TELECOMMUNICATIONS EQUIPMENT
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1 IMPORTANT LEGAL NOTICE - The information on this site is subject to a disclaimer and a copyright notice. The Single Market Review Series Subseries I - Impact on Manufacturing: TELECOMMUNICATIONS EQUIPMENT Summary By: Analysys August 1996 SUMMARY The creation of the European internal market is having a profound effect on the European telecoms equipment sector. Although the internal market is still developing, and many of its impacts are not y visible, internal market measures are contributing both to the reduction of telecom equipment prices in the EU and to the competitiveness of the EU telecoms equipm manufacturers. These benefits are beginning to pass through to business and resid consumers of telecoms services in the form of lower service tariffs and increased functionality. The EU telecoms equipment industry employs over 700,000 people (Section has a turnover of over ECU 30 billion (see Chapter 2). Telecoms equipment produ is an important activity for global economic and social development the supply affordable, state-of-the-art telecoms equipment is a pre-requisite for the developm the European economy and the economies of other regions of the world. Telecom equipment production is a technology-intensive activity in which the EU has main its global competitive position over recent years (see Section 4.2.2). Defending an increasing the competitiveness of equipment manufacturing is a key challenge for EU. It is therefore important to understand the impact of a major environmental ch such as the Internal Market Programme, on the competitiveness of the telecoms equipment manufacturing sector. While internal market measures have had a significant direct effect on many part
2 European telecoms equipment sector, their most profound impact in telecoms equ manufacturing has been indirect. The changes occurring through the creation of a internal market for telecoms services are having a substantial impact on the struct performance of the European telecoms equipment sector, as illustrated in Figure 1 (below). The introduction of competition in telecoms services is causing telecoms operators to be more demanding in their relationships with suppliers. Figure: The impact of the EU Internal Market Programme on telecoms equip manufacturing The Internal Market Programme encompasses a very substantial programme of legislation and other measures specifically targeting the reform of the EU telecom sector (see Chapter 3). This programme of specific measures has addressed many sensitive and challenging issues, often facing significant resistance and inertia. Te is, in itself, an extremely complex area, covering the intersection of technology, economics, social and industrial policy, and corporate, civil and international law Chapter 3). In such an environment, it is inevitable that the process of reform will slower and less perfect than some may wish. However, the Internal Market Progra has made significant progress in the reform of EU telecoms, including telecoms equipment. The remaining obstacles to a truly harmonised and open market are lo and are being addressed by specific implementation actions rather than new prima legislation, and the existence of these remaining obstacles should not obscure the achievements of the main programme of measures. The most important impacts of the Internal Market Programme on the telecoms equipment sector have been to reduce the price of EU telecoms equipment, and to improve the competitiveness of the EU equipment manufacturing sector, as discu below. The impact of the Internal Market Programme on EU equipment prices: This study concludes that the primary impact of the internal market has been to accelerate the reduction of EU equipment prices by changing the purchasing beha of Europe's telecoms operators, which account for over 80% of telecoms equipme purchases in the EU (see Chapter 4). Figure 1.2 (below) illustrates the trends in real equipment prices from 1985 to 199 the estimated impact of the Internal Market Programme. In 1985 EU telecoms equ prices were considerably higher than equivalent prices in other regions. Since 198 equipment prices have fallen dramatically to around one quarter of their 1985 leve real terms, and the price premium in EU markets has fallen from 20% to 8%. In th
3 absence of key internal market measures, the EU would have foregone average equipment price falls of approximately 7% (in total, 1985 to 1995), equivalent to between ECU 1.5 billion and ECU 2.0 billion per annum of additional cost to equ purchasers in the EU (see Section 4.2.6). Figure. The impact of the Internal Market Programme on EU telecoms equip prices The impact of the Internal Market Programme on equipment manufacturers competitiveness: The internal market is contributing to the competitiveness of European equipment manufacturers by both generic and specific impacts: a. generically, by increasing the competitive intensity of EU equipment marke accelerating the development of a large and harmonised European equipme market b. specifically, by contributing to the development of individual areas, such as ensuring radio spectrum availability for the GSM standard in mobile communications, and encouraging standards development in areas such as I These measures, in combination with the efforts of equipment manufacturers themselves, have sustained the competitive position of EU equipment manufactur period of growing global competitive intensity. Telecoms equipment manufacturi notable as a high technology sector in which EU competitiveness has been sustain over recent decades. In the absence of key measures and actions, the global market share held by EU manufacturers would be below its current level (see Section 4.1.2). Each percenta point of global market share is equivalent to approximately ECU 0.8 billion of equipment sales, and this study finds that it is probable that current EU telecoms equipment production would be reduced by at least ECU 1 billion in the absence o Internal Market Programme (equivalent to 14% of current EU external exports of
4 telecoms equipment). In the absence of Internal Market measures this output wou been met by non-eu production, through increased penetration of EU markets an increased containment of EU export growth. It is not tenable, however, to attribut specific portion of current world market share entirely to internal market measure rather the Internal Market Programme has assisted the development of several asp competitiveness. Figure 1.3 (below) illustrates the assertion that around ECU 1 bi EU production would have been lost to non-eu manufacturers in the absence of t competitiveness impacts of the Internal Market Programme. The broad conclusions of this study concerning EU competitiveness are consisten survey of telecoms trade associations (DRI, 1995) undertaken on behalf of the EC survey found that "the increased competition within the EU, brought about by sin market measures, has increased the global competitiveness of the EU industry." Figure : The impact of the Internal Market Programme on EU telecoms equi production The global telecoms equipment sector has undergone major technological and stru changes during the last ten years, which makes it extremely difficult to attribute particular changes to the introduction of the internal market. For this reason the quantitative assessments of the impact of the internal market (a are made on the basis of hypotheses comparing actual developments with the prob development of the sector in the absence of an Internal Market Programme. As part of its impact on prices and competitiveness addressed above, the Internal Programme has: a. significantly altered the relationships between EU equipment manufacturer their major customers, the telecoms operators. The prospect of competition telecoms services has made telecoms operators change from exclusive and integrated relationships with equipment manufacturers to more open and commercial relationships with a wider range of suppliers (see Section b. improved EU manufacturers' access to economies of scale and scope, throu reduced fragmentation of the EU marketplace (see Section 4.2.3) c. removed the main legal and administrative barriers to market access, encou
5 cross-border activity and new entrants, particularly small manufacturers (se Section 4.2.4) d. contributed to increased levels of competition in EU telecoms equipment m (see Section 4.2.7) e. accelerated the restructuring of large EU equipment manufacturers, with a consequent negative impact on employment in the sector (see Section f. reduced the price of telecoms equipment for EU consumers, and increased t range of products that are available (see Section ). The outstanding obstacles to a harmonised and open EU telecoms equipment mar all matters of implementation rather than matters requiring further internal market measures. The major area where obstacles remain are the harmonisation of equipm approvals (particularly for terminal equipment) and the development of EU standa (again, particularly in the area of terminal equipment see Section 3.3). Both of t areas are the focus of continuing efforts at EU and national levels. The timetable f reform of the telecoms services market has been set since 1993, focusing on the liberalisation of voice services and infrastructure in 1998, and the major purchase telecoms equipment, the telecoms operators, are preparing themselves for the arriv full competition. Their purchasing behaviour has already changed dramatically, an continue to become more demanding. The purchasing imperatives of the telecoms operators will continue to turn the EU equipment market into a truly integrated in market. The Internal Market Programme has provided vital additional impetus to the evolu the European telecoms equipment sector, at a difficult period of its development. benefits of the Internal Market Programme will to continue to accumulate over th coming years. For example, the price premium for telecoms equipment in the EU (relative to US prices) is likely to disappear by the year Based on their expe of the competitive pressures now apparent in the EU internal market, EU manufac will continue to transform themselves to face the challenges of an increasingly dif and competitive global marketplace. [ ] - [ Update on the Single Market ] - [ Free Movement of People & Individual Rights ] - [ Free Movement of Goods ] - [ Services & Establishment ] - [ Financial Services ] - [ Company Law, Accounting & Auditing ] - [ Public Procurement ] - [ Media, Information Society & Data Protectio [ Intellectual & Industrial Property ] - [ Economic & Monetary Union ] - [ Infringements ] - [ STU
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