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Telecom consolidation remains a difficult topic at EU level
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Proposed new ‘DNA’ legislation would aim to provide an improved framework
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New EU AI Act is also moving toward completion
The European Commission’s recent approval of the Orange-Masmovil merger in Spain was regarded by some as an indication that it is adopting a more favorable stance towards in-market mergers in order to ease the competitive environment for battle-weary telcos, and support investments in 5G, fiber and other advanced technologies.
However, it became apparent this week that while some EU leaders are indeed calling for greater consolidation, others, such as EU competition chief Margrethe Vestager, maintain that large telecoms mergers in Europe would reduce competition for consumers and even further fragment the single market.
This apparent disunity emerged when Vestager seemed to rebut calls for telco consolidation included in a wider independent report (opens a PDF) on the single market that was presented to EU leaders by former Italian Prime Minister Enrico Letta on Wednesday.
In the report, titled "Much More than a Market," Letta commented that the scale of investments necessary for new technologies, such as edge, cloud, 6G and AI “implies that due consideration should be given to the necessity of some level of consolidation within national markets or strategic alliances between market players including pro-competitive sharing of investments in key network elements.”
However, during her speech at a conference on Thursday, Vestager said “no evidence suggests that more concentrated national markets lead to better outcomes.”
To the contrary, she added, “it would lead to less competitive national markets and to a more fragmented single market.”
As head of the EU’s antitrust arm, Vestager’s view on this issue is pretty significant. And while EU regulators have said there is no magic number of operators within a national market, they remain critical of deals that reduce competition to just three providers. Indeed, the MasOrange deal was only approved subject to remedies that could usher in a fourth player in the form of Digi Spain.
About that ROI
Meanwhile, Letta’s report also made reference to an EU white paper published earlier this year that detailed issues with the EU’s telecom market and addressed how operators are failing to make a return on their network investments.
Although the white paper, titled "How to master Europe’s digital infrastructure needs?", did not specifically encourage in-market consolidation, it made a number of proposals such as cross-border mergers to create pan-European players.
According to Thierry Breton, the European commissioner for internal markets, this paper serves as a basis for further consultation and lays the foundations for a so-called Digital Networks Act (DNA) that is now being explored at EU level. Here, an over-arching aim is to ensure that operators “have the scale and framework needed to invest at pan-European level.”
A key objective is to create digital network infrastructures that will be robust enough to underpin a competitive and resilient Europe in future. Breton first presented the concept in October last year, and described it as “redefining the DNA” of the telecoms sector in the EU.
As things stand, any legislation is still some way off, as even the consultation period will not close until June 30, 2024.
Meanwhile, if “DNA” is indeed adopted as a new EU act, it will add to a thickening alphabet soup of legislative efforts by the EU to maintain some control over the rapidly evolving technology landscape.
Acting up
The bloc has already adopted the Digital Services Act (DSA) and Digital Markets Act (DMA) that are designed to work in tandem to “create a safer digital space where the fundamental rights of users are protected and to establish a level playing field for businesses.”
The two acts are already having real-world impact for big tech. For example, under the DSA, the commission has sent TikTok a request for more details on the risk assessment the provider should have carried out before deploying the new app TikTok Lite in the EU.
Moreover, the commission has opened non-compliance investigations under the DMA into Alphabet’s rules on steering in Google Play and self-preferencing on Google Search, Apple’s rules on steering in the App Store and the choice screen for Safari and Meta’s “pay or consent model.”
Next on the agenda is the upcoming EU AI Act, an attempt to bring some order to the wild west of artificial intelligence, including generative AI. Proposed by the commission in April 2021, the draft AI Act sets a common framework for the use and supply of AI systems in the EU.
The European Parliament and the EU’s Council of Ministers reached a political agreement on the draft act in December 2023. In March, the European Parliament adopted the act, which is now entering the final stages before coming into law.
As you’d expect, the new AI Act has its critics. Indeed, concerns about the initial proposals prompted over 150 political and industry leaders from companies such as Airbus, Cellnex, Deutsche Telekom, Orange, and Siemens to write an open letter that warned of the potential to “jeopardise Europe’s competitiveness and technological sovereignty without effectively tackling the challenges we are and will be facing.”
Some see the EU AI Act as setting a standard for the rest of the world. For instance, AI compliance specialist Holistic AI has previously described the act as “arguably the widest-reaching AI regulations yet announced and predicted to become the gold standard, in the same way as GDPR did [for data privacy] in 2016”.