Why Europe’s telecom sector needs regulatory modernization

The European telecom sector is faced with significant challenges in terms of rapidly emerging new technologies and new forms of competition and business models driven by these technology changes. 2015 will be a pivotal year for European policy makers, regulators and competition watchdogs to improve the environment for the European telecom sector. Regulation is the single most important driver in the telecoms sector. HSBC’s Global Regulatory Heatmap report[1] aims to take the regulatory temperature globally and to identify those countries where regulation is most and least supportive of investment, and then to assess how the world’s largest operators are exposed to these conditions. The report shows, that the European region has faced the harshest regulation, although there are now encouraging indications the environment here is starting to improve.

The telecom sector is widely regarded as an enabler of innovation, productivity growth and international work sharing in the context of an increasingly competitive and globalised economy. Academic research indicates that economic progress in any given country is driven less by the mere arrival of new technologies, and more by the speed, breadth and depth of their adoption. Consequently, it is tremendously important that network operators invest heavily so as to ensure that the latest telecoms technologies are available on as ubiquitous a basis as possible.

Network investment is important for another reason also: as set out in HSBC’s Supercollider report[2], it can be clearly demonstrated that the primary driver of lower prices in telecoms is CAPEX. In deploying more of the most modern systems, operators take advantage of new technology that is the basis for innovation, capable of handling traffic with greater efficiency, and thus at lower unit cost[3]. Lowering unit costs and prices should be a primary policy goal, as it is this that enables the development and adoption of novel applications and contributes towards productivity growth in the broader economy. However it has to be mentioned that there is a Babylonian confusion in the public debate on “price” meaning either the monthly bill or the price per unit (MB, text, minute voice).

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Source: Serentschy

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