Telecom Prices: No Use Comparing

Telecom Prices: No Use Comparing

Like the issue of competition, the debate on the prices of telecom services in Belgium that are considered too high re-emerges very frequently. The two are actually often linked: it is believed that it is normal that prices are kept artificially high by its players. We have already defeated this concept (read “the Belgian telecom market is more competitive than you think”); what remains is the matter of prices.

Comparing apples to oranges

The first argument put forward by those who criticize the telecom prices in Belgium is that they are much higher than in the neighbouring countries, in particular France. Very well: a triple play service in Belgium costs on average far more than that offered by a player like Free in France. Except that we are not exactly talking about the same thing in terms of quality and - above all - availability of service. For instance, an Internet connection with a speed of 30 Mbps, is available to only 50% of French households, as opposed to virtually all households in Belgium.

What is more striking is that, in 2016, only 16% of households in France actually subscribed to an internet speed higher than 30 Mbps, compared with 80% in Belgium. This level of quality and availability of service requires heavy investment which must pay off. It should also be pointed out that, for customers who are looking for a more ‘affordable’ solution, alternative operators exist; the choice that is available to the Belgian consumer is far from being as limited as it is claimed to be. High-speed Internet subscriptions, without other products, are in fact more attractively priced in Belgium than elsewhere: €27.62 on average, compared with €39.68 in France, according to a survey by IBPT.

The speed with which technological developments come onto the Belgian market is in fact far greater than on markets that are nevertheless considered effective, such as the Netherlands or Germany. In terms of Internet quality, Belgium is 10 to 15 years ahead of Germany, according to Carsten Brzeski, Chief Economist of ING Bank for Germany, the ECB and the euro zone (De Standaard, 16 December 2017).

One expense among others

Let us imagine for just one minute that the prices charged in Belgium are indeed artificially higher than in the neighbouring countries. What is the weight of the expense item ‘telecom’ in the household budget? Is the imbalance noticeable? According to the latest figures presented by Eurostat, telecom expenditure represents an average of 2.2% of the budget of Belgian households. A small fraction, and certainly smaller than for the households in neighbouring countries (2.6% in France, 2.9% in Germany, and 3.2% in the Netherlands). This proportion has in fact diminished over the last 10 years, unlike the budgets for ‘energy’ and ‘food’, which have been steadily increasing.

All these elements appear to indicate that the prices charged in Belgium are in line with the cost of living in this country. In this respect, we should not forget that the telecom prices which the end consumers pay include the weight of two typically Belgian factors: the high VAT rate and the very high salary costs, while the telecom industry is an important job creator.

Social choice

Let us take the example of France, which is consistently cited by those who claim that telecom prices in Belgium are too high. In France, the industry regulator (ARCEP) played an important part in the emergence and steamroller effect of the operator Free. By literally demolishing prices with the support of ARCEP, the group also ravaged the market, putting the industry giants into such a difficult position that large-scale redundancy schemes had to be put in place. These players became so weakened that they could be taken over and found it difficult to approve the necessary investments to build the networks of the future, even as the shortfall in network coverage is being resolved but very slowly. Lower prices indeed, but also less quality, less employment, less perspective: is that really what we want for the Belgian market?

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