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ETNO's position papers present its member-companies' views on a wide range of technical, regulatory and trade issues to European Union decision-makers, national governments and the general public.
They are developed either internally by ETNO working groups or, occasionally, in co-operation with third parties such as other industry associations.
Click here for definitions of ETNO Position Papers and Expert Contributions.
The financial crash that occurred in the United States in 1837 prompted the need for risk assessment for investors. The power of financial rating agencies in influencing investors has grown in importance over the past decades, due to a number of significant events (the collapse of Enron in the US; the US Subprime mortgage crisis; the late 2000 financial crisis; and the Greek national debt crisis). Following increased complaints and impact of such agencies, this has led to the creation in Europe of the European Securities and Markets Authorities (ESMA). Since 2010, credit rating agencies need therefore to comply with ESMA rules.
Cyber rating is now being introduced in continuity with financial rating. In 2015, Standard and Poor’s was the first agency to announce that it was taking cyber risk into consideration when calculating its rating. Cyber rating initiatives in general have been booming over the past five years and there are now several US-based agencies that produce cyber ratings, such as Security ScoreCard, BitSight, Panorays, VisibleRisk etc.
Those credit rating agencies are looking for KPIs that assess cyber security risk coverage. Today, companies are more and more using these ratings when considering to enter into business arrangements; they can influence the decision of a company to work with another. It appears that EU governments are also increasingly working with cyber rating agencies. Developing ratings in our complex and interconnected world is understandable and welcome, as long as the methodologies used are transparent, reliable and robust, considering their huge business impact especially on EU companies.
24 September, 2021 Read more
The European Telecommunication Network Operators' Association (ETNO) welcomes the ongoing work by the Platform on sustainable finance and its relevant role in providing advice on the further development of the EU taxonomy. We thus appreciate the opportunity to provide feedback on the draft report on preliminary recommendations for technical screening criteria.
ETNO fully supports the role of the EU taxonomy as an essential facilitator of the EU Green Deal. Channelling investment flows towards environmentally sustainable projects and activities will be crucial to meet the EU’s climate and energy targets for 2030 and beyond. Therefore, the EU taxonomy urgently needs to provide the right investment incentives, both when it comes to economic activities with the highest negative environmental footprint as well as economic activities that can support the green and circular transition.
Digital solutions are a pre-requisite for achieving the EU Green Deal’s goals across different sectors of the economy and society. The enabling potential has a contribution across all sectors of the economy, including manufacturing, transport, buildings, healthcare and public administration, that can only achieve carbon neutrality by accelerating their digital transformation. For example, the recent ETNO BGC report(1) quantified this enabling potential measuring up to 15% of emission reductions resulting from full digitalization (including smart cities and buildings, transportation, industry IoT and blockchain applications, and energy).
Against this background, ETNO is concerned that the EU taxonomy has so far missed the opportunity to adequately address the role of the ICT sector in the technical screening criteria adopted as part of the Climate Delegated Act and in the preparation of the next set of technical screening criteria, which are the subject of the present consultation. The EU Taxonomy urgently needs a stronger emphasis on ICT sector’s “greening of” and “greening by” activities, which have a much deeper and broader impact across sectors of the economy and of the society.
In this regard, the EU taxonomy has in particular failed to reflect the crucial role of the telecommunications sector, which is the infrastructure necessary for digitalization. Telecommunication companies have invested and continue to invest heavily in the build-out and upgrade of energy efficient and high-speed network infrastructure and data centres, as well as in the development and deployment of ICT services. This results in increased energy efficiency in the provision of mobile and fixed services. As indicated in the 2021 ETNO State of Digital Communications(2) , the carbon intensity of ETNO companies decreased in 2019, with emissions at 27 grams per EUR earned as opposed to 29 grams in 2018. ETNO companies also reduced their use of non-renewable energy by 23% and increased their use of renewable energy by 24% in one year.
In 2019, ETNO companies deployed 70.9% of the total network investment in Europe. At the same time, and despite telecom operators’ large investments, the EU faces an investment gap for digital infrastructure. Once built, 5G and fibre networks will have cost Europe around €500 billion.
A clear framework for access to long-term and sustainable funds through EU taxonomy can prove crucial for efforts to include all European regions in the Gigabit Society and for the transition towards energyefficient networks such as 5G and fibre.
1 “Connectivity and Beyond: How Telcos Can Accelerate a Digital Future For All” https://etno.eu/library/reports/96-connectivity-and-beyond.html
24 September, 2021 Read more
ETNO welcomes the opportunity to comment on the measures being explored by the European Commission in preparing the Data Act. This document complements our response to the public consultation questionnaire with regards to the two specific sections on business-to-government data sharing for the public interest and on business-to-business data sharing, building on our recent feedback to the Commission’s Inception Impact Assessment (IIA) on the Data Act.3 September, 2021 Read more
The European Telecommunication Network Operators' Association (ETNO) welcomes the opportunity to provide feedback to the Draft RSPG Opinion on the role of radio spectrum policy to help combat climate change.3 September, 2021 Read more
ETNO welcomes the European Commission’s (EC) aim to get a comprehensive understanding of the consumer Internet of Things (IoT) sector, and to assess whether competition in this sector may be restricted or distorted within the internal market.
As markets and technologies converge, European telecommunications providers have become increasingly entwined with wider consumer propositions and larger ecosystems. In the consumer IoT sector, our members typically provide the connectivity layer for smart devices. Additionally, several telecom service providers have their own IoT offerings – such as cloud-based platforms for the analysis of IoT data – and voice assistants.31 August, 2021 Read more
ETNO welcomes the European Commission’s (EC) initiative to look into two new initiatives aimed to make mobile phones and tablets more energy efficient and to improve their material efficiency.
European telecommunication companies have high ambitions to include sustainability and circular economy measures as essential core elements into their business.
Mobile phones and tablets are important parts of the business through which connectivity services become useable by customers. Here the telco industry needs to rely on the supply chain, and it has been requesting to its partners in the supply chain to include more sustainability features into their hardware design. This encompasses several aspects which include, inter alia, durability, longevity, and reparability, and which are also defined as objectives by the EC in its EU Circular Economy Action plan.17 August, 2021 Read more
ETNO welcomes the initiative of BEREC to undergo a stock-take of the lessons learned regarding communications networks and services for a resilient society, including the response of the NRAs.
The global COVID-19 crisis once more shed light on the importance of strong and reliable connectivity among societal and business communities. The COVID-19 crisis showed that telecom networks witnessed an increase in internet traffic, as entire societies moved to remote working, but ISPs have coped extremely well with the increase in internet traffic and they avoided networks congestions.
On June 15, 2021, BEREC published its second Report on WACC parameter calculations according to the European Commission’s WACC Notice of 6th November 2019 (‘WACC Report 2021’).
ETNO had taken a critical stance on the Commissions WACC Notice and the first BEREC Report in January 2021 and provided suggestions for rectifications to achieve the goal of a more harmonized WACC which would indeed provide the opportunity for a fair and simplified WACC setting throughout Europe.
The WACC Notice so far has not been changed and the BEREC Report2 now reveals the pitfalls of methodological shortcomings of the Notice: based on the current BEREC calculations national WACCs in a number of member states would fall below 5% (pre-tax, nominal), a threshold which has never been passed by NRAs before the Notice and which would be in contradiction to usual market WACC estimates for the regulated companies. The latter currently stand usually at least at high single-digit levels.
Such wrongly set WACC poses serious threats for electronic communications markets in Europe. It sends negative signals to investors and reduces trust in regulation as it shows that Regulators do not consider investors expected return on investments and furthermore, they would allow for disruptive decreases.
Although the WACC notice is formally limited to a WACC for legacy network regulation, such legacy WACC decisions could spill over to VHC where the legacy WACC is perceived as benchmark or basis for VHC WACC. Contrary to the Commission’s intention to promote the internal market the Notice may create distortions to EU internal market as countries with bigger differences with the current WACC figures for the telecommunication sector would be penalized.
The second BEREC report follows calculation methods of the first report but changes the peer group which is used for assessing major parameters such as the beta, gearing or debt premium for the analysis of the equity risk premium. The net effect of these changes are even lower WACCs in comparison with an unchanged peer group.
The main flaws of the Commission Notice remain. The Notice systematically underestimates the cost of equity in times of artificially depressed low interest rates for governments bonds (the “risk free rate”) by forcing NRAs to combine national low or negative bond yields of the past 5 years with a uniform EU average market risk premium which is derived from historic data on bond yields and equity market return over a very long time period without aligning the outcome with forward looking risk estimates and ignoring the effects of the quantitative easing policy on interest rates. Indeed, while low or decreasing interest rates have allowed companies to raise debt at better terms, the cost of equity did not follow this trend, resulting in an overall WACC estimates at company level significantly above the BEREC estimates following the EC’s notice.
The recent Ofcom estimate for the WACC of BT provides an interesting case study on the outcome of an alternative WACC estimate. Ofcom did not apply the WACC Notice methodology or the BEREC numbers but undertook its own investigation. As a result, Ofcom established a WACC of 7,8% for BT. Based on the first BEREC Report, however, the WACC should not have exceeded appr. 5,3%. Such a large gap is a strong indicator that the WACC
Notice might lead to a severe underestimation of correctly estimated WACCs. Wrongly set WACCs could cause significant harm on investments in European telecommunications. As the Commission has undertaken the review of the Next Generation Access recommendation, the current situation, while limited to legacy assets, might trigger wider damage to very high capacity network (VHCN) investments, at the opposite to the ambitious targets the Commission itself sets on VHCN.
ETNO hence reiterates its concerns and urges the Commission and BEREC to consider appropriate estimates of the WACCs to enable National Regulators to allow for a regulatory environment which supports and values investments.14 July, 2021 Read more
ETNO welcomes the possibility to provide its comments below in response to the public consultation on the Inception Impact Assessment on the future Data Act.25 June, 2021 Read more
ETNO (European Telecommunications Network Operators' Association) represents Europe’s telecommunications network operators and is the principal policy group for European e-communications network operators. ETNO’s primary purpose is to promote a positive policy environment allowing the EU telecommunications sector to deliver best quality services to consumers and businesses.
ETNO fully supports the EU taxonomy role as an essential facilitator of the EU Green Deal, with the purpose of channelling long-term, sustainable finance into sustainable activities.4 June, 2021 Read more