I just read this wonderful quote from Orange CEO, Stephane Richard, "The optimal level of competition looks to be three carriers per market rather than four." I agree with Richard, when it comes to the profit margins of the carriers, three is better than four, but I would like to suggest that maybe just one carrier would be even better!
For users of carrier services, consumers and businesses, it is quite clear that optimal market outcomes indicate something entirely different. The facts, both EU-wide, in France (Orange home market) and in the US market tend to strongly suggest that when you go below four carriers in a market, competition decreases significantly.
If you look at the US market where you have a duopoly market dominated by AT&T and Verizon, both the margins and end pricing is significantly higher than in Europe where regulation has ensured a more level playing field. This has ensured better services at lower prices in most European markets.
The French market is a great example of this. It was a stagnant market with limited competition before the fourth carrier, Free, entered and shook things up.
The German market, which actually has four carriers, is an anomaly in that it is one of the least competitive and most expensive markets in the EU. This can partially be explained by that all German wireless carriers are incumbent carriers in Germany or neighboring markets or major pan-European carriers that historically has had little tradition of innovation or competition and have found that they are all happy, not competing in this market. The question is also how effective the German regulator has been at fostering competition.
In any case, it is clear, for competition to be alive in a market, four or more wireless carriers need to be present. If the EU for some reason actually would approve the O2 and E-Plus deal, that would send the wrong message to users as well as carriers.
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