Brussels, 13 July 2007
Consumers benefit as market opening leads to
better performing network industries
The performance of network industries, such as
telecommunications, transport and utilities has continued to improve and
consumers are generally satisfied, according to a European Commission report.
The opening up of these industries to competition has benefited users by putting
pressure on service providers to keep their costs and prices down. Access to
services at affordable prices for the less well off is also improving. However,
there are wide variations between sectors and between Member States. In some
Member States delays in market opening and in removing legal and technical
barriers to new entrants have held performance back and competition is
developing only slowly in postal services, the railways and the energy
"The EU's policy of opening the telecoms, transport and other network
industries to competition has been the right one, since this has made them more
competitive putting downward pressure on prices without compromising either the
service or its quality. But much more needs to be done to extract the full
benefits of competition for the consumers of Europe," Economic and Monetary
Affairs Commissioner Joaquin Almunia said.
The Commission's report is the fifth of a series of annual reports, which
examine the performance of network industries, covering telecommunications,
postal services, electricity, gas, air, road and rail transport. Together, these
industries account for around 8% of the EU's value added and employ more than 10
Competition spurs productivity
- Regulatory changes in network industries have created the conditions for the
emergence of more competitive markets, with new and better products on offer.
The number of direct flight routes connecting European cities, for example, has
doubled since 1992. In the telecommunications sector, the roll-out of broadband
access has been greatly stimulated by the EU regulatory framework and households
now have the liberty to choose their electricity supplier according to their
preferred generation method.
- As a result of the changes in their structure, the performance of these
industries has generally improved. Indeed, over the last decade, prices have
either fallen, in particular in the telecommunications (40% in real terms over
the past decade) and air transport sectors, or been contained. The benefits are
less visible in the energy sector as the liberalisation process is more recent
and because of the steep increase in oil and gas prices worldwide since 2004
(the price of the barrel more than doubled and reached an all-time high in
August 2006 at $78).
In some Member States this unsatisfactory
situation in the energy markets is also a result of the inadequate
implementation of the regulatory framework legislation, notably regarding the
unbundling of generation and network infrastructure.
- Productivity in network industries has grown faster than in the rest of the
economy: indeed, over the period 1993-2003, annual labour productivity growth in
the communications sector (7.6%) and the energy and water sectors combined
(5.9%) outpaced the economy as a whole (1.8%). In many cases, productivity
increases were accompanied by employment growth, allaying beliefs that there is
necessarily a trade-off between the two. Furthermore, in many Member States the
number of jobs created by new entrants in the telecommunications sector, for
example, greatly outnumbered the job losses at the incumbent companies.
- The quality and accessibility of the services provided has also remained
stable even though there is room for improvement. In the meantime the services
have become more affordable, in particular in the new Member States. Low-income
households, who tend to spend a higher share of their outgoings on network
industry services, are likely to benefit most.
- Against the background of this improved performance, recent consumer
satisfaction surveys indicate that
consumers in the EU are generally satisfied with the services offered. The
majority of consumers (50-70%) also consider their interests to be "well
protected". In 2006, the Commission adopted for the first time a list of
airlines banned from the European airspace for failing to meet minimum safety
standards. At the same time the rights of persons with reduced mobility
travelling by air were strengthened.
- Despite these improvements and overall satisfaction, consumers still show
some reluctance or inertia when it comes to switching to new market entrants, an
attitude that may be attributed to switching costs and the difficulty of
comparing different offers ( 38% cite such difficulty).
- The report also points to the need to further integrate the markets at EU
level. Insufficient powers of the regulatory authorities in some Member States,
inadequate capacity or inefficient use of cross-border interconnections and the
vertical integration of transport, distribution and supply activities are some
of the obstacles that prevent consumers from fully reaping the benefits of
competition. The Commission will propose legislation later this year to
strengthen the regulatory framework, notably with regard to the management of
radio spectrum in telecommunications and separating the operation of energy
transmission networks from generation and supply activities.
full text of the report and a detailed annex are available at