Barcelona, 16/02/2007 (Agence Europe) - On Wednesday 14 February, in Barcelona, where the 3GSM World Congress for mobile communications is being held, three new entrants to the mobile telecommunications market announced that they were forming the strategic “Mobile Challengers” group. BASE (Belgium, E-Plus (Germany) and Bouygues Telecom (France) hope that, by working together, they will be better able to make their voice heard by the European Commission, to encourage it to tackle the regulatory inequalities which currently work in favour of historic provides in most European countries.
“The situation is absurd,” Stan Miller, Chairman of the Supervisory Board of BASE and E-Plus, told press. “There is no regulation at European level. The incumbents are saying that deregulation is the best way forward, but the playing field is very uneven. We are seeing huge variations on the one hand between the conditions imposed on the incumbents and the challengers, and on the other between the different member states. We are pleading for the regulators and the Commission to intervene”.
The grievances set out showed, especially, the differing conditions of those companies which were the first onto the mobile telephony market, often with the support of a nationally established parent company -like France Télécom or Deutsche Telekom - and, on the other hand, of the smaller, independent companies which appeared on average two or three years later. (These companies are also referred to as “challengers” - hence the name of the group.) Since they did not enjoy the benefits of the exponential growth of the mobile telephony market in the first few years, challengers take longer to see a return on their investment in infrastructure, and consequently find themselves in a more insecure position. Well-established, having had the time to recoup their investment during the boom years can now be more aggressive in their spending, and so have an even more dominant position than might have been expected.
The current regulatory situation does not take account of this handicap. Mobile Challengers, however, are not looking for favouritism: they are asking simply that, given the reality of the situation, all measures aimed at increasing competition in the sector be effective. As Emmanuel Forest, Deputy Managing Director of Bouygues Telecom put it, “We want regulation that is fair, not egalitarian”.
The problem, essentially, is in the disagreement over mobile termination rates. These come about from the charges an operator can demand for accepting a connection from another network. They are very important, particularly for challengers, because they give remuneration in exchange for the connection service available to operators of the other networks. Above all, it is the regulatory management of these charges at European level which creates the inequalities mentioned above.
When asked about the exact changes they would like, Mobile Challengers' Community competition law specialist listed the following: Coherence - the European regulatory body does not apply the same criteria in every member state. In Germany, it advocates a “cost model” to calculate interconnection charges, but, in Belgium and France, it recommends a benchmarking system (based on best practice in the market). Non segmentation - in calculating of market position directives, the Commission considers normal call charges, SMS charges and interconnection between networks revenue to be three separate markets. This does not correspond to reality, and does not allow a precise assessment of each one's market position - these distinctions between markets ought to be removed. Transparency - the specialist questioned said that the group with responsibility at the Commission “listens to whom it wants, when it wants”. The Mobile Challengers group wants to open up the process to encourage stakeholders to speak out. For example, the principle of “tariff symmetry” as the solution to the problem of interconnection charges has “become a dogma” at the Commission, although it is based only on studies in the United Kingdom, and clearly does not suit conditions in the other member states. Mobile Challengers welcomed the recent initiatives from Information Society and Media Commissioner Viviane Reding, but did not feel that their concerns, relating to challengers' problems, had been properly addressed.
The companies' context
The question was asked by the press: which did only three operators join Mobile Challengers? Mr Miller answered that, when they began discussions with some others, it was often the case that the parent company, which had a dominant position on a national or other market, preferred to keep things as they were, where it benefited from a certain national protection. It was difficult, Mr Miller said, for a subsidiary in this situation to “rock the boat” and open the way for new operators on the market.
Mr Miller is also a member of the Board of KPN, the former “historic” telecommunications operator in the Netherlands, which wholly owns BASE and E-Plus. Why would these subsidiaries be free to “rock the boat” as they wished, if this could harm historic operators throughout Europe, such as KPN? Two explanations: on the one hand, a source involved in regulation at KPN said that, “Frankly, national authorities are already imposing harsh regulation on us, it cannot get any worse”. It would be to the advantage of KPN if the other providers were subject to the same conditions, especially given that their subsidiaries were often challengers in the Netherlands, while benefiting from the support of the parent companies abroad, which, in addition, benefit from a more favourable national system. On the other hand, a source close to the KPN Board admitted to EUROPE that they could hardly encourage consolidation of the mobile telephony market in Europe, because, ultimately, they weren't sure of being part of it.
When asked if it were possible that these KPN priorities could have played a role in the creation of the Mobile Challengers group, Miller denied any link. “We want a fair market for challengers, he repeated, “it has nothing to do with that (KPN)”. KPN subsidiaries, however, are meeting the full costs of the new organisation. Its internet site is http://www.mobilechallengers.eu (cd)