The Wireless Ecosystem, US vs. EU

By the end of 2016, it is expected that two-thirds of all mobile subscriptions in the US will be 4G/LTE. The European Union at best will see 30 percent of subscriptions being 4G/LTE. The US has multiple operators with pan-American 4G networks, but the EU can’t claim even a single mobile operator with pan-European 4G scale. The European Commission, while having paid lip service to the need for more infrastructure investment, reports that investment has stayed flat for the last two years. Meanwhile the US had a record year in wireless investment in 2014. These are some of the conclusions in Strand Consult’s latest report ,”The Wireless Ecosystem, US vs. EU” Order it for free today.

This report follows what Strand Consult observed in 2014 in ”The EU’s Broadband and Telecom Policy is not working. Europe is falling further behind the US”. The EU, which had accounted for a third of the world’s capital investment in telecom infrastructure in the preceding decade, fell to less than one-fifth. Meanwhile per capita, America’s private telecom providers invested at double the rate of providers in the EU. In fact, the US maintained global leadership in infrastructure investment, accounting for about a quarter of the world’s total from 2003-2013. It reviews the most recent official data from the FCC, European Commission, and other prominent sources on international broadband comparisons, infrastructure investment, wireless competition, coverage, and subscriptions.

Simply put, the EU has fallen even further behind the US in the last two years. Investment is flat, and the EU lacks €106 billion to meet its goals for the Digital Single Market. It is difficult to see how the EU will lead on 5G, a goal for European Commission, when the EU is not even ready for 4G.

But all is not well in the US either. In spite of the stunning success that favors the US approach to the wireless ecosystem, a group of regulatory advocates inexplicably claimed that the US would be better off taking the “European” approach in which wireless and Internet access is regulated the same way as the telephone network. Their efforts, along with the support of President Obama, led the Federal Communications Commission (FCC) to pass the net neutrality or Open Internet Order (OIO) by a split 3-2 partisan vote on February 26, 2015.

Now, just over a year later, the District of Columbia Circuit Court of Appeals is expected to rule on the legality of the FCC’s Order (also called net neutrality rules), whether the FCC has the authority to regulate the Internet, and whether wireless services can be subject to such rules. Overturning the rules would be a boon the future of the wireless ecosystem in the US and would restore the prudent regulatory approach which Congress proscribed and which has worked well to date.

It’s no secret that Strand Consult is a leading critic of EU telecom policy. Its various reports and research notes describe this view when it comes to investment, roaming, consolidation; competition; and subsidies. The list of challenges facing the EU and the European telecom market is long and growing.

The previous European Commission under Vice President for Digital Life Neelie Kroes made a series of analyses about the need for more consolidation and investment in the telecom sector but was not able to deliver results. Kroes was replaced by three men who have continued in the same vein: feel good/look good politics but no action. After more than one and half years, we can see that the EU continues to fall behind the US. Strand Consult observed that the next crisis in the EU will be a digital because of a lack of telecommunications investments.

The EU continues to fall behind the US
Politicians in the EU want to tell their constituents that there is light at the end of the tunnel, but Strand Consult’s research and our new report which you can order free shows the evidence that the light is the oncoming train.

Commissioners Ansip and Oettinger may talk about a dream that the EU will lead in 5G. But without the right policies and regulatory framework, these are just empty platitudes. The EU has is in process to develop net neutrality implementation guidelines that make it impossible to operate 5G networks. Roaming charges will be eliminated without the ability for operators to recover the costs to deliver traffic. The experience from Denmark shows that the Commission will deter the necessary consolidation to make it more efficient to build and operate telecommunications infrastructure in Europe.

Strand Consult and others have published much research that the US leads the EU in telecom and wireless markets. Our new report “The Wireless Ecosystem, US vs. EU” documents the negative trend in the EU for more than 12 years. But US leadership is not assured. If the country starts to adopt the failed policies of the EU, it’s not difficult to see that investment will decline and the nourishment to the rest of the ecosystem will dry up.

In any case, it does not serve the US that the EU continues to fall behind. Europe is the leading destination for America’s digital exports, and as American-made apps evolve for better and faster networks, app makers want to run their state-of-the-art apps in the EU too. As such, other regions need to move forward together.

If the DC Circuit were to strike down the Open Internet rules on wireless, it would be a boon to 5G development in both the US and the EU. The lesson learned to promote economic growth should be simple and the same for both regions: do not let misguided regulations imperil investment and innovation.

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