Infrastructure deal boosts Czech digital rollout
Against a backdrop of repeated delays to the upgrade and expansion of the Czech Republic’s digital infrastructure, news that a recently launched investment fund has acquired the country’s heavily indebted mobile tower business České Radiokomunikace seems to offer a welcome development for those looking to hasten the country’s 5G advancement.
České Radiokomunikace accounts for the lion’s share of the deal brokered by Cordiant Digital Infrastructure, comprising several hundred TV, radio and telecoms towers, microwave connections and thousands of kilometres of fibre. Now, following its acquisition, it’s hoped that Cordiant will be able to breathe new life into struggling České Radiokomunikace, which had been investing in providing infrastructure for 5G rollout across the country and developed a market-leading offering across IoT, cloud services and data centres.
Network-sharing deal has hampered progress
Indeed, market shake-ups of this kind might be helpful in reviving digital infrastructure expansion projects in a country whose progress on that front has been hampered by a network sharing agreement between the Czech Republic’s number one and two mobile network operators, O2 CZ and T-Mobile CZ, as well as Czech telcoms infrastructure provider Cetin.
Signed in 2011, the agreement aimed to reduce operating costs and circumvent existing merger regulations, and covers all mobile technologies, including 4G networks, offered by O2 and T-Mobile, covering 85 percent Czech territory. The vastness of the agreement has provided the two mobile operators with an advantageous market position that none of the other competitors can match. In all, the deal has held back network development and hampered innovation. The market has been choked so extensively that the European Commission initiated an anti-trust investigation in 2016 that is ongoing to this day.
What the manoeuvring between O2 CZ and T-Mobile CZ means for 5G – and the consumer – is clear: while network sharing can in certain cases lead to faster rollout, cost savings and improved coverage and network quality for consumers, the specific nature of the agreement has caused higher consumer prices and stalling 5G rollout.
All of these constitute serious shortfalls when 5G and derivative technologies are at stake, particularly in light of the fact that network expansion relies on the prompt scheduling of 5G auction. Delays in conducting the spectrum auctions were rumoured to be the consequence of the anti-competitive deal between O2 and T-Mobile in 2019. However, the bigger factor might be that the Czech regulator is waiting for the European Commission to resolve the issue ever since Brussels launched its investigation five years ago.
Breaking the vicious cycle
Even so, the Czech Republic suffers from exceptionally high spectrum costs, which is the result of the state’s attempt to maximise revenues from spectrum. Indeed, a recent study has made clear the link between “high spectrum costs, and lower investments and higher consumer prices”, supporting the point that “high spectrum costs are not a free lunch for governments” and that profiteering off auctions is more often counterproductive than not.
It is therefore not surprising that investments into digitalisation have been lacking, which is of course at the heart of the country’s current infrastructure malaise. And while Prague and Prime Minister Andrej Babis should be extracting the appropriate lessons from their attempt to maximise profits from the spectrum auction, the nature of the issues plaguing the Czech Republic’s progress in digitalisation makes it clear that upending anti-competitive arrangements between market players should be the first priority.
This would also be in line with the European Commission and its investigation, whose role in resolving the evident market distortion is only set to increase the longer the situation persists. With the Czech regulatory authorities relying on the Commission to come to an immutable conclusion, this means that a decision from Brussels on the matter of antitrust cannot come quickly enough.
For the sake of Czech users, it’s obvious that only a more open market will allow for competition and better service for the value being paid. Prague would therefore do well to stick to its Innovation Strategy 2019-2030 designed to turn the country into one of innovation and forward-looking adoption of Industry 4.0 technologies – all of which requires the opening up of the domestic telecom market to investment.
Only then can the Czech Republic truly reap the benefits of digital infrastructure, 5G and the digital single market.
Image: Alex Williams via Flickr