Mallinson: EU competition authorities should not intervene

Competition authorities are watchdogs on collusion among suppliers and purchasers, and market abuse by dominant entities. The EU's competition authority has recently indicated concerns with regard to technology standards on two separate fronts. Intervention would be unwise, with evidence indicating no consumer harm or market failure.

Europe's largest mobile operators could face an investigation into possible collusion during discussions among their senior executives. According to the Financial Times, the meetings, which involved Deutsche Telekom, France Telecom, Telecom Italia, Telefónica and Vodafone, were focused on industry issues ranging from the harmonisation of technology platforms such as mobile payments to the challenges being posed by over-the-top (OTT) players, including Google and Apple. The group, called E5, met occasionally since being formed in 2010 but has now been disbanded, with the GSMA taking over its work.

While recently approving Google's proposed acquisition of Motorola Mobility, the European Commission's Vice President of Competition Enforcement, Joaquín Almunia, indicated concerns of potential abuse. "Today's decision does not mean that the merger clearance blesses all actions by Motorola in the past or all future action by Google with regard to the use of these standard essential patents," he said. In a speech given in February he also alleged a "surge in the strategic use of patents" and said he is "determined to use antitrust enforcement to prevent the misuse of patent rights to the detriment of a vigorous and accessible market." The European Commission in late January initiated an investigation into Samsung's licensing practices for standard-essential patents (SEPs). 

The trustbusters should tread carefully and only intervene where there is proof of actual abuse or consumer harm. Markets for mobile technologies and devices are flourishing: innovation continues, customer choice is increasing and sales are booming for smartphones and other smart devices such as tablets. These devices, mostly in conjunction with OTT services as well as carrier-provided value-added services, are becoming consumers' primary means of Internet access, with applications, services and usage levels that were unthinkable just a few years ago.

No company or companies have anything like market dominance or the large and stable market shares observed elsewhere in PC operating systems, microprocessors and with some online services such as with Google for search or Facebook in social networking. The markets for mobile devices and mobile Internet services are also in significant flux. Various ecosystem participants have made major innovation investments including research and development.

Absent proven market failure or consumer harm, the market should be left to establish absolute values in patent licensing, or relative values for SEPs versus other patents. OTT players are growing unstoppably from strength to strength in mobile as they have online with fixed platforms, while operators are constrained in how they can monetise network usage by regulation such as net neutrality restrictions. Operators face enormous challenges with price regulation on termination rates and data roaming, resulting in flattened revenues for basic voice and data services, while they need to invest heavily in new spectrum and network infrastructure to enable mobile broadband growth.  

Competition authority intervention could cause distortions that undermine incentives to continue making large investments while tilting the playing field in favour of one vested interest group or business model to the detriment of others.

Keith Mallinson is a leading industry expert, analyst and consultant. Solving business problems in wireless and mobile communications, he founded consulting firm WiseHarbor in 2007. WiseHarbor is publishing an annual update to its Extended Mobile Broadband Forecast in May 2011. The new forecast will include network equipment, devices and carrier services to 2025. Further details are available at: WiseHarbor on Twitter @WiseWarbor.