Back off, Mario! Capitals do not like the taste of Draghi’s telecom medicine

The European Commission’s competitiveness adviser Mario Draghi wants the bloc to slash telecom regulation and relax merger rules — but its national governments just aren’t buying it.

Capitals are pushing back on key recommendations made by Draghi — the former Italian prime minister who authored a flagship report underpinning the new European Commission’s plans for growth and global competition — according to a document to be signed off by digital ministers on Friday and obtained by POLITICO.

Draghi recommended that regulators ease off to allow European telecom providers to size up and deliver the investments to upgrade the bloc’s networks, as it faces fierce competition in a global race with the United States and China to innovate and control key technologies.

The call took up cries for help from bigger operators who’ve been warned off buying their rivals. It also echoed many ideas previously floated by the European Commission.

But it is now running into a reality check from national governments.

“There is a lack of analytical material to back some of the conclusions that are made in the white paper and the Draghi report,” one EU diplomat said ahead of the meeting of ministers this week, citing consolidation in the telecom industry, usually understood as allowing operators to merge with national rivals.

Countries are skeptical that reducing the number of telecom players will unlock more money for Europe’s infrastructure. They also fear it could lead to higher prices for consumers, an issue raised by competition experts such as former EU competition czar Margrethe Vestager.

Some of Draghi’s premises are “questionable,” according to Tonko Obuljen, Croatia’s chief telecom regulator and chair of the EU’s group of national telecom regulators, BEREC.

“Many European countries are actually doing better than the U.S.,” he said, citing quality of services and affordability. “We would plead for analyzing before jumping to some conclusions. And of course, for proving the facts on which the proposals are based,” he added.

Some capitals are also worried their own national champions might be the target of a takeover by a bigger European rival. “Operators of all sizes should have business opportunities in the single market and be able to benefit from and contribute to effective competition,” the document reads.

Back off, Mario

Draghi didn’t exactly win over governments with a call for member countries to cede some ground on spectrum, which is the bandwidth of airwaves over which mobile data travels.

Dubbed a “cash cow,” licenses for operators to use the airwaves are sold by governments for billions of euros. Draghi’s report called for harmonizing licensing rules and timelines, giving a bigger watchdog role to the EU executive.

That idea, too, got the cold shoulder from capitals.

“Spectrum harmonization is not the favorite topic of member countries,” said Katalin Molnár, the ambassador for Hungary, who currently chairs talks between EU governments.

The national capitals in their document insisted that managing radio frequencies is “a key public policy tool,” stressing “the sustained significance of Member States’ national competencies in that regard.”

In short: Governments are telling Draghi and the Commission to butt out.

They also push back against the idea of cross-border telecom providers operating under their home-country rules — the “country of origin” principle — over worries this would clash with their national prerogatives, again, and open the door to “forum shopping” to let them choose the most favorable national regime.

With a future Digital Networks Act looming as a potential plan to boost 5G and fiber rollout, the Commission will need to present rock-solid evidence to win over EU governments.

“Any future legislative proposal requires a solid impact assessment” and be based “on evidence,” the member governments warned.