Europe Carriers Urge Looser Rules to Revive $380 Billion Market

Telecommunications executives meeting in Brussels today will look for promises from the new European Commission for simpler regulation to help return the region’s $380 billion market to growth.

“We need fewer rules that are streamlined toward an investment-friendly climate and a simpler institutional landscape,” Luigi Gambardella, chairman of the European Telecommunications Network Operators’ association, said in an interview. “The next EU digital agenda should focus on how to make network investments happen.”

Members of the group, which include Deutsche Telekom AG, TeliaSonera AB and Telecom Italia SpA, will also push for more freedom in mergers and acquisitions and permission to charge content providers such as Google Inc. and Netflix Inc. for prioritized access to their networks, executives said.

Carriers in the 28-nation bloc have said strict rules made them reluctant to invest in networks, allowing U.S. and Asian rivals to get ahead with high-speed Internet data services. During the decade under Commission President Jose Manuel Barroso, European telecommunications stocks were the second-worst performing group, rising 10 percent compared with an almost 40 percent increase in the Stoxx Europe 600 Index. The only industry group that performed worse were banks.

The region’s phone companies spent a total of $70 billion on expanding landline and wireless networks last year, or $10 billion less than the level in 2008, according to data compiled by Bloomberg. Voice and data revenue shrank 14 percent in the period to $383 billion and will decline further to $374 billion this year, the data showed.

‘Same Space’

“We’ll be in the same space talking about the importance of Internet services and consumers, both end consumers and partner suppliers, and how we address the quality of service in the space,” said Johan Dennelind, chief executive officer of TeliaSonera, Sweden’s largest carrier.

Also scheduled to attend today’s meeting are outgoing Commissioner for Digital Agenda Neelie Kroes, Vodafone Group Plc CEO Vittorio Colao, Deutsche Telekom’s Europe chief Claudia Nemat, Telecom Italia Chairman Giuseppe Recchi and Netflix CEO Reed Hastings.

The new European Union executive arm under Jean-Claude Juncker will take office in a few weeks. During his predecessor’s tenure, regulators cut connection prices and carriers spent large chunks of earnings on temporary wireless licenses. Carriers argue they’re losing an ever greater part of the value chain as content providers like Facebook Inc. and Google establish tighter relationships with clients.

Competing Agenda

“There are two competing agendas: lower prices for consumers and encourage investments, and operators will try to tip the balance toward the latter,”said Andrew Hogley, an analyst at Espirito Santo Investment Bank in London. “It’s important that they set out their stakes before the new commission comes in and makes its public statements.”

The timing of today’s meeting, before new rules have been set in stone, is opportune. The following two days, telecommunications ministers of European Union member states will meet in Milan to debate Internet governance rules.

The European Parliament in April voted in favor of draft rules that would make carriers treat all Internet traffic equally, no matter if it comes from Google, Inc. or Netflix. The debate is paralleled by discussions in the U.S., where the Federal Communications Commission weighs extending strict network-neutrality rules to the wireless sector.

“The final ruling on net neutrality will have a significant impact on business models of network operators and Internet companies,” said Stefan Borscheid, a telecommunications analyst at Landesbank Baden-Wuerttemberg in Stuttgart. “There are very good reasons for net neutrality, but if you want more investments you need to make a compromise.”

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