The 3 true reasons behind the European ‘broadband lottery’

Appalling broadband price differences have long been the reality for anyone moving home across Europe, even between places as close as the UK and Belgium. So have been the differences in broadband quality, speed and coverage. This ‘geographic lottery’ for broadband has been confirmed by the European Commission in their latest study.

However, whilst the Commission is clearly right in identifying the problem, it is questionable whether the set of measures proposed by them, primarily more robust rules on consumer contracts and transparency, will provide an effective way to solve the problem. Here is my alternative explanation and proposal:

  1. There is no common mandatory European Union infrastructure investment policy and the Member States are largely prevented from developing their own. When it comes to rolling out fibre or even providing basic xDSL broadband, consumers are left to the mercy of their local operators’ investment policies. With no obligation to provide a certain level of service and with copper wires still serving their purpose, what can you expect? We have addressed this issue in our White Paper on rural broadband coverage.
  2. Local enforcement of wholesale remedies will always be a bottleneck. It is not simply about the EU rules not being harmonised enough, as often assumed by the Commission. Enforcement requires checks at the Member State or even local level, which is costly, time-consuming and subject to information asymmetry. The Commission should focus on regulating the quality and price of wholesale infrastructure with clear and enforceable NGA / FTTH transition objectives, and leave the rest to retail service competition. Potential bottleneck flaws at the infrastructure level could then be addressed by retail broadband operators on behalf of their end-users, rather than end-users themselves. Taking competition enforcement more seriously could also drive down the prices in some Member States.
  3. By focusing on retail, consumer regulation, the Commission is sending wrong signals to the market. I disagree with those exaggerating in their assessment of the adverse impact of the regulatory burden on investment. However, these measures, no matter how good they sound, inevitably narrow the scope for service competition whilst leaving the consumers in false belief that the main villains to blame are service providers, not poor infrastructure. Face it : transparency obligations might prevent you from buying a crappy connection but they will not get you a good one if your local infrastructure is outdated or non-existent.

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