The Belgian telecoms market is plagued by the hefty challenges of inadequate competition, high tariffs and under-investment. Greater powers have been given to the national regulator, but several key measures remain in limbo as the outgoing government continues to operate in caretaker mode. Their fate depends on the state reform being negotiated by the parties invited to form a coalition, which could nevertheless bring more complexity for operators.

On telecoms, “Belgium has an average ranking, although all the structural conditions are in place to allow it to hold a top place,” notes the European Commission in its communication on the Digital Agenda 2020. It adds that the country could do better. The small size and complexity of the market, the dominant position of the former monopoly Belgacom, the lack of interest of foreign investors, the lack of competition on certain segments and high rates for consumers are the keys to the problem.

At the instigation of the energetic Telecommunications Minister, Flemish Liberal Vincent Van Quickenborne, the outgoing government adopted a 30-point plan to remedy these weaknesses. It aims to raise from 60% to 90% the proportion of families with a high-speed internet connection by 2015. Meantime, several measures have been taken, in particular the appointment of a new team of directors for the regulatory authority (IBPT) and the strengthening of its powers. IBPT has embarked on lowering wholesale rates between mobile operators, slapping a high fine on Belgacom for its failure to provide information for its customers. The public authorities have also increased transparency by setting up a website where users can find the tariff offer best suited to their use.

These measures have begun to produce results, as seen in the latest annual report of the European Competitive Telecommunications Association (ECTA), a lobby that aims to develop competition in this sector. In the 2009 ranking of Europe’s most competitive countries, Belgium holds 11th place, up from a mediocre 15th place in 2008. This improvement – the greatest in Europe – “reflects the improved regulatory environment and the IBPT’s forward-looking regulation,” states the report. The ECTA nevertheless adds that “Belgium continues to suffer from certain institutional weaknesses and under-performing market outcomes that improved regulatory conditions have been unable to curb as of yet”.

In fact, despite Van Quickenborne’s triumphalism, there is still a good deal of work ahead. However, the reform process came to a halt when the government fell unexpectedly last May. The formation of a new coalition without the Liberals but with the Flemish nationalists could result in very different policies.

This could be the case for auctioning of the fourth mobile telephony licence, for instance. To compete with Proximus (Belgacom), Mobistar (France Télécom) and Base (subsidiary of the Dutch group KPN), a new licence for national coverage is set to be issued this autumn. Rumour has it, however, that it could be split in two. This scenario would allow the two leading competitors, the Flemish group Telenet and the Walloon firm Voo, to share the markets still up for grabs in Belgium.

The final decision on the allocation of frequencies freed up by the switch to digital television (the so-called digital dividend) also depends on discussions between Belgium’s two communities. Although the federal government wishes to allocate them to new telecommunications services, the communities would prefer to keep them for TV broadcasting.

More generally, the state reform in the pipeline could lead to further regionalisation of telecoms, to the displeasure of the sector itself. All of the main operators in Belgium, under the umbrella of Platform Telecom, expressed, in July, their opposition to the regionalisation sought by the Flemish nationalist party N-VA, which won the latest elections. Regionalising the sector would be equivalent to redesigning the national frequency spectrum, “a more difficult task that would take years and freeze all future investment,” according to the platform’s President – and Director of Mobistar - Benoît Scheen.

The new head of the IBPT, Luc Hindryckx, echoes that view. Regionalisation “would result in higher costs for the sector,” he states in an interview (see other article). “And we would even have national roaming!”

From the virtually unanimous standpoint of observers and the industry, regionalisation does not seem advantageous. But the overwhelming election victory of the Flemish nationalists could lead to ideology prevailing over economic efficiency. It would not be a first in a country accustomed to stifling tensions between its communities under a layer of institutional complexity.

References

Belgium, heart of digital Europe 2010-2015: www.vincentvanquickenborne.be/DigitalBelgiumFR.pdf

Website on tariffs: www.meilleurtarif.be

ECTA report: www.ectaportal.com/en/REPORTS/Regulatory-Scorecards/Regulatory-Scorecard-2009

Platform Telecom: www.platform.be