European operators are falling behind their U.S. counterparts in the deployment of next-generation mobile networks and the European market requires major regulatory reform in order to catch up, according to a new report from the GSMA.
The report from the GSMA, which represents mobile operators across the globe, comes as Europe's digital chief, Neelie Kroes, set out a target to abolish mobile roaming fees in 2014 and ensure net neutrality across the European Union, as part of her plan to create a single market for telecoms.
Now, the GSMA is arguing more enlightened regulatory policies are needed to bring improvements in order to create benefits for EU consumers and drive economic growth. Tom Philips, head of government and public affairs at the GSMA, told the Financial Times that the report's findings are shocking for the European sector.
"The [investment] gap looks like it is getting worse, not better," he said. "Europe is so regulated that it cannot afford to invest. Everything in Europe is subscale."
The association particularly highlighted the large lead the U.S. has in the deployment of next-generation technologies. By the end of 2013, nearly 20 per cent of US connections will be on LTE networks, compared to fewer than 2 per cent in the EU, the report said. The report also found that mobile investment in the United States has outpaced that in Europe, with capital expenditure in the U.S. market growing by 70 per cent since 2007 while declining in the EU.
"Europe was the early leader in mobile, with a wide range of companies pioneering the innovation that now benefits more than 3.2 billion men and women around the world," Anne Bouverot, director general of the GSMA, said in a statement. "However, this report confirms the very sobering reality that Europe has lost its edge in mobile and is significantly underperforming other advanced economies, including the United States."
Only five years ago the European mobile market was performing as well as, or even better than, the United States, the GSMA added. However, since then, the situation has dramatically reversed.
To provide some other examples of how Europe has fallen behind the U.S., the association said U.S. consumers spend more each month than their European counterparts, but consume five times more voice minutes and nearly twice as much data. In the U.S., average revenue per subscription per month is $69 compared to $38 in Europe.
What's more, average mobile data connection speeds in the U.S. are now 75 per cent faster than those in Europe and by 2017 will be more than twice as fast, the GSMA said.
"While there are several factors leading to this divergent performance, it can be partially attributed to the relatively inefficient structure of mobile markets in Europe," said Jeffrey Eisenach, managing director at Navigant Economics, which developed the report with the GSMA. "EU regulatory policies have resulted in a fragmented market structure that prevents operators from capturing beneficial economies of scale and scope and inhibits the growth of the mobile ecosystem."
The GSMA has now called on the European Commission to introduce fundamental regulatory reforms to restore growth in the European mobile industry, including a focus on facilitating investment and innovation, a faster allocation and harmonisation of spectrum in the 700 MHz band, a more streamlined approach to mergers and the creation of a European single market for mobile.
Following Kroes' speech this week, a tweet sent by Bouverot highlighted that the GSMA believes a much broader approach is required to drive regulatory change: "@NeelieKroesEU EU must focus on big pic, unique opp for new approach in mobile reg, to drive investment & innovation http://gsma.at/17werlK."
It seems unlikely that operators represented by the GSMA would welcome abolition of roaming charges in Europe, however: operators have already complained about the impact the existing caps are having on their revenue.
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