European telcos "collusion" claims: Has the industry brought EC investigation down upon its own head?

After the news broke yesterday that the EC has sent out detailed "questionnaires" to Deutsche Telekom, France Telecom, Telefonica, Telecom Italia and Vodafone about possible industry collusion that may have taken place before, at, during and/or after meetings of the E5 group that now happen under the aegis of the GSM Association, Antoine Colombani, a spokesperson for Joaquin Almunia, the Competition Commissioner, went on the record to state that "These fact-finding steps do not mean that we have competition concerns at this stage, nor do they prejudge any follow-up."

Optimists at various carriers will take solace from this statement and regard it as an indication that the EC has already started rowing-back from the threat of a full-scale Europe-wide investigation into allegations of collusion between the continent's Big Five operators and that, as a result, a lawsuit for anti-competitive behaviour will not follow.

However, despite Mr. Colombani's pronouncement, it could be no more than wishful thinking. History shows that such so-called 'requests' from the powers-that-be are usually the precursor of much more lengthy and detailed investigations that can last months, if not years, and often conclude in legal action.

If the EC finds the E5 have a case to answer and if collusion is subsequently proven to have happened the consequences for the operators involved can be swingeing. The EC has the power to fine network operators and other industry organisations up to ten per cent of  their global turnover. That sanction would be bad enough, but the adverse publicity that would accrue could also severely damage some famous brands and have a major impact on the commercial performance of big players.

Commenting on the collusion allegations, Robert Vidal, the Head of Competition, EU and Trade at the international law practice of Taylor Wessing , said "It's too early to say whether an investigation will follow, but a high profile information request can be damaging to a company's reputation. This highlights that meetings between competitors will always be of potential interest to competition authorities and should be treated with extreme caution. Meetings between competitors are especially risky in a concentrated market where the participants are restricted to a few, major players. It can give the wrong impression to customers as they may assume the telecoms companies are up to no good."

Mr.

Vidal added, "This information request comes hot on the heels of the Commission's rejection of a regulatory holiday for telecoms companies. The industry has called for breathing space to allow it to invest in new infrastructure, but it may be that the Commission wants to send a clear signal that it is committed to open competition within the EU."

Over past months the heads of several powerful telcos have taken a swipe at the European regulatory environment and mauch criticism of the current regime was voiced at this year's Mobile World World Congress which, once again, was held in Barcelona under the banner of the GSMA.

Vittorio Callao, chief executive of Vodafone, was one who publicly castigated the European regulator. Speaking to what he knew would be a sympathetic and partizan audience at the Fira showground he opined that "Regulators should stop cutting mobile termination rates, pushing down roaming prices, building funny auctions which are designed to extract more money from existing operators, and resisting industry consolidation."

He added "This is not a request for a moratorium on competition but a much stronger request for a moratorium on regulation."

As far as Mr. Colao is concerned, regulation in the EU is excessive and is being done "on auto pilot" and he rounded off his trenchant critique of the European regulatory status quo by issuing a thinly disguised threat that unless the sector is given preferential treatment by the regulator the mobile operators will cut back severely on future investment in advanced networks.

The response from the European Commission was quick, tough, ascerbic and personal. The body's vice-president and Commissioner for the Digital Agenda, Neelie Kroes, issued a statement that she specifically called a “message to Vittorio and Vodafone" in which she said that she is "calling Vodafone's bluff", "takes the side of the Vodafone customer" and "doesn’t respond well to threats.”

So, the big questions must be; has all the noise, anger and regulator-baiting been counterproductive and has it had the effect of causing the EC to look much more closely at the E5 gatherings than they might have done had things be handled in a less stentorian and confrontational way?

It's easy to get carried away expounding to the cheers of a receptive audience, but once the applause dies down and the auditorium clears, the personleft in the spotlight on the platform is alone and exposed for the whole world to see - and then things aren't quite so comfortable.