Connected Research

Union policy research in the 21st century

T-Orange in the pink?

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Orange is reported to have claimed [subscription required; limited viewing time] yesterday at the FT World Telecoms conference taking place in London that it and T-Mobile would not be required to make concessions to the regulator to get the go-ahead for their joint venture, dubbed T-Orange.

Well, it would, wouldn’t it? And continuing to claim that the venture would be ‘good for the market, good for the consumer, good for the entire industry’ doesn’t make it any the more true (though, depending on definitions, I can easily see a situation in which a reduction in competition might be held by those responsible to be ‘good for the industry’).

The context of the claim is the issue of making any concessions on spectrum – and here the company may have a point: T-Mobile and Orange have spectrum at the 1800MHz frequency, whereas the more prized 900MHz frequency, because it lends itelf better to penetration inside urban buildings, is – currrently – the preserve of Vodafone and O2. This might indeed require T-Mobile and Orange to invest more for the future (a crucial argument in the Vodafone and 3 merger in Australia, interestingly enough, which I blogged about here), although the proposals of the Independent Spectrum Broker (see also the Digital Britain final report, at p. 72) to ‘rebalance’ operators’ holdings will change this. So, over time, investment by T-Mobile and Orange will be lower than it is currently stating.

But, of course, spectrum concessions are not the only regulatory tool at the disposal of the regulator and I remain unconvinced that the creation by merger of what would be the industry’s dominant organisation, in terms of numbers of consumers, is in the interests of consumers. That it can be argued that it is so is an indictment of a regulatory policy which has been focused – not just in the UK, and not just in the telecoms industry – on the sole purpose of encouraging competition as a means of driving prices down. Short-term, low prices are clearly good for the consumer but, long-term, when they are apparently too low to meet the investment needs of the operators (or – outside telecoms – when they allow dominance of the entire industry, including of the links in the chain by Tesco, for example), they are bad. It is of course that situation which had led T-Mobile and Orange into this merry dance.

And it won’t stop there. The same report claims that Vodafone, which would become the smallest UK operator (excluding 3) were the merger to be allowed to proceed, said at the same event that it is ‘unphased’ by the proposal and that competition in the UK would remain ‘extremely robust’. Well, it would, wouldn’t it, given that this would then replicate the situation which allowed Vodafone and 3 to merge in Australia. No doubt Vodafone does indeed believe in ‘consolidation in some markets’ since it is perfectly possible to imagine that it will lead to a situation where the UK has just three mobile operators rather than the five that currently exist. And wither competition policy then?

But, more than that, we do need to consider how regulatory policy has led to a situation which appears to facilitate a reduction in the number of competitors in the market place. Aside of what the regulators may otherwise ask T-Mobile and Orange to do as a condition of the venture being allowed to proceed, we do need to have the debate as to how we have got into this mess.

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Written by Calvin

20/11/2009 at 2:08 pm

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