The report called for the EU to increase investments by €800 billion ($883 billion) a year while also completely overhauling the bloc’s rules and approaches to mergers in the telecoms sector.
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In a show of support, CEOs like Börje Ekholm of Ericsson and Pekka Lundmark of Nokia signed an open letter to express their support for Draghi’s findings.
“We should be encouraging and facilitating investment in digital infrastructure like fibre, 5G and 6G, as well as seizing the potential of technologies such as AI and quantum computing to boost productivity and speed up decarbonisation across Europe’s industrial sectors,” Lundmark wrote on LinkedIn.
The Nokia and Ericsson CEOs were joined in their backing of Draghi’s report by peers from energy, infrastructure, and manufacturing firms, including Siemens, Renault, SAP, Schneider Electric, and E.ON.
The CEO-led letter agreed with Draghi's findings that promoting investments in digital innovation will be crucial for boosting Europe's competitiveness.
“In the past decade, as noted in a paper by the European Round Table for Industry, €500 billion have been invested by telecom operators in upgrading and expanding Europe’s networks. Draghi’s milestone report reminded us that, despite efforts, telecom ‘investment per capita is half of that in the US, and we are lagging in 5G and fibre deployment.’”
“We agree with the Commission analysis that more must be done to fix the situation and we support action aimed at improving investment in connectivity and digitalisation across the continent.”
The CEOs wrote that maximising the potential returns from use cases such as smart mobility, renewables and 5G private networks are at stake if more investment isn’t encouraged.
One way Draghi’s report suggests to kick start spending is to streamline competition rules for telcos to create a more harmonisation industry.
The CEOs agreed that increased investment levels were needed to “grow, innovate and stay competitive at the global level.”
“As European industry, we need increased collaboration and investment in trusted, secure, resilient, and high-quality connectivity, as well as in computing infrastructure,” the letter reads.
ANALYSTS: MARKET FRAGMENTATION & NEED FOR SCALE
Draghi’s recommendations secured the support of several leading CEOs, with industry analysts also throwing their weight behind them.
Dan Pitt, president of Palo Alto Innovation Advisors, told Capacity that the findings were “spot on” but may not even go far enough.
“There are so many European telcos and national requirements that to achieve any interoperability they argue for years trying to hammer out standards and agreements,” Pitt said.
“Meanwhile, the hyperscalers run at lightning speed, not hampered by having to get anyone to agree with them. It’s no wonder they are making such inroads in everything but the last mile, which they are loath to take on in any case. This is evident even in the US where consolidation has long been a fact of life in telecom.
“The European common market is not a common market in telecom because of national differences and industry fragmentation. Thus it does not enjoy economies of scale. The market is asking for consolidation. Yes, consolidation means fewer but larger players but at least they will be successful players, if they can commoditize their own connectivity businesses and concentrate their resources on software-based innovations, especially at the edge.”
Similar sentiments came from Chris Lewis, founder of Lewis Insight, who told Capacity that the European telecoms market “is not a healthy sector” and that regulators have failed to come up with remedies to improve the health of the industry.
“There is no doubt we have way too many players in our fragmented region,” Lewis said. “In addition, the structural separation of infrastructure and service further complicates things. So, the money is following the infrastructure while the regulation is focused on the service.
“I think the report misses the key issue of understanding how we need to build out vital infrastructure per country. Telecoms is fundamentally a national issue. Under previous iterations of competition following liberalisation of the sector, money flowed in from the bigger, pan-regional and potentially global players but this settled down into mainly national companies with a few enjoying regional success.”
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