ETNO Response to European Commission Green Paper: Preparing for a Fully Converged Audiovisual World: Growth, Creation and Values
ETNO welcomes the European Commission’s Green Paper ‘Preparing for a Fully Converged Audiovisual World: Growth, Creation and Values’ as a timely initiative aimed at better understanding the current developments in the audio-visual sector and the likely trends. ETNO thanks the Commission for the opportunity to contribute to the public consultation and the debate launched by DG Connect on the right way forward, in particular in relation to the eventual need to revise the current regulatory landscape in order to better adapt to new and innovative products/services.
ETNO notes that the current Green Paper seems particularly focused on the changes and challenges that Internet-based services are bringing to the traditional broadcasting sector and devotes less attention to the impact that the dramatic increase in traffic growth is registering on broadband networks. The Internet ecosystem is undergoing huge change due to the increase of video traffic on broadband networks (a number of studies report that by 2016, video traffic will amount to 55% of total Internet consumption), which raises questions about current capacity levels. New players have emerged in the Internet value chain and, in particular, ‘Over the Top’ players (OTTs) who come from unregulated sectors or different regions of the world but who compete in the same market as European telecoms operators. These OTTs have the flexibility to provide similar services, often for free or at significantly lower tariffs, as they do not contribute to the underlying networks and so the playing field is not level.
The ongoing migration towards an all-IP environment correlates with the shift of value from telcos to OTTs. Between 2008 and 2012, European telcos lost nearly €70 billion in aggregate market capitalization while OTT digital service providers, device manufacturers and cable companies gained more than €200 billion. This process was accompanied by a substantial value migration from European to foreign players. Additionally, revenues are decreasing sharply and are expected to continue to contract over the next decade by up to 2 percent a year, representing a cumulative decline of €70 billion to €190 billion. This leads to a loss in telcos’ competitiveness and investment capacity in high speed networks and innovative services. In this asymmetric market context, European network operators are still called upon by the European institutions to heavily invest in broadband network deployment and upgrades, in order to support the video traffic increase requested by users and to meet the ambitious EU Digital Agenda goals. If one wants to meet users’ expectations (users require new service features such as interactivity, ubiquity and multi-device use), the market structure with its newly shaped value chain needs to be reconsidered. We need to rethink the traditional paradigms which were developed when the Internet was still in its infancy and symmetric data flows were a feature.
There is general agreement about the need to guarantee a sustainable Internet ecosystem. However, there are still opposing views on how best to achieve this goal. We strongly believe that if we wish to pursue the European Digital Agenda goals, the needs of those European players that contribute the most to EU growth should be heeded. As such, ETNO believes that the European Commission should take a much more holistic approach when considering the impact of convergence on EU competitiveness and consider in its analysis the following areas (beyond the specific and most directly related legislation, such as the AVMS Directive):
- The IP interconnection field. Operators must have the freedom to be able to explore new relationships with those players who send large amounts of traffic into the network. The volume and sometimes network sensitive nature of these services may require a reassessment of the commercial realities in these relationships.
- Privacy and data protection. Telcos are regulated through a binding EU Directive while digital services players are not and yet both are providing functionally equivalent services. The particular nature of the digital services (provided by global operators active in a cross-border market) requires the establishment of a level playing field among players also at geographical levels. The current proposal of EU regulation on data protection goes in the right direction to address this need.
- Switching and data portability. Again, these areas are regulated for telcos, not for OTT players.
- Taxes. As new entrants, OTTs often have more flexibility than telcos to maximize tax savings by choosing where to have their European headquarter operations.
- Identification and safety-related measures. Telcos are subject to strict, country-specific rules for electronic communication services that do not apply to OTT providers offering services that represent reasonable alternatives from the consumer's point of view.
ETNO believes that the Commission should seize any occasion to re-balance the strength of the EU industry and to re-establish its competitiveness. ETNO has recently voiced its position in the context of the public consultation on the EU-US Trade Agreement, stating that in the context of ICT services, it is of particular importance for European companies that the Transatlantic Trade and Investment Partnership (TTIP) ensures a level playing field, providing for equal access of EU service companies to the US market and at the same time ensuring that service providers from the US have to respect the same rules applicable to EU companies when providing services in Europe or to European customers. Different regulatory regimes have put European companies at a disadvantage, leading to unhealthy asymmetries in the EU-US relationship. In particular, this situation has led to the dominance of OTTs in the digital economy value chain, leading to imbalances that need to be addressed.
In conclusion, we believe that the EU Commission should take a holistic view when addressing the digital single market issue, starting from a full understanding of the market dynamics and looking at all relevant aspects of convergence.
Click here for the full Reflection Document.
 BCG/ETNO Study: Reforming Europe's Telecoms Regulation to Enable the Digital Single Market http://www.etno.be/datas/publications/studies/BCG_ETNO_REPORT_2013.pdf
 BCG/ETNO Study: Reforming Europe's Telecoms Regulation to Enable the Digital Single Market