Telecoms and innovation

3 May 2023

Until recently, the telecommunications market was held up as an EU success story, with Europeans emerging as the big winners. European consumers were indeed the great beneficiaries of competition, which went hand in hand with low prices. However, despite this success, Europe is not at the forefront of technology development or adoption.  Maintaining their networks is costly, and upgrading them for 5G deployment is problematic in the European context of price competition. On the other hand, digital giants are in good financial health. It thus has been defended that digital giants ‘participating‘ in the financing of telecommunications networks would be a way out. However, putting redistribution ahead of wealth creation is an admission of helplessness and resignation. The belief that digital players are responsible for the difficulties of European telecoms is a dead end. As with many key activities in Europe, the telecom market is being penalised by taxes and regulations that are both disproportionate and inappropriate. Instead of dreaming about taxing foreign players who are more dynamic than we are, the priority should be to remove obstacles to wealth creation.

There are structural factors holding back wealth creation in the European telecommunications sector. Policy changes should focus on eliminating the taxes that penalise networks, adapting European competition law to allow mergers, and removing anti–stock market regulatory biases rather than seeking to impose changes in profit-sharing agreements . Without suitable tax and regulatory frameworks and without long-term savings, we will fail to meet major challenges, whether in digitalisation, healthcare, or the energy transition.

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EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).


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