Thierry Breton the white knight of the telecommunications operators in the hard and cold offices of Brussels. He speaks his own language and defends a thesis close to his. The one who was CEO of Orange in the early 2000s has become the great hope of this sector. Large companies, including the three main ones that operate in Spain, have embraced the Internal Market commissioner as their great supporter in this particular regulatory battle to reduce pressure and improve economic returns in the industry. And they have staged it at the Mobile World Congress (MWC).
This Monday, the French politician met with the ‘first swords’ of the big names in this market, including Álvarez-Pallete, assuming that he will push to change some of the current archaic ‘rules of the game’. His approach is much more pragmatic than that of his Competition counterpart, Margrethe Vestager. His ultimate goal is for Europe (and, therefore, Spain) not to lose the race for the use of infrastructures, even if this requires changing the regulation and making other companies pay to finance the uses.
In some of the meetings that were held yesterday with the telecommunications operators, according to known sources, two very clear points were raised. One was the one that everyone expected: the sharing of costs for the use and maintenance of networks between operators and companies like Netflix, Amazon or Google as large data consumers. “We will need to find a financing model for the gigantic investments that are needed that respects and preserves the user’s freedom of choice and the freedom to offer services on a fair and competitive playing field”, he pointed out in his inaugural presentation of Mobile.
The other issue that has been dealt with in these meetings is the unification of the radio spectrum in the European market. This is a ‘sine qua non’ condition for achieving a true wave of purchases and mergers of large operators on the European continent, since the existence of very different rules and assets between the markets means that the synergies of potential transactions are limited. Breton, who also insists that it is necessary to eliminate potential obstacles to these unions, understands that the potential of the European territory with 440 million citizens is not really being taken advantage of.
Both have been issues with which the executive president of Telefónica, José María Álvarez-Pallete, has been hoarse in his regulatory offensive. Both for the Spanish executive, and for some of his counterparts in Europe, Breton is someone who speaks the same language. He is an electrical and computer engineer and has not only been CEO of the former France Telecom, but also at the technology consultancy Atos. He is sensitive to the issues that concern the operators, such as the ‘rules of the game’ or the reduction of competitors. And his role as ‘good cop’ against Vestager has conquered a sector that is looking for a clear reference in Brussels so that 2023, as Telefónica has promised its investors, becomes the year of relevant regulatory changes.
Breton flees from any war with technology companies and seeks their collaboration, as the president of Telefónica himself has done now
Telecommunications operators have lived through a kind of ‘cold war’ with Brussels for years. The harsh regulatory demands and the decision to stop any significant merger operation that would reduce the harsh competition unleashed in the last decade weighed heavily. Vestager has exercised a certain heavy hand with the sector, which has been subjected to rules that implied that there would be, as a general rule, four companies with a network in each of the markets. By contrast, Breton -who did not shake his hand when approving tough decisions against technology companies- has in mind the need to comply with the necessary infrastructure uses for the 2030 horizon. And he understands that squeezing more from the operators will not It is the best way.
This greater sensitivity does not want to be interpreted as having chosen a side. “This is not if the interest of one party prevails over the other,” he admitted in his speech. He does not seek confrontation and regrets that the consultation has been described by many market analysts as a battle between the big operators and the tech giants. “A binary choice between those who provide networks today and those who feed them with traffic. This is not how we see things, ”he pointed out. He implies that if he does not have the collaboration of Netflix, Amazon or Google, it will be very difficult to generate dynamics that really move in the direction of progress in ultra-fast networks in the next five years.
And it is just what Álvarez-Pallete himself is also doing during this Mobile World Congress. That of the telcos is a very complicated balance, because with one hand it demands toughness against those who load their ‘highways’ with traffic information. With the other, he collaborates with them because they own a relevant part of the current internet and cloud architecture. That is why the executive president lowered the temperature in his words a couple of degrees compared to what he said just a few days ago in the presentation of the company’s annual results. The conclusion: “We need collaboration.”
In this game of alliances, Telefónica and the rest also have a somewhat less expected ally: the Spanish government. The Vice President of the Government, Nadia Calviño, winked at them again, defending the suitability of this payment for the use of the networks and hurried Breton and the rest of the Spanish Commission of the European Union – which will take place in the second semester Legislation of that ‘fair contribution’ could be expedited as much as possible this year.
The battle of the payment by the networks is very old. At the end of the 2000s, it began to be considered by some companies. Today, fifteen years later, it begins to take shape in Brussels. The telcos, with Telefónica as the most visible head, want to have a clear reference after years with a tense relationship with Vestager. Breton is one of the chosen ones and the 2023 Mobile World Congress has served to stage it. It remains to be seen if this increased sensitivity really translates into something else.