European Telecommunications Sector Research Articles

Deregulation of European Telecommunications: The Role of Private Interests

The large-scale reformation of various economic industries, which took place in developed countries at the end of the last century, is very oft en perceived as “liberalization” or “deregulation”. Meanwhile, there are robust reasons to argue that this terminology does not fit correctly the nature of the real transformation. Moreover, the newly formed system is often described in modern literature in such terms as “managed competition” or “regulatory capitalism”, and this system highly relies on various forms of government interventions in the market process, which makes the environment incompatible with the proclaimed values of neoliberalism. The analysis of the actual processes from the point of view of private interest theories of regulation allows one to conclude that the real objectives of the new regulatory environment were rather the suppression of market mechanisms and the curbing of the creative destruction process, than the development of market institutions as was proclaimed in the official documents. Moreover, it is important to take into account that the scientifi c discussion also off ered an alternative to the chosen methods. It could be based on the views of the Austrian school of economics, which understands competition in a diff erent manner than the neoclassical mainstream does. However, this alternative was widely ignored by the reformers. This study focuses on the European telecommunications sector. The history of its reformation allows one to see in details how, under the guise of market liberalization, the reforms created a new regulatory regime that was aimed at restriction of market forces. Th e research uses the approaches of the Austrian school, as well as those of the Virginia school of political economy which formed the main postulates of public choice theory, according to which government interventions are mainly explained by private interests of powerful actors.

The European Framework for Regulating Telecommunications: A 25-year Appraisal

The European telecommunications sector has been radically transformed in the past 25 years: from a group of state monopolies to a set of increasingly competitive markets. In this paper we summarize how this process has unfolded—for both fixed and mobile telecommunications—by focusing on the evolution of the regulatory framework and by drawing some parallels with the evolution of the sector in the US. Given the major strategic importance of the sector, we highlight some of the challenges that lie ahead.

A Symmetrical Regulation for an Intensified Very High Broadband Deployment

After two decades of regulations promoting competition in the European telecommunications sector, the European Commission has announced it will soon be revised. From former monopolies to intense competition on the broadband and very high broadband markets, the landscape has changed drastically since the regulatory framework was implemented. Taking into account the objectives and priorities of the new Commission, the revision of the regulatory framework will have to assess the current regulation’s outcome in respect to competition and investment and its possible drawbacks in that respect. Mobile only operators weakened in a fixed‐mobile converging world, debatable concepts like the “ladder of investments”, challenges such as the definition and characteristics of network access services and unbalanced interconnection fee flows are some of the elements to be considered. At the end of the review, in a forward‐looking view, the Commission will have to modernise the framework to better suit the current and future telecommunications landscapes. The evolution of this market must be sustained by heavy and continuous investment, especially in new generation networks, that demands an optimal level of competition for these investments to occur. Such an optimal level of competition promotes investment, giving rise to the continuous integration of advanced technologies and, as a result, reducing network capacity unit costs and ultimately unit prices. All the elements gathered lead us to propose a high priority for the new framework, namely investment in new networks and the adaptation of the regulatory rules in line with this objective. The level of competition and the continuous need for investments call for a move from the current asymmetric regulation, based on the SMP concept, to a symmetric one, to regulate fixed network access and interconnections, better suited and less intrusive for the benefit of the consumer and the European digital economy. Furthermore, the mobile market

Causal interrelations among market fundamentals: Evidence from the European Telecommunications sector

Abstract This study investigates the interdependence of some major financial variables applied to several European Telecommunications institutions using a multivariate vector autoregressive (VAR) approach. In particular, this paper examines the bilateral relationships among market fundamental variables, such as stock returns, index returns, earnings, capital expenditures and interest rate, with respect to causality and impulse responses, for companies that play major role in their home stock markets. Unlike the fact that the selected Telecommunications companies have many similar characteristics, this research finds that only few of them support common behavior.

Service quality in utility industries: the European telecommunications sector

Purpose – The purpose of this paper is to analyse the economic and technological factors that determine the quality of European telecommunications services. The paper test whether the privatisation, the efficiency and the labour factor of telecommunications operators are determinants of service quality and whether competition, technology and infrastructure investment in the telecommunications sector influence that quality. Design/methodology/approach – The paper use the panel data methodology to analyse the factors that determine the quality of service of telecommunications. Findings – The results indicate that the more efficient the company is, the more quality it will deliver. However, the paper finds no evidence that the privatisation and the restructuring of the labour force of the main telecommunications operators, or the competition, technology and investments in the sector, lead to greater quality. Practical implications – In order to foster higher quality, effective market competitiveness has to be established to avoid benefitting the incumbent company and to make the development of competition possible in the long run. Originality/value – Although previous literature assumes a positive relationship between the performance of privatised companies and quality, this study shows that the privatisation and liberalisation processes do not bring about quality improvements by themselves. The research finds that the efficiency of privatised companies is the primary source of quality.

Implementing Activity-Based Costing in the Telecommunications Sector: A Case Study

Profound changes have affected the European telecommunications sector in the last 15 years. With its liberalization at the end of 1990s many telecommunications companies, such as ‘International Telecom’ had to adopt advanced managerial accounting systems that could provide them with detailed and accurate cost accounting information. To this respect Activity-based Costing revealed crucial to aid International Telecom to face fierce competition coming out from the new operators that came into market and to respond to regulatory demands.

The Telecoms Single Market: Meeting the Needs of the European Youth

The European Commission's proposal to build a single market for electronic communications will require a significant reform of the European telecommunications sector. The two most contentious elements of the proposed legislation are the abolition of roaming surcharges and the measures to guarantee network neutrality. The proposal seems to offer substantial benefits, particularly to young Europeans, in terms of communications, connectivity and mobility, as well as with regard to increased job opportunities, especially in the growing Internet economy. Nonetheless, a considerable obstacle to the creation of a genuine telecoms single market is the existing regulatory fragmentation into 28 separate national telecommunications markets, as well as the unattractive investment climate for network operators.

A critical review of the “ladder of investment” approach

The “ladder of investment” is a regulatory approach proposed by Cave (2006), which has been widely embraced by national regulatory authorities in the European telecommunications sector. The approach entails providing entrants, successively, with different levels of access—the “rungs” of the investment ladder, while inducing them to climb the ladder by setting an access charge that increases over time or by withdrawing access obligations after some pre-determined date (i.e., by setting sunset clauses). Proponents of the ladder of investment approach claim that such regulatory measures would make service-based entry and facility-based entry complements—albeit they have been traditionally viewed as substitutes—in promoting competition. The regulators, thus, have shown a strong interest in this approach. The paper provides a critical review of the ladder of investment approach by setting out its two underlying assumptions and discussing their validity with references to the related industrial organization literature.

Anti-Competitive Practice Triggered by Pro-Competitive Regulation: An Outline of Margin Squeeze in the Liberalized European Telecoms Sector, in the Light of the Deutsche Telekom Decision

Liberalization in the telecoms sector in the EU, launched in the late 1980s, implied inter alia an added obligation on the vertically integrated incumbent operator to grant potential entrants wholesale access to the natural monopoly elements of its network. There could thus be seen post liberalization, an unusual escalation in discriminatory practices by telecommunications operators, more so in what is known as ‘margin squeezing’ paralleling the positive results of progressive measures as they created a market structure wherein new entrants who sought to compete with incumbent operators, required, at the same time, access to their upstream inputs. Inevitably thereafter, competition law proceedings in this regard were launched in several Member States of the EU. The need to prevent this pricing practice became pressing also for the NRAs who were regulators of wholesale and retail telecommunications prices. The focus of the present paper, as against this backdrop, shall be on Margin Squeeze, incidences of which were seen in the EU Telecommunications Sector around the time of the advent of the 2002 Regulatory Framework. The paper is divided into two Parts. Part 1 gives a brief overview of the stream of changes ushered in by the liberalization process in the European telecommunications sector, discussing the positions immediately before and after it had begun; and Part 2, which is on the problem of margin squeeze abuses in the sector, consists, in essence, of a study of the issues that arose in the DT case, of the Decision delivered by the Commission, and general observations of the approach adopted by European courts in such cases.

A Critical Review of the 'Ladder of Investment' Approach

The of is a regulatory approach proposed by Martin Cave (2006), which has been widely embraced by national regulatory authorities in the European telecommunications sector. The approach entails providing entrants, successively, with different levels of access - the rungs of the investment ladder, while inducing them to climb the ladder by setting an access charge that increases over time or by withdrawing access obligations after some pre-determined date (i.e., by setting sunset clauses). Proponents of the ladder of investment approach claim that such regulatory measures would make service-based entry and facility-based entry complements - albeit they have been traditionally viewed as substitutes - in promoting competition. The regulators, thus, have shown a strong interest in this approach. In this paper, we provide a critical review of the ladder of investment approach by setting out its two underlying assumptions and discussing their validity with references to the related industrial organization literature.

Eine effiziente vertikale Verteilung der Exekutivkompetenzen bei der Regulierung von Telekommunikationsmärkten in Europa

Abstract The present paper discusses the advantages and disadvantages of centralising regulatory competencies in the European telecommunications sector. As we demonstrate, political economy suggests that an over- rather than an under-regulation of telecommunications markets has to be expected. This tendency has been strengthened by the allocation of competencies under the new regulatory framework which endows the European Commission with far reaching veto rights under the so-called article 7 procedure. In order to delimit the risk of over-regulation through institutional safeguards, it should be easier for regulators to deregulate than to regulate a market. Current suggestions and ambitions by the Commission to extend its veto right or to even establish a European regulator for telecommunications should be dismissed. Instead, we suggest limiting the Commission’s veto rights to (a) markets, in which regulation creates significant international externalities and (b) cases, where national regulators do not move into the direction of deregulation. If, however, a national regulator decides to deregulate a market, the Commission’s ex ante veto right should be abandoned (but ex post intervention by the Commission still be possible) in order not to hamper deregulation which tends to be the desired result, in principle.

Strategic typologies in the European telecommunications sector: a rejoinder to Turner

PurposeTo demonstrate that the strategic typology advanced by Turner in this journal for the European telecommunications sector is in need of further clarification.Design/methodology/approachThe Turner sample is subjected to a number of tests specifically in the European mobile telecommunications sector.FindingsThe Turner typology is found to be imprecise in certain respects.Originality/valueThe paper addresses the issue of how to build appropriate typologies.

The Coexistence of Regulation, State Ownership and Competition in Infrastructure Industries

In many countries, infrastructure liberalization progressed faster than the privatization of former state monopolies. Regulatory agencies, established to oversee the transition and safeguard the preconditions for competition, therefore monitor state-owned firms in addition to privately owned firms. Prior accounts of similar arrangements have generated contradictory claims. The paper studies two propositions of this literature theoretically and empirically for the European telecommunications sector. It examines, firstly, whether the dual role of the state as owner and regulator distorts competition. Secondly, it probes whether the combination of government ownership and regulation helps overcome some of the shortcomings of the regulation of private firms. Although we find hints of tensions between state ownership and government regulation, we do not find a systematic bias. We do not find compelling evidence that state ownership is used to pursue public interest goals that could not be achieved by private regulated firms.

Telecom Italia takeovers: Chinese boxing clever

During the recent past there have been two successive and successful takeovers of Telecom Italia, in both cases by other Italian companies and employing the device of “Chinese boxes” to secure control without the need either to hold a majority stake in the acquired company or to pay much regard to the interests of minority shareholders. This raises into question the extent to which “Anglo‐Saxon” attitudes in financial markets are making inroads in continental Europe; the willingness of continental European governments to permit foreigners to acquire control of the “commanding heights” of their economies; and the manner in which the European telecommunications sector is being restructured.

Economic performance in European telecommunications, 1978‐1998: a comparative study

The European telecommunications sector is undergoing major structural change in the face of new technology, privatisation and European Commission directives requiring market liberalisation. This study considers the comparative performance of the major European telecommunications operators between 1978 and 1998. This period encompasses an era of state monopolies, market liberalisation initiatives and a number of privatisations. The objectives are to assess: the extent so far to which market liberalisation and privatisation have impacted on the efficiency with which telecommunications services are provided in Europe; and changes in the performance of the different telecommunications operators over time with a view to providing an insight into the comparative efficiency performance of the different telecommunications operators in Europe. Performance is measured in terms of profit margins and labour and total factor productivity.

Strategic breakout in UK telecommunications: the case of Kingston Communications

Abstract The progressive liberalization of the UK telecommunications sector has necessitated a strategic repositioning by its incumbent operators, British Telecommunications (BT) and Kingston Communications (KC), as they face up to increased competition within their traditional market places. This repositioning has stimulated a process of strategic breakout, a framework derived from the author's on‐going examination of changes in the European telecommunications sector. Amendments in the regulatory framework governing the industry has enabled firms to move into geographic and product markets from which they were previously excluded. However, they still face a residual regulatory framework that sustains a commitment by them to their base market principally through universal service obligations. Such a scenario has the potential to create conflict and undermine strategic focus. This paper seeks to explore this conflict through the strategic repositioning of KC since its licence was last reviewed in July 1998. After exploring the process of strategic breakout, the framework is then applied to KC highlighting how the process, when interacting with the residual regulatory framework, creates the potential for strategic conflict. Copyright © 2002 John Wiley & Sons, Ltd.

Le choc de l’UMTS sur la « corporate governance » des firmes européennes

Innovation and Corporate Governance in European Telecommunications Firms In this article, the author inverses the traditional approach (does corporate governance favour innovation ?) considering how innovation influences corporate governance in the European telecommunication sector. JEL classifications : G30, O31, L96

European Telecommunication, Multinational Enterprises, and the Implication of “Globalization”

Like other sectors of the economy where national and regional markets are being subjected to the force of greater international competition, the European telecommunication sector is characterized by an important contradiction. One set of arguments holds that globalization and technical change are forcing open national and regional markets. As competition becomes more pervasive, the aim of policy must be to ensure that the telecommunication sector is responsive to the requirements of multinational firms. These firms require seamless transparent networks to support their global business and technological activities. Digital technologies and innovations in computerized information processing are driving change in the industry, it is argued. The future structure and organization of the industry will inevitably be dictated by technical change and this cannot be altered, at least not successfully, by differentiation in national or regional industrial or telecommunication policies. Seen in this light, failure to liberalize the European telecommunication sector in line with trends in the United States and Japan will

Liberalizing telecommunications markets: Political externalities in the Greek case

In the course of technological changes in the information technology area and of completing the Internal European market, reforms in the traditional structure of the European telecommunication sector have become a key issue. This paper presents the policy reforms in the Greek case. Focusing first on the importance of regulation as a background activity to any type of change, the paper then gives an overview of the situation in the Greek telecommunication sector and evaluates the plans for privatization. It is argued that the new regulatory framework and the shift to private ownership are necessary, but not sufficient, conditions to deal with the political externalities the country faces.

The EEC telecommunications sector: Between integration and projection

The policies of the EEC, as outlined in the recent Green Paper, with regard to the European telecommunications sector, are of dual intent. This paper examines these aims and the threat posed to them, as well as discussing ambiguities in the Green Paper itself. Nevertheless, the author acknowledges that this is a first worthy attempt to define a policy for Europe.