Deutsche Telekom’s new CEO and the man behind Angry Birds seem to agree on one thing: the scandal over U.S. spying on allies could come at a cost to U.S. companies. At the opening session of Munich’s DLD Conference on Jan. 19, Rovio chief Peter Vesterbacka called it “the best marketing campaign for European companies ever,” forcing business leaders to think twice about storing sensitive data in the U.S. For Timotheus Höttges, who took over the top job at Deutsche Telekom a few weeks ago, the key is how they rebuild trust.
The depth of feeling around the issue signals that President Obama’s promise to rein in the National Security Agency’s reach may not be sufficient to address allies’ concerns. As Paul-Bernhard Kallen, a fellow panelist and CEO of Hubert Burda Media, put it: “Everybody has been blaming China. What is now apparent is that it’s not the old friends who are the real friends.” Kallen, whose media company hosts the pre-Davos gathering, was also joined onstage by Lutz Schüler of German cable operator Unitymedia Kabel.
Together, the four men debated what it would take to accelerate competition in the fragmented and highly regulated European market. Telecom chief Höttges argued the first step is to ease up on rules, arguing that “we’re regulated on whatever we do.” Second, he wants an environment that allows him to charge sufficient revenues to make a profit. While U.S. and European data traffic have both jumped 900 percent over the past five years, he said, that’s enabled U.S. telecoms to grow annual revenues by roughly 35 percent while European carriers’ have seen sales drop. The comparison with Asia is similar. “There seems to be a digital divide between Europe and the rest of the world,” said Höttges. With more than 200 carriers in Europe, vs. four in markets like the U.S. or China, that may not be a surprise.
One of the biggest issues for the European leaders was preferential treatment of foreign players. Unitymedia’s Schüler complained that Germany gave Netflix access but struck down efforts to create a homegrown version through a partnership with ProSieben and RTL. “The change which has to happen is deregulation,” he said. “There’s no digital brand coming out of Germany …To the Googles of this world, Deutsche Telekom is a dwarf. We all need scale.”
Kallen agreed, talking about the need for a level playing field. A website that operates out of Luxembourg, for example, can sell e-books into Germany at a negligible rate while a local producer has to charge a 19 percent sales tax. “My biggest concern is that the regulatory environment isn’t fair to all the competitors,” he said.
Rovio’s Vesterbacka, though, wasn’t convinced that policy was the problem. “I haven’t seen too many operators in Europe go out of business, even though we’ve had these challenges for years,” said the Angry Birds co-founder. While he’d love to see a single European market that eliminates the need to get approval in every country, he doesn’t think the will is there to change it. Meanwhile, he welcomes foreign players. “We made 51 games before Angry Birds. What really changed was the market. Apple happened. iPhone happened. Instead of having to go to Deutsche Telekom, to Vodaphone, I can go to Apple and I reach the world.”
