Thursday, February 26, 2009

Europe - lobbying over MTRs

Operators Meet with EU to Block Termination Rates Hike

Europe's key telecoms operators are meeting with the European Commission today, in a bid to halt proposed cuts in termination rates (MTRs) in the bloc, Reuters reports. The report states that the U.K.'s Vodafone and BT, Germany's Deutsche Telekom, France Telecom, Spain's Telefónica, and Telecom Italia will meet with the European Commission over new guidelines, which propose cuts in MTRs of up to 70% within three years. According to sources within the EU, the operators will meet Commission President Jose Manuel Barroso, Telecoms Commissioner Viviane Reding, and Competition Commissioner Neelie Kroes, in a last-ditch attempt to block the proposals.

Significance: The majority of Europe's big operators oppose the cuts in MTRs, which can make up to 20% of their revenues. As part of recent proposals to shake up telecoms regulation in the EU, the commission has recommended forcing operators to cut these fees, saying they are artificially inflated and anti-competitive as they favour incumbent and dominant operators. However, the operators have countered this argument, claiming that any erosion of their revenues will put investments in new services at risk—particularly in the current European recession. However, IHS Global Insight believes this is a rather desperate attempt to blackmail the EU as operators will inevitably invest in new services and technologies anyway, if they hope to keep up with their competitors. Although this may not be the best time to cut operator revenue, as European markets stagnate, the recession is likely to hit the smaller alternate operators harder. MTRs have been the golden goose of the European giants for too long—and the boost to competition that these cuts will bring has never been so vital.

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