Following the recent Salzberg Conference when Teresa May’s so called “Chequers” proposals were rejected, the likelihood of a no deal Brexit has gone up considerably.
Even if a Canada plus type trade deal is agreed there will be significant impacts of the telecoms industry affecting consumers and businesses alike. Is it all doom and gloom or are there potential upsides to being outside the EU?
Here is a look at the main areas where impacts will be felt:
Roaming
One of the benefits delivered by the EU was the abolition of all the charges levied by the mobile operators for roaming calls and data within the EU area. This occurred in 2017 although some critics said that one consequence was that it meant that people who never travelled were subsidizing those that did as some basic charges went up.
If we left with no deal what would happen to this arrangement? Other countries outside the EU such have Norway have signed up to the deal, but they have agreed economic agreements, such as EEA, as well. If the UK is operating on World Trade Organisation (WTO) arrangements, then there is nothing in there that covers roaming. This is similar to the Canada free trade deal which is being mentioned as an alternative.
For the mobile operators it could be tempting to reintroduce the fees as it was a major source of revenue. So far Vodafone and 3 have stated publicly that they will not reintroduce them – whilst BT and O2 have been silent on the matter. The Government’s briefing paper said it would legislate to cap any monthly roaming charge at £45 if necessary.
Like all these bilateral arrangements it depends on whether the EU wants to cut its nose off to spite it face – by allowing us to roam, they will also have to allow all EU citizens to roam for free in the UK.
There is the potential that as the UK negotiates new trade deals around the world it could seek to include free reciprocal roaming as part of such agreements. Certainly, it has been discussed as an option in the initial conversations between the UK and USA. So, if you look at the most likely early trade targets USA, India, China and Australia it may well be free to roam there but not in Europe.
So, there are potential implications for tourism, business people working in Europe and those with an overseas home there but for those travelling further afield it could be beneficial. Whatever the outcome users need to watch their contracts closely and potentially change supplier if they don’t all offer free roaming to Europe at least in the short term.
Competition
If we do leave the EU, no longer coming under the ECJ, we would not be subject to them arbitrating over company mergers and acquisitions. For example, the final decision on the O2 and 3 merger deal fell to European competition commissioner Margrethe Vestager. Were that to be revisited post a no deal situation it would be considered by Ofcom and the UK’s mergers and monopolies commission.
The EU has generally been anti-merger and has been proactive in tackling larger companies such as Google and Microsoft over anti competitiveness. Historically, the UK Government has been less interventionist. Although should Labour win the next election they have indicated they will more interventionist in industry. For example, they may consider nationalizing Openreach like the rail and water industries. They would not be constrained over subsidy rules to improve broadband infrastructure as they are currently.
It should enhance the role of Ofcom, which has constantly bottled the decision to split Openreach away from BT. Also, it potentially leaves companies more open to overseas acquisition. Would BT be a tempting target for someone given that the fall in share price and pending departure of Chief Executive Gavin Patterson? Deutsche Telecom already owns a stake in BT. As a general rule, greater consolidation leads to less choice for customers and the potential for lower service levels and higher prices.
Trade
It is well documented that the UK is predominantly a services based economy with manufacturing playing a smaller role. Therefore, the UK imports far more telecoms equipment than we export. Not many mobile phones or phone systems are made here, even most of the infrastructure is imported. A lot is made in China, Asia and the USA.
It is forecast that if there is a no deal then the value of the £ will fall pushing up the price of imports. This happened after the Brexit result and within weeks, at that time, companies such as Dell raised prices in the UK.
Again, in the longer term, the countries that make the equipment we all consume are at the forefront of targets for our own trade and import deals. As the fifth largest economy that makes us attractive to the handset makers and deals could lead to lower import charges and, therefore, lower prices.
If that seems the likely option and your business is considering replacing your phone system, mobile phone and data infrastructure it may pay to order early if a no deal is likely and you won’t be able to wait until relevant trade deals are done.
Regulation and Infrastructure
The telecoms industry has not integrated very much across Europe. For example, unlike goods which can be ordered in the UK and delivered to Spain – you cannot go BT and ask them to install a broadband circuit for you in Madrid. Each country issues its own licences and phone numbers. There are no minimum standards for 4G coverage or broadband speeds. Although the EU has stated it believes the minimum target speed should be 30 mbps - which is higher than the UK.
The EU has set targets for 5G rollouts; each country should have one city operational by 2020. The UK has continuously lagged behind most of Europe on 4G coverage and FTTP availability. The recent announcements have targets that will not improve that, but currently being in or out of the EU won’t affect that situation. It is more a question of local priorities.
The EU Customs Union allows member states to charge higher international termination rates to non-EU members so the UK would be free to break away from that and make the cost of calling here from abroad lower and therefore more attractive to businesses to have overseas offices here.
There is still a lot to resolve and with the clock ticking even the Government is starting to prepare for a no-deal outcome. Either way, it will make the telecoms market very interesting and it means businesses and consumers should be asking key questions when signing long term contracts that extend beyond the exit period.
ABOUT THE AUTHOR
Dave Millett has over 35 years’ experience in the Telecoms Industry. He has worked in European Director roles for several global companies. He now runs Equinox, a leading independent brokerage and consultancy firm. He works with many companies, charities and other organisations and has helped them achieve savings of up to 80%. He also regularly advises telecom suppliers on improving their products and propositions. www.equinoxcomms.co.uk
Twitter: @equinoxcomms
LinkedIn: http://www.linkedin.com/pub/dave-millett/2/17b/a94
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