Productivity

PRODUCTIVITY, GROWTH AND JOBS:
HOW TELECOMS REGULATION CAN SUPPORT EUROPEAN BUSINESS

Conclusions

A more developed and competitive market in access network services would deliver significant economic gains to the EU economy through substantial increases in productivity, innovation and product and service development says a new report: “Productivity, Growth and Jobs: How Telecoms Regulation Can Support European Businesses”, launched in Brussels on 3 April 2008

Background

In June 2007 BT released a major economic study, examining how multinational enterprises source and use communications services. This study was produced in conjunction with a number of international experts from the academic and consultancy communities, and was based on interviews with companies in various industry sectors.

The study concluded that uneven and ineffective application of the regulatory framework was holding back business efficiency, competitiveness and economic growth in the EU. Information and Communications Technologies (ICT) have become central to competitive success in the global economy and European businesses were found to be in danger of being left behind those in other world regions.

A new study quantifying the benefits of ubiquitous access

In a follow-up study just released, Indepen Consulting have now attempted to quantify the economic benefits from effective pan-European communications services. Their findings are based on in-depth discussions with five EU-based multinational enterprises and a survey of managers working in BT’s Global Operations.

The study highlights the importance of “ubiquitous access”. Access here means fixed and mobile telecommunications services that connect the end user’s premises to a pan European communications supplier’s network.

The study estimates that were ubiquitous access to be provided on a competitive supply basis right across the EU, together with complementary measures, it would generate significant benefits - possibly of a trillion Euros – to the EU economy over the next 20 years. To put these estimates in context, while it might take a decade for the EU economy to feel the full effects of ubiquitous access and complementary measures, the full effect could be to increase EU GDP by 1.6% to 2% each year from then on. This increase is equivalent to an increase in wealth of over €400 per person per year in the long-term.”

These estimates do not include additional potential benefits such as improved macroeconomic stability from better supply chain integration and management, and the potential for businesses to reduce their carbon footprint through better ICT connectivity.

What is wrong with pan European communications services today?

There are several key problem areas today which hinder suppliers such as BT from providing telecommunication services to multinational companies on a global basis. Prices for services procured from incumbent telecommunication operators are often substantially above competitive levels. Some wholesale access products are simply not available in certain member states. Other access products are only available to communications providers who build out infrastructure toward the customer. Services may also be provided on discriminatory terms. Some incumbent operators supply wholesale access to pan European providers on price and non-price terms which are significantly inferior to those offered to their own retail arms. When they are supplied, products may not be fit-for-purpose or offer satisfactory quality of service.

What do enterprises seek?

They require one supplier to manage the provision of their services in all their countries of operation and for all their sites and workers. This is described as a ‘one stop contract for all services’ – covering: fixed and mobile services; itemised billing for the services; a limited number of technical network ‘interfaces’ permitting some measure of standardisation; guaranteed end to end quality of service and in provisioning times of services; and unified network management encompassing the whole of the multinational enterprise.

Such services would enable not only productivity and service quality improvements for multinational enterprises, but also for the many small-medium enterprises that make up their supply chains. The study estimates that multinationals and their supply chains together account for 35% of EU GDP.

How would business benefit from competitive telecommunications?

Looking forward over a twenty year period, the report uses three different ways to quantify the potential benefits of a ubiquitous access network supplied under conditions of fair competition.

First, it estimates the potential benefits from increased market opening in telecommunications services and the corresponding gains from trade.

Secondly, it estimates the potential benefits from an increase in the rate of productivity growth coming from improved connectivity.

Thirdly, it estimates potential benefits to the way businesses organise their processes and get their products to market, directly based on economic reasoning and survey evidence.

Download the full report  [862Kb]