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European policy makers see mobile, or wireless, communications
technology as one of their big industrial success stories. Indeed,
many believe that Europe is the global leader in wireless
communications. The truth, however, is that all three of the
world's main economic regions (Europe, the United States and
Asia) have their own strengths and could learn something from
each other, not least in public policy.
Much has changed since the controversial allocation of 3G licenses
in Europe four years ago - 3G is a wireless technology that
promises high rates of data transmission, allowing customers to
access music and video downloads as well as other services such as local information
and direction-finding from their cellular telephones. European policy makers had very
high hopes that 3G would be the next step in Europe's success story, and indeed they
still do.
While the licensing process was not a
failure, it started a train of events that
led to changes in the way people looked
at the progress of wireless communications
in Europe. Not all the 3G licenses
were taken up, although governments
across Europe did collectively realize
Þ100 billion in license fees - so the
process can at least be said to have been
a success for them! In some countries,
such as France, 3G licenses are still
unclaimed, while German operators
handed back their licenses, belatedly realizing
that they were not a viable business
proposition.
At the same time, in 2000, telecommunications
and mobile technology
stocks in Europe and the United States
were starting a long decline, following
the bursting of the dot-com bubble. The
market began to question just how much
value and future profits really could be
derived from new cellular telephone
services. That year also saw the last of the
giant telecommunications and media
mergers, in which France Telecom created the Orange Group, Vodafone Airtouch
won control of Mannesmann and AOL
TimeWarner was established.
Although the markets initially
praised these unions, they changed their
minds as faith was lost in the technologies
and services that had promised so
much. In short, the combination of the
blemished 3G licensing process, the
stock market crash and large-scale consolidation
wiped some of the gloss from
the European mobile success story.
Since then, however, wireless services
have defied the doomsayers and a lot
of people have been proved very wrong.
Penetration of mobile technology has
reached as much as 95 percent in some
European markets. The average in the
15-nation European Union, before its
enlargement in May 2004, was 80 percent
- practically everyone in Europe
now has a cellular telephone.
There has also been an explosion of
instant messaging services in Europe, as
well as the beginnings of new markets
for wireless data transmissions. Pan-European
brands for mobile services have
been established across the European
Union, helping the mega-mergers to realize
the value they had promised. The
first 3G services have arrived on the
market, allowing customers to download
movie and music clips straight to their
mobile handsets, or to make wireless
video telephone calls. The distinctions
between markets for fixed, mobile, Internet
and broadcasting communications
have become blurred as the different
technologies have taken on more and
more of each other's characteristics
øtoday's cellular telephones have nearly
the same computing power as personal
computers did in 2000.
Europe has introduced a new regulatory
framework for telecommunications
to cope with all these new developments, which nobody foresaw in 2000 when
sentiment toward wireless technology
was so negative. The developments are
creating new policy challenges, not just
in Europe, but in the United States as
well. Policy makers on both sides of the
Atlantic must strike a fine balance between
ensuring that mobile operators
can continue to develop and invest in
new services and protecting consumers'
interests.
"Wireless services have defied the doomsayers and a lot
of people have been proved very wrong
It is important to ensure continued
investment and innovation because it is
now clear that wireless technologies have
the potential to revolutionize society,
economies and the lives of consumers. In
Europe, so-called m-payment services
are being developed, enabling people to
pay for goods and services at the touch
of a button. Governments are testing
technologies to bring them closer to
their citizens and improve services such
as health and education.
In short, mobile technologies are
providing people with new ways to communicate
and do business, wherever and
whenever they want, and neither European
nor U.S. policy makers can afford
to miss out on the benefits that these
technologies can bring.
At the same time, however, regulators
have a mandate to protect consumers
- to ensure that they are getting a
good deal and that the market functions
effectively. Regulators can oblige operators
to lower prices, or allow access to
their networks and services, if they feel that it is in the consumer's interest.
In seeking to balance the need to
give consumers both innovation and
value, however, regulators may run into
a paradox. Innovation requires investment,
and there is a risk that in their
pursuit of providing consumers with
value, regulators will end up depriving
them of innovation. European and
American regulators are facing up to this
challenge in different ways.
Europeans are worried that the right
balance is not being struck as regulations
are extended into mobile services. European
regulators have started setting
wholesale prices for wireless services and
are increasingly interested in imposing
the same kind of regulations on wireless
network operations as they do on public
utilities. The trend appears to be for this
type of regulation to increase.
The operators, however, are investing
in new technologies and services and
trying to realize a return on the investments
made in 3G licenses and networks.
The benefits for consumers and
society could be huge. These benefits are
at risk, however, because in attempting
to provide consumers with value by regulating
some wireless services and controlling
prices, regulators risk impeding
the investment necessary for the next
wave of services.
Europe could learn a lot from the
United States, which leaves the market to
function. As a result, the American market
is highly competitive, with competition
not regulation providing customers
with optimal value. This is not to say
that U.S. regulators have nothing to
learn from their European counterparts.
The penetration and coverage of mobile
technology is higher in Europe than in
the United States. Instant messaging has
experience phenomenal growth in Europe
and the rest of the world, but has
not enjoyed the same success in the
United States.
In a nutshell, the United States could
learn from Europe how to develop markets
and ensure that wireless technology
is available as widely as possible. Europe,
on the other hand, could learn from the
United States to leave markets to function
without regulatory interference.
There are, of course, other challenges
facing European and U.S. regulators
in the coming years, including how
to ensure data protection in the information
age. Spam is obviously a huge
problem for fixed terminals, and as the
mobile terminal moves closer to the
fixed terminal we must ensure that consumers
avoid the problems that have
dogged the traditional Internet.
Another difficult question on both
sides of the Atlantic is how to manage
the trade-off between the need to protect
national security, by requiring operators
to retain data for long periods of time,
and the cost to operators of warehousing
and managing these data.
In sum, the challenges are numerous
and complex, which means that outcomes
are sometimes impossible to predict.
As the events of the last four years
have shown, it is hard enough for the industry
to foretell the future - so what
chance do regulators have? This means
that regulators should as far as possible
refrain from intervening in markets such
as those for wireless technology, because,
while competitive distortions are extremely
easy to introduce, they are particularly
difficult to remove. The best
course is for European and U.S. regulators
not to intervene unless it is absolutely
necessary, and only to do so
when they are sure that the benefits outweigh
the inevitable costs.
Paul Franklin is Group Vice President of Regulation
and Public Policy of Orange SA. He had a key role as Integration
Director in the creation of the Orange Group from Orange PLC and
France Telecom Mobile in 2000. He has previously served as Director
of Regulatory Affairs for Energis, a UK long distance fixed telephone
company, and as Senior Marketing Manager and Director of Regulatory
Affairs of Microtel Communications (now Orange UK).
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