Some thoughts on financing telecom networks

Marguerite Vestager and Thierry Breton hold a joint press conference on data law at the European Union headquarters in Brussels, February 23, 2022.

Marguerite Vestager and Thierry Breton hold a joint press conference on data law at the European Union headquarters in Brussels, February 23, 2022.

©John Thess / Agence France-Presse

Network Finance

The topic of telecom network financing is on the agenda. On May 2, Competition Commissioner Margrethe Vestager, who is leading a long-running attack against major US digital companies with Inland Market Commissioner Thierry Breton, stated that “some players that are generating a significant amount of traffic … do not contribute to connection deployment investments.”

On the same day, echoing a letter that several telecom operators sent to the Commission last February, Etno, the European lobby for incumbent operators, published a study aimed specifically at supporting the competition commissioner’s analysis.

Let’s be clear: this is not about making a judgment about the advantages, siding with either the telecom operators or the major platforms. The former – it’s fair game – seek to consolidate their gains while the Commission, particularly with the DSA and DMA, no longer hides its fight against GAFAM, and a new front is opened against Apple. The latter, for their part, will claim that the end consumer certainly needs a communication infrastructure, but it is they who provide the content that interests them. In short, let’s remember that it is in everyone’s interest, platforms and operators, to serve the consumer as much as possible.

After making these preparations, the question of financing telecommunication networks comes at the right time. Because it arises even though the deployment of 5G is on the agenda. Therefore, it is time to think about the organization of financing our system. As such, there is one approach that can be considered: the structural separation of networks – placed under the responsibility of a public operator – and their operation under competition between operators. Perhaps such an approach deserves some thought.

Let us first define that there is nothing fanciful about it, neither in principle nor in operational terms. In terms of principles, the OECD has advocated the separation of infrastructure and operation for nearly twenty years, and it is well documented in terms of economic analysis. Above all, it is there. In the areas of electricity and railways, this is the choice that Europeans have already made, propelled in recent years by the European Commission. Consider the role of SNCF Réseau (for rail) or RTE (for energy). This communication model has not been adopted in the European Union, but has existed since 2006 in the United Kingdom.

Then we ask what is the purpose of this chapter? There are two types that are undoubtedly worth discussing.

The most obvious, of course, is the question of the cost of building, maintaining and modernizing networks. Telecom operators on this point are right: the cost they indicate is too high. But isn’t that specifically a good reason to reduce it by bundling it? Of course, there are solutions on the ground to avoid repetition of installations in such a building or in such and such an area. However, is it sufficient? This question is also very subjective, since not a day goes by without network problems (reductions, additional costs associated with subcontracting, etc.).

Assigning a public operator to the networks could also present more political interest. With the digital revolution in place, everyone is already aware of the risks involved in some form of the digital divide. Our fellow citizens know this, as well as those who want to consider the problems of equitable coverage of the territory by fiber. As such, the public authority can naturally be in a better position than the private sector to carry out the necessary arbitrations.

Ultimately, telecom operators are right to raise the issue of network modernization. Does this mean that it is up to public authorities, in this case the European Union, to use their own competition law to actually set investment policy? Mostly not. On the other hand, posing the question in terms of competition cannot avoid thinking of a solution the EU is fond of: structural separation between network and operators.

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