The EU has set ambitious targets in its Digital Agenda: “Ensuring that by 2020 all Europeans have access to much higher internet speeds of above 30Mbps and ensuring 50 per cent or more of EU households subscribe to internet connections above 100Mbps.” Put simply, the EU wants broadband prices and high quality standards to be affordable as future economic prosperity depends partly on the success of the digital economy.
The conclusions of two studies funded by the European Commission on broadband pricing and quality offered to Maltese do not augur well for local consumers. If Maltese consumers are getting the most expensive and least efficient broadband deals in the EU, then something needs to be done urgently to reverse this trend.
Broadband technology is essential for providing modern essential communication services like internet, TV and telephony. The local market is dominated by two service providers: GO and Melita. The conclusions reached by the EU reports seem to indicate that we may be suffering from the ill effects of a duopoly where prices could be kept artificially high.
According to the EU reports, “while more than 90 per cent of Maltese subscribers buy their broadband services from GO or Melita, there seems to be little difference between the two”. This is bad news for subscribers but one needs to investigate more thoroughly to see why.
The roll-out of high-speed fixed and wireless broadband networks across the EU requires substantial investments. A 2014 EU directive proposes measures to scale up national best practices for creating a robust infrastructure. Civil engineering works, such as digging up or roads to lay down high-speed broadband, account for 80 per cent of the cost. The EU hopes the implementation of this directive “helps to create a digital economy that delivers sustainable economic and social benefits based on modern online services and fast internet connections”.
One needs to be careful not to resort to knee-jerk reactions to control prices in a market that is presently deregulated because this may discourage further investment in the latest technology by the service providers. In the US, for instance, broadband costs to the consumers are significantly higher than in Europe but broadband providers there claim that “the US is the only country in the world that provides a fast streaming cable service to everyone”.
The Malta Communications Authority was rather coy in its reactions to the negative conclusions of the EU reports on the pricing and quality of local broadband services. Consumers rightly expect to be protected from any alleged collusion in pricing by duopolies. In the UK, the regulator, Ofcom, is proposing cutting what BT charges for its leased telecom lines, which could see significant price cuts for those who buy them.
If it is found that broadband service providers in Malta are indeed overcharging for their services, than the MCA will be more than justified to intervene. However, it would be fair to hear out the two service providers to understand why the costs of broadband services are higher and quality of service lower than in other EU countries. Consumers deserve a clear, straightforward explanation.
The dynamics of competition are often distorted in a small market like Malta. Economies of scale have a less pronounced positive effect on costs and so return on investment may be lower for entrepreneurs that provide essential services. The MCA should therefore engage in an open dialogue with broadband service providers to protect all consumers’ interests.