LONDON - Mobile phone operators are getting crossed signals from European Union lawmakers.þþThere is plenty of political talk supporting the broad aims to digitize the European Union economy, including development of Internet-based mobile phone services. But at the same time new rules are being drafted that would heap greater regulatory and financial pressures on wireless network operators, as they struggle to switch to a new, third-generation mobile phone technology.þþAs European Union heads of state agreed to an ambitious ÿeEuropeÿ action plan at a conference in Seville during the weekend, they and the European Commission, whose job it is to build the regulatory framework for the so-called information society, have been criticized for overlooking current realities to set their sights on the long term. þþÿEuropean lawmakers are acting with best intentions, but you have to ask whether their policies are appropriate when the market place is in such a parlous state,ÿ said Peter Alexiadis, a partner in the Brussels office of the law firm Squire Sanders & Dempsey.þþShortly before the Seville conference, the European Commission announced two mobile phone initiatives that marked an abrupt departure from a more sympathetic approach to the industry that the commission expressed last year.þþAs beauty contests for so-called third-generation, or 3G, wireless licenses turned ugly and telecommunications stocks plunged in in 2001, the commission hinted that it could extend the lengths of the licenses to ease the financial burden on the companies that had paid exorbitant amounts for them.þþBut that approach has changed, even if the industry's fortunes have not. The commission released a report on the 3G mobile phone market, which proposed that there be no loosening of the licensing rules. The report explained that ÿextending license duration appears to have comparatively little impact on restoring the financial institutions' confidence in the sector.ÿþþBy the commission's calculations, telecommunications companies have spent about 110 billion euros (about $107 billion), pushing them to spectacular debt levels. Last month Vodafone, the world's biggest mobile operator, announced a record loss of £13.5 billion ($20.2 billion). It alone spent roughly that amount on acquiring 3G licenses in Germany and other European Union markets, as well as Britain. þþOne way the companies are financing their investment in the next generation of mobile phones is by charging customers an array of fees to use their existing G.S.M. (for global system mobile) phones. A recent study by Goldman, Sachs found that roaming fees and termination charges (which companies assess for completing other carriers' calls) together accounted for up to 40 percent of revenues of some European wireless operators. þþIn a separate move two weeks ago, the commission announced that it wanted to clamp down on these fees, in the interests of consumers. ÿThe commission doesn't seem to realize that mobile-phone operators need these fees to subsidize their investments in the new technologies,ÿ a person close to one of the big European wireless companies said, insisting on anonymity. þþThe commission's change of attitude toward the mobile phone market reveals an internal struggle of the competition commissioner, Mario Monti, with his colleague in charge of forging Europe's new economy, Erkki Liikanen. Right now, Mr. Monti seems to be prevailing. þþÿThe approach of the commission to regulating the mobile-phone sector has morphed from aiming at creating legal certainty with the emphasis on less intervention, to one that grants maximum flexibility for competition officials to police the market,ÿ Mr. Alexiadis said.þþThe commission justifies the new tougher approach to the industry by saying that despite its perceived difficulties, the telecommunications industry still out-performed the general economy in the European Union last year, with revenue of 224 billion euros (about $218 billion) and market growth of about 10 percent.þþBut Michael Bartholemew, an industry executive, said the wireless industry was still suffering. ÿEurope used to have a two-year lead on the United States in mobile phones, but that lead is being lessened largely because of the severe debt companies fell into paying for their 3G licenses,ÿ said Mr. Bartholemew, director of ETNO, an association of some of the biggest telecom players in Europe.þþÿIt is easy to blame the operators, but the governments that reaped the rewards of the highly priced licenses are equally to blame,ÿ Mr. Bartholemew said. ÿThey were greedy, and they didn't consider the impact such high license prices would have on the telecoms industry.ÿ þþBefore the Seville conference, ETNO wrote to all 15 heads of state of the European Union, asking them to give the industry greater legal certainty and a lighter regulatory touch, as companies grapple with converting their wireless and land-line networks to high-speed, or broadband, technology.þþÿUntil our members have certainty that broadband won't be over regulated they won't make the necessary investments,ÿ Mr. Bartholemew said. ÿThe question of who is going to pay for broadband is missing from the debate.ÿþþThe cost of switching to broadband, he said, will be ÿsignificantly higherÿ than the 110 billion euros already paid for 3G licenses. ÿThat's why there's a bit of a pause in development now,ÿ he added.þþMr. Alexiadis said: ÿIt would be better to focus on expanding the potential for narrowband, especially since broadband content isn't developed yet. You have to question whether the industry can absorb the costs of switching to broadband in the short term.ÿþþThe 15 heads of state who met in Seville were mainly occupied with broader, longer-term issues. They agreed on setting a target date of 2005, by which time all schools, hospitals and local government offices should have broadband access to the Internet.þþMeanwhile, the commission is preparing to play a more prominent role in regulating the telecommunications market. Beginning in July 2003 it will be able to veto decisions by national regulators.þþÿThere is an onslaught from the commission at the moment and it is sending a chill up the spines of many leading telecoms operators,ÿ Mr. Bartholemew said. ÿWe hope they don't choke off new investment with over regulation.ÿ þ
Source: NY Times
