantime we can be incremental: gradually decreasing the burden of regulation as competition increases -- like through reviewing and cutting down the list of relevant markets. And all along, of course, competition rules will always will require fast and firm enforcement for a level playing field.Or take another area you have talked about this afternoon: net neutrality.I listened with great interest to what Reed Hastings had to say earlier. I can certainly agree that network operators cannot ask for payment of their service twice. But I don't agree that the European Parliament is proposing a 'soft' version of net neutrality. Because they have addressed clearly the issue of specialized services -- too much for ETNO, more than the Commission -- but enough to ensure investment in networks can continue.I agree we need to find a solution that guarantees openness and promotes innovation. Different people have different views about the best way to achieve that. But on one thing I hope we can all agree: this market needs certainty, coherence and consistency. Not every country of the EU making their own divergent decisions. Nor an endless delay.And here again, let's not kid ourselves. There is a need for, a demand for, investment in broadband capacity. And of course that has to be paid for. But customers cannot be forced to subsidize specialized services they do not use, and those specialized services cannot be allowed to slow down access to the open Internet.Today's European market is fragmented, ring-fenced, and subscale. I know many others today have made that point. My dream is to change that. To see equally open and unified markets on both sides of the Atlantic.We have taken the first step, our connected continent proposal which I hope will soon be completed. That isn't the final word; it won't alone deliver the dream. Not for any of us.But it is a first step. And others share that dream, and can take the remaining steps. This is a project that will continue under the next mandate; as Jean-Claude Juncker has made clear.A project that can ensure our digital future, where a strong telecoms sector supports every European. That is what I long for, and that is what all of you should long for too.Thank you."

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