European Union's Policy in Telecommunications - Essay Example

1) Why did the European Union decide to develop a policy in telecommunications To what extent has the policy been successful European Union (EU) is a union of twenty seven independent countries which joined together to enhance economic and political corporation of those member regions. EU is the ultimate outcome of a free trade area in Europe that began among 6 European countries way back in 1957 after the scrapping of its predecessor organization European Coal and Steel Community. Currently its 27 members have a single set of economic goals to be achieved by the time of full integration, though the telecommunication aspect plays an equally important role too. A ten year evolutionary process of the liberalization of the telecommunication policy in the EU has been marked by an equally countervailing process of retaliatory protectionism by those affected by telecom market during the whole period of their existence. Thus the EU telecom market has been undergone some revolutionary process, where new players have come to the market along with offering innovative new services, quality products and low prices. Mobile communications, online services, information through the super highway or the internet have revolutionized the continuous growth and use of telecommunication in almost every sphere of the EU region. Telecommunication companies in EU in particular have introduced not only new but also cheaper combined fixed and mobile service packages with alternative pricing formulas and new ways of paying methods (Noam, 1992). Thus these new developments in the telecommunication policy of EU will be crucial to become a part of the modern Information Society. In fact liberalization of telecommunication is the cornerstone of EU's transition, with lowering the price of communicating, encouraging innovation and investment in new services and networks and contributing to improved competitiveness and increased employment. Thus the Information and Communication Technology (ICT) acquired a significant dimension in the coordination efforts of EU in their both the regional and global operations. ICT is increasingly becoming the world's most important determinant of integration related issues and actions. For instance EU's significance in the internal and external telecommunication strategy in its global operations can be seen with regard to the level of its applications in coordinating inter-country and intra-country operations. The changing telecommunication environment at overseas and operations has such a big impact on the ICT related decision making process in EU. Thus the transition from monopoly to liberalized telecommunication policy in the competitive world would be a very challengeable to the EU commission. In order to have concrete effects, detailed rules are necessary for the EU and also the application of those rules needs to be careful supervised. So the resources had to be focused on scrutinizing the implementation and practical application of the EU regulatory framework in the Member States. The National Regulatory Authorities (NRAs) for telecoms have been established in member states of EU and range of tasks has set by the EU regulatory framework in order to grant number of telecom services including - to granting new mobile and fixed network licenses; to approving interconnection prices and agreements; policing prices charged to customers for changing operators, and dealing with the allocation of numbers to new market players. Thus the national competition authorities are also occupied with scrutinizing the new telecoms market. In the 1980's telecommunication policy in the EU was characterized by some public monopolies and run with postal services. Thus it has been revolutionized with the privatization and limited competition in some member countries in EU (Damro, 2000). The development of the telecommunication industry has basically been driven by the increasing application of modern information technology in the telecommunication sector and it has provided a significant opportunity to transform the EU telecom industry. The liberalization of the telecommunication services and introducing networks has been offered by the EU commission in order to maximize the opportunities at European Commission (EC) market. Thus the EC has used three instruments in order to increase the level of competition in the market. Progressive liberalization of a former monopoly sector Accompanying harmonization measures New competition rules. The appropriateness of the strategic competitive approach depends on the EC's own capacity for the using innovative and modern telecommunication equipments of all its strategically important functions, so that competitive advantage will be achieved. Lateral technology development in telecom industry across the EU to achieve competitive advantage against other similar countries (Caby, & Steinfield, 1994). Tactical strategies adopted by commission to avoid telecommunication risk are common in every sphere. Such strategies have been criticized by many writers due to their incongruous element. However such strategies are part and parcel of the decision making process of the member countries. The average country isn't an exception to this rule. EU operations depend on the qualitative outcomes related to the EC's communication strategy. However many member countries in EU, have immensely benefited from a policy of convergence in operations achieved through a seamless liberalized telecommunication process in which operational aspects are integrated into the communication function without structural division so that connected operational parameters are well defined and focused on goals. However it is the internet related technological environmental influences that have impacted heavily on the goals and outcomes of the EU in particular. Particularly the operations need to be updated in keeping with competitors' moves. Modern equipment costs dearly when innovative approaches are put in place. Thus the EU has the resources to meet these new challenges. Article 86 of the Treaty has given the opportunity and the power to the EU to give the certain rights for the public and private enterprises to produce the telecommunication equipments or provide telecommunication services and networks in the telecom market. The different directives have been adopted by the EU, which desperately needed access to the external competitive telecom markets. The EU has adopted a directive thus removing all special and exclusive rights to import, market, connect, bring into service and maintain telecommunications terminal equipment in the member states. The services directive has enabled the abolition of special and exclusive rights over public telecommunications services except the provision of voice telephony services (Gillespie, 2004). In fact it covered value-added telecommunications services targeted at business customers, as well as opening up the provision of communications for businesses or within so-called closed user groups, e.g. private branch exchanges to competition. Diversification or product differentiation is practiced by member countries by using service quality of the telecommunication equipments. Product diversification has been at the very heart of the telecommunication industry. While most of the member countries have been targeting and adopting some innovative strategies in their telecom operations including quality management with a view to maintaining the positive relations with existing customers. Critical success factors at both member country level and the industry level include such things as the flexible and liberalized telecommunication policy, quality improvement standards and techniques, and so on. It must be noted that the average EU member countries has been placed at a strategically advantageous position in the telecommunication sector through its combined resource capabilities and enhanced operational capacity along with the modern communication technology. Thus the future performance of the telecommunication industry in Europe in particular depends on the EU's ability to harness these capabilities to the maximum by innovating in the sphere of telecommunication services (Cronin, et al 1993). The telecommunication services market in Europe has been more and more oriented towards meeting these technology-based demands of a new generation of customers. For example the EU that introduces internet and network facility in telecommunication industry is in a better position vis--vis its rivals in the market and thus able to achieve both horizontal and vertical aggregation of synergies such as sales volumes and market penetration. Mobile technology hasn't yet reached many customers in Europe. In fact it is not a secret that technology advantage in the telecommunication sphere is growing exponentially each day. The Commission has introduced subsequent liberalization policies in the telecommunication industry in order to expand the scope of activities in the EU area such as provision of satellite services and satellite equipments, cable TV networks, mobile networks and alternative telecom network which required EU member countries to offer innovative and effective communications services. Thus it opened up the market for directory information to full competition, and set out a range of provisions addressing licensing, universal service, interconnection, and numbering, which established basic regulatory principles derived from the competition rules. EU competition law also applies to telecom industry and a liberalized telecom market is a relatively new phenomenon to the Commission and it has published Guidelines on the application of EC competition law in the telecoms sector (Bartle, 2006). Thus these guidelines seek to clarify, specifically in relation to telecoms, what sort of behaviour is likely to fall foul of the competition rules. The Commission has also issued a Notice on the application of competition rules to access agreements. These agreements are vital if new entrant operators are to be able to reach end-users served exclusively by the incumbent's network. The Commission considered that this control which incumbents have over access to end-users could prove a source of competition problems. The Notice therefore sets out the access principles which stem from EC competition law; defines the interplay between competition law and the telecoms regulatory framework; and explains how the competition rules will be applied in a consistent way across the various sectors involved. As the available literature on the subject suggests there is a substantial amount of empirical evidence to support the telecommunication related operations and their positive impact on growth drivers such as revenues, profits, market share, share price and integration across a number of EU regions without truncation. Independent analysts have identified three forces that determine the ultimate growth prospects of EU. They are, (a). Global competitive environment. (b). EU integration. (c). Global innovation in telecommunication industry. The application of processes and procedures in identifying differences in the competitive environment is connected with the global communication strategy. It is a single aspect of this global communication strategy. If the EU were unable to identify and isolate the important elements in the global operational environment, there would be much less of an opportunity for the member countries to successfully integrate in to the global market environment. In other words the strategic global environment of competition and regulations would impact on the local product differentiation efforts of the telecommunication to a greater extent. EU integration related activity would have a definite impact on its telecommunication policy and operation. But nonetheless telecommunication policy of the EU in coordinating member country operations is basically dependent on the EU integration and the subsequent operational strategy. However the telecommunication policy environment is not completely free from developments elsewhere (Goodman, 2001). For instance EU require a well developed system of infrastructures such as road and rail networks, a good fleet of vehicles, well trained personnel and above all the latest communication equipment. Thus EU integration requires even M&A related expansion. For instance when M&A synergies become available to the member countries, it is possible to increase market penetration through intensified communication and coordination. On the other hand EU would have much less trouble in increasing its strategic presence in the market because much of its operations depend on the ability to market the product by using better communication and coordination. For example good customer relations would enable the EU firms to reach the customer in right time at the right place. Finally writers have pointed out that worldwide innovation is essential for the EU's telecommunication strategy to succeed. According to a recent research studying the member country level innovation has a qualitative impact on the telecommunication industry and as a result the EU's telecommunication and coordination efforts in international markets might suffer a setback if individual member governments ignore the positive impact of global level innovations. Some of the latest research efforts have focused attention on the following three strategies on telecommunication policy initiatives in national and international markets. (a). Cross border strategy. (b). International strategy. (c). Transnational strategy. Though all three strategies look the same there are some essential differences between them when telecommunication policy of the EU in its international environment is taken in to consideration. In the application of cross border strategy the average member country identifies the existing constraints such as differences in regulatory regimes and the ability or inability to practice transfer pricing strategies. For example countries like Canada and US have been arguing over the type of common telecommunication policies that can be put in place to increase the level of cross border trade. Despite the existence of the EU, member countries have found it increasingly difficult to freely operate because individual countries seek to benefit not so much from free operate but strategic initiatives such as transfer pricing and online related investments in telecommunication industry. Some writers have identified an international telecommunication strategy involving global operations that enable EU to identify and capture strategically important market segments anywhere in the world. However if the member country has a deficient telecommunication policy and its international coordination efforts are lacking in creating synergies across markets with little or no efforts then it is more likely that international efforts would suffer a setback (Graack, 1996). In recent years there have been some other research efforts which have identified three organizational communication structure related areas for expansion in overseas markets. (a) ICT infrastructure related developments. (b) Communication policy related developments. (c) Cost related developments. The availability of sophisticated telecommunication infrastructure - networks, equipment, services and license agreements - has enabled EC to expand overseas opportunity to identify structure related benefits. Such structure related opportunities are mostly determined by the communication requirements of the member country. On the other hand according to recent research on the member country's ICT policy related developments, the strategic operational environment has enabled EU to initiate its telecommunication policies that would continuously bring about positive changes in their overseas operations. For instance the current wave of international market expansion programs launched by some EU firms has been attributed to the ever rising expectations of firms that the global economy would sooner or later recover from its ongoing downturn. In fact telecommunication policy of member country has not been much adversely affected by the current economic recession. As for cost related developments of the EU member countries ,efforts to coordinate in overseas and domestic markets have been constrained by rising costs of telecommunication infrastructure. For example not only the prices of telecommunication equipments have gone up in the recent past, but also service vendors like Microsoft have put in place more stringent service and license agreements. Therefore in a competitive telecommunication market, it is obvious to set the pricing strategies such as cost-oriented tariffs and affordability for member countries to compete against the different markets in different standard of living of consumers. As a result the cost constraint has played a negative role in EU's overseas expansion plans. In the recent past ICT equipment sales have experienced a decline. However, according to research the decline has occurred mainly due to a fall in demand for final products. In other words while EU member countries have been affected largely due to substantial declines in mass markets and cost related constraints. The EU directives have been successful in creating the conditions for huge competition in the European telecoms market. Thus the telecommunication sector has undergone a period of immense technological and market change. This shows the existence of some evidence that the implications of the phenomenon of convergence of the EU telecommunication policy, broadcasting and IT for regulation of electronic communications in the next century would be far reaching. The results demonstrate that convergence is reshaping the communications market, and will have enormous consequences for society in terms of economic development, job creation and cultural identities of the EU. Current EU rules pertaining to telecom sector will be reviewed to examine whether they will still be relevant in the light of convergence or whether some rules are hampering the policy adaptation. The EC is obliged by the current framework to undertake a review to examine what provisions of the regulatory framework need to be adapted in the light of market developments, evolution of technology and changes in consumer demand (Hulsink, & Davies, 1997). The goal of the review will be to clarify and simplify the regulatory framework so as to be able to build on the achievements of the current framework and create a regime that is able to adapt quickly and flexibly to developments in technology and market structure. As liberalization approached, a number of member states as well as consumer and other organisations were concerned about the ability of market forces on their own to deliver universal service in a competitive environment. EU regulation therefore defines universal service at European level and provides for mechanisms for sharing any costs associated with its strategic development. Telecommunication policy of the EU member countries operating in local markets and overseas markets is simultaneously dependent on the available opportunities for expansion and the extent of competition. In other words the EU telecommunication policy is focused on the final outcomes related to efficiency and here there are some shortcomings. Such negative developments are essentially connected with the telecommunication industry of the EU (Miller, 1996). However there can be some conflicts and disagreements between and among the member countries due to the non existence of common telecommunication policy for all the EU regions. Thus the EU has to face some implementation problems related to telecommunication policy, because of the different form of political, social and technological circumstances in member countries. The policy success is determined by these developments to a greater extent. REFERENCES 1. Bartle, I 2006, Globalisation and EU Policy-making: The Neo-Liberal Transformation of Telecommunications and Electricity (European Policy Studies), Manchester University Press, Oxford. 2. Caby, L & Steinfield, S 1994, 'Trends in the liberalization of European telecommunications: community harmonization and national divergence in Steinfield', Telecommunications in Transition, Policies, Services and Technologies in the European Community, Sage Publications, London. 3. Cronin, FJ, Colleran, EK, Herbert, PL & Lewitzky, S 1993, 'Telecommunications and growth: the contribution of telecommunications infrastructure investment to aggregate and sectoral productivity', Telecommunications Policy, vol. 17, no.9, pp.690. 4. Damro, C 2000, 'The EU's 1999 communication review: an American perspective', info, vol.2, no.3, pp. 289-296. 5. 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