Günther Oettinger: Anyone for monopoly?

clohamon

Günther Oettinger the new EU Commissioner has been thinking out loud.

But much more is needed to connect every village in Europe. We need new, fresh ideas and open discussions without "taboos". Hence, my idea to incentivise investment in rural areas by allowing telcos to reap the benefit of their investments. It is similar to what we are already doing in the energy sector: in some limited cases, for new pipelines, companies can be exempted from the requirement to provide competitors with access to pipelines. This is only given if they can convince the EU Commission that without that exemption the investment would not have been made.

https://ec.europa.eu/commission/2014-2019/oettinger/blog/connected-europe-broadband-all-answer_en

watty

We need new, fresh ideas and open discussions without "taboos".

That much true. Competition isn't an End. It's a means to an End. So maximising "Competition" artificially sometimes gives the opposite to the desired goal.

i.e. Spectrum Sales
The way Eircom was privatised
Electricity & Mains Gas made artificially more expensive.

Also nothing done about the defacto cartel in Banking for years.

Or bottle gas duopoly.

Competition works for beans, shoes, cornflakes. Not for everything. But where competition isn't the best route you need sound Regulation. You won't get it from Ofcom or Comreg. They even have their own anti-consumer agendas.

clohamon

Benoit Felten of Diffraction Analysis takes aim.

Dear Mr Oettinger,

I hope you don’t mind my writing to you in such a direct way, but we like to be informal in the technology world. I’m addressing you to commend you for the conceptual leap you nearly made in your first blog post as Digital Czar (or whatever the official title is.) It’s entitled Connected Europe? Broadband for All is the Answer, and while I’ve heard snappier titles, it’s actually the contents that are worth discussing.

In this blog post you argue that the digital divide is intolerable, and that we need to be thinking outside the box to connect rural areas with high-speed internet. I couldn’t agree with you more, and it’s nice to see you come out of the gate with such a strong will to break the mold. You may not be aware how much the mold has been cast by telecom lobbyists, but I’m sure you’ll find out soon enough.

You then argue that because the cost of deploying infrastructure in rural areas is so high and the expectation of revenue so low, we should consider granting monopolies to operators who agree to go there. In economic terms, they call this kind of situation a natural monopoly, and it’s good to hear you state clearly that yes, infrastructure is a natural monopoly. As you dig in deeper on these issues, you will actually discover that this doesn’t just apply to rural areas, but to 99% of most European countries.

But I digress.

The only issue with your proposal is that you don’t actually have to sacrifice the rights of citizens to choose their providers to achieve what you want. The reason is very simple: the natural monopoly is actually the infrastructure, not the service. And we in Europe (unlike our American friends) have been running multiple services on shared copper infrastructure for years. It’s very simple to do.

So since we’re thinking really outside the box, why not consider infrastructure and services as separate issues? There are several ways this can be (and has been) done:

we could establish an infrastructure company for rural areas that would have all kinds of public and private shareholders (including operators, local governments, investment banks, long-term financial funds, etc.) This company would wholesale access to their network to all market players, thus allowing rural areas to have connectivity and choice.
if we’re a little bolder, we could look at what New Zealand did and actually separate the incumbent’s infrastructure and service arms. Make them into two companies with no financial ties between them. One company would be focused on long-term investment and operations, the other would be focused on short-term service retailing.
This last concept is called structural separation. It was never discussed by the previous commission because, well, it’s a “taboo”. One of those taboos that millions of Euros of lobbying money has kept silent at the bottom of a deep, dark, hole.

Yet I and a number of colleagues believe that it could actually help solve the issue of underinvestment in broadband infrastructure at very little (if any) cost to the European taxpayer. And it wouldn’t just solve it for rural areas, it would solve it for Europe.

Tomorrow, my colleague Thomas Langer and I are running a webinar to present our findings in this area. We have modeled a structurally separated market in one country in Europe you know well and found that the resulting capacity for investment was vastly higher than current investment while at the same time representing significant financial upswing for the shareholders of the incumbent. It’s free to attend and we hope you or members of your staff will join this webinar. It should not be “taboo” to ask such questions and start a public discussion on them.

Yours,

Benoît Felten

croo

Also nothing done about the defacto cartel in Banking for years.

Ah come on now, sure didn't they put the whole country up as collateral to get the money to keep it going. More commitment to a cartel you'll not find anywhere.

Wait, did you mean...