Good morning Ladies and Gentlemen
As you all know, Radio spectrum is a cornerstone of the digital economy and essential for the successful introduction of 5G in Europe. 5G will be a key factor in restoring the competitiveness of European industries and our chance to win back global digital leadership. It involves significant investments in much denser networks, as some of the massive gains in capacity will come from using new spectrum bands which have shorter ranges than those mainly used today. These investments will in turn require a predictable and stable regulatory framework.
As access to spectrum is the key enabler for the exploitation of 5G, we need to update the way spectrum is managed in the EU in order to cope with the versatile and disruptive nature of this new technological generation and to respond to ever increasing needs for spectrum across the continent for citizens and businesses.
Member States and the European Parliament are currently intensively debating the Commission´s proposal for a revised telecoms regulatory framework which includes an ambitious spectrum reform.
There is resistance among EU countries to engage now on substantive regulatory reform because of alleged uncertainty related to market and technological developments. They prefer the status quo and "maximum flexibility" to tailor spectrum management to national circumstances.
I am seriously concerned about this development, and stakeholders are too. Last month all major relevant associations including ETNO, GSMA, and Digital Europe issued statements stressing the need for an ambitious spectrum reform. They were clearly alarmed by the lack of political response, as earlier this month they were joined by most of the rest of the European industry associations - not just "the usual suspects", but also players in the general digital sector and in healthcare, - again expressing their concern about where the debate on the code was heading. In spite of the calls for reform, there seems to be out there a slightly complacent view which does not take into account how communications markets have and will evolve. I am therefore happy that the incoming Estonian Presidency wants to have a real discussion on substance, on present challenges and future needs, with telecoms ministers in Tallinn in mid-July.
The reality is that Europe lost the lead in 4G because of a very piecemeal approach to spectrum management. These are the facts: as recently as in 2015, according to GSMA, only one in four Europeans used 4G services, while three quarters of Americans did so. This is because the right spectrum was not available on time on the right terms. Other regions in the world are already beginning testing 5G. The US started this year in eleven cities, followed by South Korea next year and Japan in 2020.
When it comes to harmonising technical conditions for spectrum use, Europe has put things in motion to be able to deliver spectrum for 5G use on time. But technical conditions do not deliver electronic communications services. 5G is a whole ecosystem, a connectivity platform transforming industry and society, and Europe is the minimum scale to develop it. I hasten to note that we are not proposing Europe-wide licenses or some central control, but consistency and legal certainty to boost investment by industry.
Therefore, if we are serious about providing European citizens and businesses with high-quality connectivity, we must be ambitious on the objectives and also clear on the means.
Take for instance licence durations for harmonised spectrum: establishing a long fixed licence duration – we propose 25 years – will give long-term predictability and greater legal certainty to operators and investors.
By doing so, we want to deliver a clear message to the market in recognition of the fact that the deployment of denser networks will be very costly. Thanks to the technology neutrality principle now in full force, operators are free to introduce new technologies without the need for having their rights of use of a spectrum band revisited and approved by regulators like in the past. Having long licences makes such technological generational upgrades worthwhile for the operators.
We also create further opportunities for the growth of a secondary market. Trading is available today but neither much used by operators nor proactively enforced by regulators. This is something which both long license durations and clearer competences for authorities could help to overcome. Industry views spectrum trading and leasing as key complements. A more dynamic market can act as a corrective factor for inefficient auction outcomes. It offers the flexibility of market-based solutions and is more likely to lead to efficient spectrum use than an approach relying solely on the outcome of assignment procedures.
This was identified already long ago by the Nobel prize winner Ronald Coase. While he recognised the importance of predictable usage rights, he argued that given flexible secondary trading, the market will find the most efficient use of spectrum over time. This flexibility can be achieved with low regulatory barriers to promote spectrum trading or leasing. If the most efficient use is already achieved by the assignment procedure, the longer licence duration will provide stability for the spectrum owner, encouraging increased investment. This argues for more predictable renewal procedures too, which we also propose.
The call for short license durations in the name of flexibility for spectrum managers implies that technocratic and planned solutions are better than the market outcome. There is no evidence for this. On the contrary whenever long-term spectrum assignments for wireless broadband have been granted, more mobile network investments have been made.
Of course, we do not believe blindly in efficient markets theory. Once the stability message is clear, we can discuss ways to avoid abuses or enable adjustments to respond to policy priorities or to ensure an effective and efficient use of the spectrum. Regulators should be equipped to enforce "use-it or lose-it" clauses, which require clear licence conditions from the outset and criteria for checking compliance. And of course, at the other end of the scale, there are specific cases where shorter licence durations are sufficient, like temporary or experimental usages.
For those who are concerned about locking up the market for a long period, the response is to be found in effective competition, enforceable efficiency conditions, and public policy conditions (e.g. on coverage) subject to review at long intervals. For new, short-range bands (so called "millimetre-wave bands"), it can also lie in new forms of licensed sharing of spectrum use rights that allow multiple users across a territory under clear investment conditions.
There are other important areas which require better European coordination, too: common maximum deadlines for the assignment of new bands, binding tools to resolve problematic cross-border interference cases and common parameters for defining and measuring ambitious network coverage objectives to name a few important ones. How else will the motorways of Europe be networked for connected cars and trucks? To foster timely deployment of the more costly 5G denser wireless networks, we must clear administrative obstacles, with lighter planning rules for small cells.
We need to create scale if we want to attract industry and manufacturers in Europe. What they tell us is that similar requirements and conditions for mobile networks will provide a basis for truly cross-border services such as smarter energy systems or connected cars which heavily rely on quality and coverage requirements along roads – new types of networks that must be largely built from scratch. But they will only enable European industrial leadership, and widespread take-up by and benefits for European citizens, if they are developed in parallel across our continent. Only a common reflection by all Member States together about how to license future 5G bands can deliver this.
However, Member States will keep the flexibility to decide on the exact means to achieve it.
We have much to learn from each other in Europe. Our objective is to generalise good spectrum management without holding back front-runners. Though some unfounded allegations have been made, I am quite clear: nothing in our proposal can be credibly said to prevent a Member State from moving early to release a future 5G band to the market on appropriate terms. Member States, no matter the size of their economy, have most to gain from a transition of a whole Europe to 5G to a similar timetable under attractive investment conditions.
However, a voluntary high-level gathering without a push for consistent assignment conditions will not take the hard decisions: we need the key measures and mechanisms to be embedded in EU legislation. Sticking to a reactive approach and being satisfied with the least common denominator will not deliver the necessary strategic input Europe will need in this fast-moving scenario.
I agree with RSPG that for example the exact coverage conditions should not be harmonised as each Member State faces a different starting point. But the key question is that the 5G services will each require the same definitions of coverage or quality of service across the EU, simply to know whether a service is available or not, something on which RSPG should take a position on.
The creation of the 5G ecosystem is not just vital for the European communications sector and telecoms equipment providers, but also for a number of key industries, such as connected mobility, the digitisation of industry and of both public and commercial services. It is vital to deploy 5G timely and on a large scale to trigger positive competitiveness effects on the economy.
Telecom operators, financial markets or industrial players will not consider us credible if we say that we will lead by keeping current spectrum arrangements in place. The entire sector argues that a spectrum reform is a pre-condition for major new investments, to ensure adequate returns on capital. I am glad that European telecom operators and equipment providers unanimously support our proposal to strengthen EU cooperation in spectrum; and they are firmly backed by present and future key users of these networks in the industrial and service sectors. And I share their concerns about the fact that EU countries seem to lower their ambitions for a 5G roll-out.
We stand ready to defend our investment-friendly proposal to ensure that a clear political signal of a major and substantive spectrum reform is delivered, and that we are serious in Europe about 5G investment conditions.
We have provided compelling evidence to support our proposal. Whoever has a different idea should be asked to provide an equally sound economic analysis supporting it.
In June 2016, our argument was recognised by the European Council, which called for better coordination of spectrum assignment to be rapidly established. Member States need to recall this political imperative. I am of course ready to constructively engage with them to fully commit to a successful outcome. As Commissioner-designate Mariya Gabriel underlined yesterday in her European Parliament hearing - now is the time to address the challenge of spectrum coordination in Europe.