At times telecom operators defend their wish to become unregulated duopolies by claiming ‘it takes two to tango’. Very true. The problem is that we don’t want a tango, a romantic dance where partners synchronize their moves in a smooth and elegant way. In fact the tango is the last thing we want in a telecoms duopoly, since synchronization is likely to benefit operators at the expense of end consumers.
To stick to the dance metaphor, what we want are disruptive dances such as pogo, circle pit or Balinese Monkey Dances, where the dancers bump into each other and are constantly on the move in a dynamic fashion. An essential feature of such dances is that you need more than two dancers to create the necessary dynamics.
How odd it is therefore to find Anthony Whelan, Director of European Commission’s DG Connect, supporting the tango view held by operators in a recent interview in MLex. Allegedly national regulators love to regulate so much that they want to regulate forever, even in absence of a single dominant position by one operator. Instead of regulating ‘forever’, following Whelan’s logic, it would be better not to regulate duopolies at all.
The reality is much more nuanced. Take the example of the Netherlands where consumers have enjoyed the benefits of competition stimulated by access regulation over the past fifteen years. Gradually over time the Dutch regulator was able to relax regulation at those markets that became competitive. The tendency to deregulate across Europe is visible and important, but in each case requires a balancing act between freedom for operators and protection of customers against a possible abuse of that freedom.
In spite of the ongoing deregulation trend, access regulation is still a cornerstone for competition in telecoms markets. Without it, the current market situation in the Netherlands, prompted by many recent mergers, will become a full-blooded duopoly, i.e. a duopoly where alternative players are likely to become marginalized.
To suggest, as Whelan does, that access regulation in case of a duopoly implies regulating forever seems at odds with economic logic. Regulation practice prompts regulators to motivate in painstaking detail why access regulation is needed at any moment in time. Without a proper economic justification, judges tend to have no mercy and reverse the access decision.
Access regulation should therefore be judged on the merits of each case. A duopoly without any access regulation may very well be detrimental for end consumers since operators who have the luxury of not being disciplined by alternative operators tend to ‘find each other’ in a tangoesk close embrace and realize price or quality levels that are not at a competitive level.
Whelan’s colleagues at DG Competition seem to share this view in recent (mobile) merger cases. The main question in these cases was whether three or four operators were enough, where most recently (UK, Denmark) three mobile operators were not even considered to be enough to foster competition. Forget about tangos in that market.
At a minimum we can expect the different services of the European Commission to speak the same language. At best we may hope that the Commission supports those member states that manage to properly motivate their access decisions, in the interest of the consumer, whether in a duopoly or not.
Marcel Canoy and Johan Keetelaar work for ACM, the Dutch competition authority and telecoms regulator.