EU's 'Connected Continent' proposal draws muted response, but analysts upbeat

Although those in the European wireless industry offered a tepid to downbeat reaction to Neelie Kroes' proposal to reshape the telecoms market by, among other things, ending roaming charges and instituting some net neutrality rules, some analysts believe the scheme is a "pragmatic compromise" that will be largely benign to most mobile operators.

Kroes, the European Commission's digital chief, has been pushing the proposal as "the most ambitious plan in 26 years of telecoms reform." The proposal covers an extremely wide range of issues and topics--from public Wi-Fi to consumer rights--and is intended to replace today's fractured telecom landscape with a  single, unified market for telecoms in Europe. The European Union said the proposal would add €110 billion ($146 billion) a year to the EU's gross domestic product if it is ultimately approved by the group's 28 member states and the European Parliament.

"The commission has rightly identified that increased investment in Europe's telecoms infrastructure is needed to drive progress across all sectors of the economy but, on balance, the package needs to do much more to support this goal," said Anne Bouverot, director general of the GSMA, in a decidedly lukewarm response to Kroes' proposal. "A more thorough and comprehensive approach is required and the mobile industry stands ready to contribute to efforts to develop an ambitious shared agenda to underpin Europe's digital economy."

Various European operators released similarly pessimistic reactions to the details contained in the EC's "Connected Continent" proposal. For example, Hutchison Whampoa's 3 called the new roaming rules "discriminatory and disproportionate," according to the Wall Street Journal, while Telefónica said that the plan "falls short of addressing the challenges of the sector and will not guarantee the expected results in terms of European competitiveness and consumer benefits through investments, growth and jobs."

"Right now, it seems that the most important chapters in this proposal are not going to lead to more investment or long-term growth," Viktor Wallstrom, a spokesman for Nordic operator Tele2, told Reuters.

But investment banking firm Jefferies said that the "Connected Continent" legislation wasn't as severe as some had worried. The firm wrote in an investor note that the stipulations in the proposal "appear benign to large MNOs/incumbents at several levels. Draconian wholesale roaming rate cuts are avoided, net neutrality conditions have been flexed to the operators' favour and broadband investments encouraged."

Perhaps the most noteworthy element in Kroes' proposition is the elimination of travelers' incoming calling charges starting next year. All roaming charges would be phased out by 2016. Charges for fixed-line calls would also be restricted. In a post on the topic, Kroes explained: "First, no more charges at all for receiving a call within the EU. And, second, a new deal so you can 'roam like at home' at no extra cost--with measures to encourage those deals onto the market as soon as possible."

Another key element tackles net neutrality; under the proposal, operators would be able to charge extra for specific services, like faster access to video, but would have to clearly spell out the terms to customers. Further, as the Journal pointed out, these premium services "must not substantially impair the general quality of Internet access services."

"Today, millions of Europeans find services like Skype blocked, or their internet access degraded: my proposal will end those discriminatory practices," Kroes wrote.

Other elements in the proposal cover consumers' rights, spectrum harmonization and cross-border regulation.

For more:
- see this WSJ article (sub. req.)
- see this separate WSJ article (sub. req.)
- see this Reuters article
- see this GSMA statement
- see this EC post from Kroes
- see the full Connected Continent proposal
- see this ZDNet article

Related Articles:
Kroes pushes through plans for EU single market
Kroes insists roaming fees will end, despite report to the contrary
European Commission denies split over single telecoms regulator
EU's Kroes: 774% difference in mobile call prices across the EU
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