Author: Richard Coppens, CEO at Group 2000
Everybody working in Telecom and IT knows that developments are going faster and faster. We have only just gotten used to 4G and then the auction for 5G is on the doorstep and the technology for 6G with speeds that literally make us dizzy is already partly conceived. We live in a fantastic era where new applications and the convenience of these applications, as a result of the removal of the “bandwidth barrier”, is or will be accessible to everyone.
Nevertheless, it is important to put the playing field and interests into perspective once again.
It has not been very long since we completed the UMTS auctions. The revenue for the Dutch state amounts to € 2.7 billion. As a result, for years no investments in innovation, thousands of redundancies at Telecom operators (also due to the internet crisis) and innovation that did not take place or at least too slowly. Great for the Dutch state but of course a vision that is focused on the short term.
A few years later the 4G auction, also here the Netherlands excels with a record yield this time as much as € 3.8 billion. An exceptionally nice amount and certainly if you compare this with the directly surrounding countries where the yield in the UK compares poorly with a yield of only € 2.7 billion (in terms of inhabitants practically 4* greater than the Netherlands) and Germany with a yield of no less than € 5 billion. Which is de-facto more compared to the Dutch situation but also practically 5* more inhabitants.
Here too, the story is well known, profits are under pressure (the frequency licenses have to be written off and the network built) and thousands of people are made redundant (partly due to automation) in order to meet the demands of shareholders and investors.
In the meantime, Italy has raised € 6.5 billion with the auction of the 5G frequency licenses, which far exceeds the expectations of the Italian government, as only half of the amount was expected. In the short term this will also be an excellent yield for the Treasury, but the question is whether it will benefit the economy, the digital economy and the development of new technology and therefore also profitability across the business community.
Too much is still thought in the short term. Meanwhile we have already reached the IOT era, its complete industries and branches are dependent on the proper functioning of mobile networks and the development of groundbreaking functionality that in an increasingly global world with ditto global and therefore also low(er) wage competition are simply necessary to give us a head start in Europe, or even better to create a head start and to maintain in the long term.
This requires long-term thinking. Can it be done differently? Certainly, but governments will have to play the game. Instead of billions in revenue, they will have to settle for a sustainable extra revenue of several hundred millions (e.g. the Netherlands) per year that the telecom industry can generate. It is very simple. The hundreds of millions of write-downs on licenses (assuming they are depreciated over 10 years with interest) can (no should be part of the deal with the government) be used for annual innovation. Assuming that the 5G auction would also yield at least € 3.8 billion, this would provide an annual economic stimulus that the Telco’s and the suppliers contracted by the Telco’s should put into innovation as much as around € 440,000,000 per year. What a great economic stimulus and that over a period of 10 years. The advantage for the government is that less subsidies need to be provided, at least (assuming that 60% of this money eventually goes to new jobs) around 3000 new jobs are created with great tax revenues (not to mention the extra spending pattern – consumer spending). There is an incredible amount of VAT and profit that can be taxed in an industry that traditionally already shows high profitability.
The long term case? For Europe, this will not only yield more financially in the long term (I expect a tipping point somewhere between 8 and 11 years compared to the short term variant) but especially in the field of innovative and sustainable development. A more competitive economy, resilient to a good stimulation climate where the industry and outside the industry will generate many new start ups and new business ideas that will benefit us all.
So Europe, what is it going to be? The gaps that may appear in a budget can not be solved in another way?