How Brussels works: if you can’t beat them, join rewrite an EU directive

Analysis The biggest European telcos are poised to use Brussels to enact their revenge on American internet platforms, and on OTT providers like WhatsApp, the Eurocrats’ house journal The Financial Times claims.

This isn’t exactly news, as a “sop to telcos” was exactly how we described what to expect last year, after we were leaked a draft of the Digital Single Market proposals.

Having grumpily accepted an end to roaming charges, the telcos were assured something in return. OTT IMs would need to abide by more telco regulations. “The e-Privacy directive could also be extended to services companies like OTT players,” we noted. That doesn’t sit squarely with the trade association ETNO’s position to “scrap” the e-Privacy Directive. But if you can’t scrap it, use it to nobble the competition.

The FT claims to have “seen” further plans to do just that - although it doesn’t deign to share those plans with the readers. The paper, described earlier this year as “the Daily Mail of the Europhile elite”, is loathe to paint Brussels in a bad light. So it is reasonable to guess that whatever sop is thrown at the telcos is not going to be “populist”. Which is another way of saying that it won’t be consumer friendly.

According to the Pink ‘Un:

“Commission officials argue that over-the-top services, which let users deliver [sic] calls and messages via the internet, should be regulated in a similar way to the services they have rapidly replaced, including SMS text messaging and traditional voice calling.”

Two years ago, Ovum predicted that telcos would lose a combined $386bn to OTT voice and text services between 2012 and 2018. The calculation is based on the value of minutes “lost”.

But this comes at a time of transition for the industry, which has long prepared for a transition to IP. Mobile operators are shifting to all-IP infrastructure - in LTE, voice is just another app - and flat rate pricing models. When EE launched 4G into the UK, it simply did away with bundled minutes, texts and data: everything was all you can eat.

The regulatory battles in the telecoms sector illustrate Brussels in all its contradictions and sclerosis.

The “sop” doesn’t satisfy what the telcos really want, which is certainty: and particularly, more freedom to consolidate. They were already unhappy that telcos couldn’t create pan-European savings. Then Commissioner Vestiger ushered in a new era of intervention when she blocked the Hutchison/O2 takeover. And just as telcos thought they’d batted away the lunatic fringe of net neutrality activists in Parliament, they returned to capture the pan-European regulator BEREC. The result is regulations which providers say are unworkable.

This has already had a chilling effect on telco innovation, as any service which guarantees QoS is potentially “illegal”, threatening to draw the operator into years of legal battles with the CJEU. Neither of the activists’ key propositions: that hard neutrality laws are a) needed because of demonstrable harm and b) benefit the consumer, is supported by the evidence. According to BEREC’s own survey, it isn’t even supported by the public, who very rapidly cool on the idea of net neutrality if it means higher prices. They care, but not enough to pay for it.

These battles have a root cause that’s structural, and very much a problem of Brussels' own making. The European Commission creates incentives both for big business to lobby to exclude competition, and for activist excess. Realising it has a “democratic deficit”, the Commission takes pride in funding activists and academics, to provide a voice for “civil society” that it believes is necessary to balance capitalism.

It then splits the difference. But the civil society that takes up placards on digital issues isn’t an organic expression of popular political expression, but big business lobbying by other means. The activists are simply sock puppets for another sector of big business. Twenty-five per cent of the funding for EDRi, the noisiest civil society group calling for hard neutrality, comes from the Commission itself.

If Brussels reformed itself to become a “minarchist” apparatus, that would remove the incentives for both telcos and soap-dodgers to spend their time lobbying Brussels. There’d be no doors to knock on. But Hell will freeze over first. ®