Four reforms that will decide whether Europe catches up
The European telecom sector is a regulated one and its health has downstream effects on the whole digital economy. This is why Europe can only win in tech when it completes the deep telecom reforms suggested by Draghi. Our view is that this depends on at least four major policy actions.
First, we need scale. Europe’s telecom markets remain too fragmented, with many operators too small to invest at the scale needed for advanced networks and dramatically improved customer experience. Consolidation therefore becomes a necessary tool, both in-market and across markets, to create stronger operators able to invest, innovate and interact with major global AI, chip and platform companies. The review of the EU Merger Guidelines, and its practical application in telecom cases, will play a crucial role here.
Second, we need a new telecom rulebook. The Digital Networks Act (DNA) is currently being reviewed by the European Parliament and member states. So far, the Commission’s main material improvement for 5G and 6G investment is the proposal to make spectrum licenses unlimited. Yet, troubling signals from co-legislators suggest that even this improvement could be watered down. If that happens, the DNA would lose the one positive measure that analysts and investors have identified so far. Other areas that should be tackled are: deregulating the current heavy-handed access regime, which currently prevents a rush to invest in fiber; removing the introduction of mandated switch-off of copper networks, which might end-up unintendedly harming consumers and removing their freedom of choice; and materially improving the space for telecom innovation, with clearer rules on specialized services and simplified service regulation.
Europe can only win in tech when it completes the deep telecom reforms suggested by Draghi.
Third, we must defend security with better tools than some of those suggested in the Cybersecurity Act (CSA). Unless improved, the current CSA will impose major costs, estimated at €30-40 billion by GSMA Intelligence, on telecom operators and their customers, effectively contradicting other pro-investment policy objectives. De-risking connectivity is worthy, however, we have serious doubts that this can be done simply by imposing an indiscriminate technology ban, while we would need a proportionate and truly risk-based approach. What about compensation, as the U.S. did? What about the investment capacity of the sector? What about unintended effects on consumers? Things are still not well-thought through.
Fourth, we need a Cloud and AI Development Act that strengthens Europe’s sovereignty, competitiveness and resilience in practice. The starting point in the Commission draft is good: the ultimate goal should be to accelerate Europe’s cloud and AI capacity, while creating the right conditions for demand, investment, deployment and scale.