"Cashing up" - a disturbing development in Europe

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An article by Claudia Nemat, Member of the Board of Management responsible for Europe and Technology

Hitting the telecommunications industry where it hurts is a popular trend at the moment - especially in Europe and especially from the point of view of consumers. But consumers and policy-makers should view one development in particular with caution, as it will ultimately push up prices and result in poorer coverage. A recent example of this development can be seen in the outcome of the auction of radio frequencies in Austria. At around 2 billion euros, the license fees paid in Germany's neighboring republic are more than twice as high as the average cost for comparable frequencies across Europe. This situation is further exacerbated by the fact that Austria has, for many years, had some of the lowest rate charges in Europe, while the country's topography (mountain-top to valley-bottom coverage) and roll-out requirements mean the network build-out costs are skyrocketing. What does this kind of spectrum policy aim to achieve?

 Claudia Nemat, Member of the Deutsche Telekom AG Board of Management, Technology and Innovation

Claudia Nemat, Board Member Deutsche Telekom AG, responsible for Technology and Innovation

There is an increasing imbalance across the European mobile communications industry. The auction models used to sell spectrum are constantly becoming more complex, like the ones seen in Austria and previously the ones in the Netherlands, and are being optimized as a source of income for the state. The fact that companies need these funds so they can invest in and rapidly expand mobile communications technology appears to be of secondary importance. And now the annual spectrum fees are to rise if British regulatory authority Ofcom's latest proposal gets pushed through. In the end, the same people who are now helping to fill state coffers will be the ones who bemoan the lack of investment in mobile communications technology in rural areas and high prices in the industry. A few years down the line, all fingers will point at the companies and nobody will be able to remember the auctions.

The digital single market that the European Commission wanted to push ahead with will be increasingly frustrated by the "cashing up" taking place on the national level. In the US, stepped-up investments over the past few years have produced significantly higher network speeds. Data there is transmitted 75 percent faster than in the EU - and the gap will only continue to grow. Long-term evolution (LTE) - the high-speed technology standard - is being rolled out to the US market at a much faster pace than in Europe. In view of the importance of Europe's mobile communications infrastructure, we should be looking to find a better balance between national budget restructuring and commercial interests.