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EU telecoms chief gets backing for reform package

Neelie Kroes, European Commission vice-president for the Digital Agenda, attends the LeWeb technology conference December 5, 2012 in Aubervi
Neelie Kroes, European Commission vice-president for the Digital Agenda, attends the LeWeb technology conference December 5, 2012 in Aubervi

By Foo Yun Chee and Claire Davenport

BRUSSELS (Reuters) - The European Union Commission has approved a plan to spur investment in communications networks and create a single market for telecoms services despite concerns that some parts may favor big operators, two officials said on Tuesday.

The commission's telecoms chief Neelie Kroes will on Thursday present the reforms, which are part of an effort to help Europe catch up with Asia and North America in mobile and fast-speed network infrastructure.

As expected, it will include measures aimed at phasing out roaming charges, improving consumer protections in telecom contracts, and making mobile spectrum auctions more consistent in the region, among other elements, according to a draft seen by Reuters.

But the package will likely evolve - and be subject to intense lobbying - as it winds it way through the legislative process. The region's 28 countries and European Parliament must sign off before it becomes law.

"The text as proposed will go through now. The majority of commissioners voted for it," said one of the EU officials who declined to be identified because of the sensitivity of the matter.

On roaming, Kroes chose an approach seeking to encourage operators to form alliances amongst themselves so consumers do not have to pay more when calling abroad. If operators do so, they would not be subject to wholesale caps on roaming fees, although it remains to see whether they play ball.

To make it easier for smaller operators to join roaming alliances, the latest draft softened the requirement that such accords cover at least 85 percent of EU population.

SECTOR STRUGGLES

Kroes also beat back a late challenge to the so-called "net neutrality" provisions in the package, which allow telecom operators to charge Internet companies for prioritizing traffic on networks.

France's Orange has such a pact with Google , and other telecom operators believe such accords could be a viable new business for them. But their legality is muddy in Europe with some states such as the Netherlands outlawing the arrangements to keep the Internet as a fair playing field. Internet activists also oppose such arrangements.

Telecom operators hope that Kroes' net neutrality measures would clear up the legal uncertainty and head off other countries from passing laws such as the Dutch one.

Kroes' blueprint for the telecom sector comes as the industry in Europe struggles with falling revenues, stringent regulation and fierce competition in many markets.

Europe's telecoms industry will face a 0.5 to 2 percent annual drop in revenues by the end of 2020, according to a report by Boston Consulting Group for telecoms lobby group ETNO, leaving a huge investment gap of 110 billion to 170 billion euros.

Stephen Howard, a telecoms analyst at HBSC, said Kroes' reforms would go some way to spurring operators to invest more in their networks. "I do think, when taken along with earlier policy on how next generation broadband networks will be regulated, that the package has moved the needle," he said.

"Admittedly we need to see the details of proposals and how they are implemented but for instance, the changes on how spectrum is allocated could have tremendously positive impact for operators."

Telecoms bosses initially welcomed the EU effort to boost network investments but some have since soured on some of its harsher elements, such as the roaming moves.

They are also frustrated at the exclusion of their key desire, namely a softer approach to consolidation among operators. Merger policy is set by EU antitrust watchdog Joaquin Almunia, and Kroes' has little power to influence it.

Several telecom deals are now under review by European authorities, including one seen as potentially important test case that would allow Telefonica to buy a rival in Germany and take Europe's largest market down to three players.

(Additional reporting and writing by Leila Abboud; Editing by Alison Williams)

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