Episode 7: Inside Europe's Telecom Future: Investment, Policy and Competition

Peter Jarich (00:00)

Hi everyone and welcome to Intelligence and Noise, the podcast from GSMA Intelligence, where we take a look at the week's work and what is becoming an increasingly hectic, busy, dare I say, interesting telco landscape, and try and sift through what's important versus what is noise, and maybe adding a little of insight along the way. We do this through the context of the GSMA's CEO newsletter that comes out every week, talking a bit about.

What was chosen and why we think it's important and maybe what was missing and and maybe what else you should be paying attention to. You may have noticed, I'm usually here with my friend and colleague Tim and I've got Pau Castells here. Hey Pau.

Pau Castells (00:44)

Hello, hi Peter.

Peter Jarich (00:46)

Pau is is the chief economist here with GSMA Intelligence. and he's here in part because he shepherded the CEO newsletter last week, but he also shepherded one of the most lauded pieces of GSMA research in recent times that we're also going to talk about. So so look forward to that. Stick around. so as I said, we don't have Tim here with us today, one of my favorite Canadians.

alongside Celine Dion and and Justin Bieber. But Tim is in Belize and we assume he's in Belize on a holiday and not fleeing the law. we're gonna we're gonna assume that's the case until he's back. But in his honor, I've got my leaning forward here, I've got my three-eyed Bieber hat on. that's in honor of Tim but also in honor of some news that

hopefully will lead us into the the the rest of the story. So as always I start with a bit of my my own personal anecdote story, what I think is is interesting. And this week what caught my eye, the fact that Meta is building a a data center, a one gigawatt data center in Canada, seems a a bit maybe, maybe not the kind of thing that's that's newsworthy, but I think it's I think it's interesting for a few reasons, right? So I mean all the normal stats that you

see for this kind

Things, right? One gigawatts of data, $9 billion, two to three years taking place in Alberta. If you don't know your Canadian geography very well, that's out in the West. And you know, it's got the normal things you might expect from an announcement about a data center build in 2026. You we're gonna be good stewards of water resources. We're gonna use this as an opportunity to ensure that we build out and and we help upgrade.

The local power, the power grid, being built somewhere where you can actually build more, more power capabilities all make sense, right? What's missing is particularly interesting is is any mention of sovereignty, right? I mean, it's rare that when you see a cloud or a data center build or an edge build or anything else from a telco or a hyperscale or anyone, that there's not some mention of of sovereignty. and you can question why. Is this just because Meta doesn't care?

Meta is just beginning to talk about a business model where they sell excess capacity. If they have, is it because they don't have excess capacity? Right? They recognize that they need all the capacity they can get just to maybe take care of all the the data on your smart glasses. Don't know, but it's a bit refreshing. at the same time, also a bit of a head scratcher of where Meta's strategy is there, because increasingly sovereignty is part of all of these discussions in terms of how we think.

About compute, how we think about services, which leads us, I think, Pau, into our first story. So the first story that did make it into the CEO newsletter, and folks who get the CEO newsletter will know this is the EC Action Plan on cybersecurity and AI. The the tagline is essentially it's it's there to address the risks and harness the opportunities of AI in cybersecurity. That seems straightforward. also seems

Pretty boring and straightforward the point of is there anything there? So is is is there anything is there anything there?

Pau Castells (04:14)

Yes, so so as you as you said, Peter, I mean, it is a plan. And the announcement of a plan by the European Commission can can be a bit vague. And actually that wasn't that wasn't an exception. So it was a bit vague as an announcement. I think that going a bit beyond the the vagueness of it, there are some interesting things that are probably worth calling out, and that that's why it made it into the into the newsletter this week.

if anything, I think just the realization that AI is becoming, I guess, not not just a solution for cybersecurity, but also a threat. And that's that's this this this dual face challenge that that we are facing with AI. This is, in my view, the sensible proposition by the European Commission. It doesn't involve regulation, at least not as set out in the plan. It's a combination of

different initiatives to try and and make the European Union more prepared for for both these opportunities and to to leverage them but also for for those challenges.

Peter Jarich (05:25)

I mean, I but so the interesting thing is, and I've seen a number of people sort of laud it or call out that you know, there's no new you know, no new regulation here, right? It's it it's all about looking at past regulation of plan to sort of leverage it. And i i if I look correctly, there's there's a whole lineup of other things that have been done already. The the AI Act, the Cyber Resilience Act, the Digital Operational Resilience Act, the Cyber Solidarity Act. So so it feels like there was a lot of other stuff done.

Already, I mean, this is I guess just a just a plan to say let's use all those things and actually do something. Is that is that fair?

Pau Castells (06:05)

So I think this is probably the point where Europe is trying to not just regulate but also build capabilities on AI. And that's that's why some of the initiatives here, if you are able to scratch a bit beyond the surface, might seem interesting. Right. So for for example, the the idea to essentially try and make sure that Europe has access to the latest.

AI models. And we have all seen that some of the stronger AI models are certainly not European based. And some of them actually might be also subject to insurances by by third countries, including the US, right? So the the the the realization from the European Union, in this case the European Commission, that this is actually important and that letting

I guess some of the cutting edge models outside of the reach of European businesses might be might be problematic. That that's that's encouraging to see. Obviously, and that's I guess linked to the sealed critique that you know we have made at the beginning, right? That's this is a bit vague. Well, this actually is is a good step in terms of recognizing that that there are some some challenges there. but then the question is well, what what the plan

is proposing to do, that's not clear at this point.

Peter Jarich (07:34)

So it does, and this is for those of you who are waiting for it, this is kind of where we get to that that sovereignty discussion, right? Because it it does bring out the idea that, you know, ultimately there is this risk or th this recognition that it's a risk of how do we get access to the models. Clearly, if we're talking AI and cybersecurity, we all you know, we're all just coming off of the the fact that European enterprises and companies maybe had access to mythos, then didn't have access to mythos, and then

for those of you who don't know, I'm talking about the anthropic model that was going to be more powerful than anything and and find all the vulnerabilities. And they pulled back access, and then the US government pulled back access and a whole litany of things there. So I think it's it's clearly, right, this is happening at a time when you're going, okay, we get it. This is in the news. But I guess the question is, right, there's still

if this is out there and and we're not just talking about models, right? The models are important, but also just the servers, US servers, suppliers of those, those servers, again, I I just talked a bit about about Meta, right? At the in the beginning here. you still have to negotiate access to that, right? I mean, so so so as much as as as much as this might be a unified like EU position to go, hey, this stuff is important.

they still need to have access to that or somehow get access to those models, right? And this doesn't really necessarily address that.

Pau Castells (09:05)

No, absolutely. And I mean I guess the the the the interesting bit of of the of developing a plan, and I'm sure that we'll we'll hear more about this plan and how it takes shape in in in the coming months, is that as you say, the the I don't think the plan is about digital sovereignty. but it clearly talks to that as an important and increasingly central aspect of of you know not just connectivity.

But think just in a general policy from a cybersecurity perspective, from a competitiveness perspective, from an economic growth perspective as well, right? So this is where I think some of the I guess assets or the position of telco operators in Europe might potentially be able to leverage and increasingly play a more important role.

in in this space, if if anything, because they are already kind of regulated entities providing connectivity services which can be considered to be increasingly critical national infrastructure. I think what the plan recognizes is is that this is actually you know the the the notion of networks connectivity but including clip you know cloud processing.

AI, these all actually becomes an interconnected system of networks that they need to be secure. And the the positioning of telco operators in in this space, just by you know not not just the their ongoing provision of connectivity today, but also by some of them already have made moves into into the cloud space, into edge computing. so these already

talks towards a transition that we might see more. And obviously having having a a pan-European plan that is trying to to navigate in the same direction can be something that that benefits European telecom operators.

Peter Jarich (11:15)

Yeah, no, I I I agree. And I think that's a I think it's an important way to look at this, right? Because, you know, one of the parts of the act is a a blueprint for access to advanced models. And I think that goes a bit back to what we started, right? A blueprint for access feels a bit broad, right? Is a a what does that look like? It it doesn't assure you access to those models, it doesn't assure you access even to the server. So I think to your point.

huge role, right? And it's a reminder that as telcos look at opportunities, as you said, you know, you you're seeing it probably with some of the most visible visible activities from DT, from Telefonica, and building out its its edge and connecting that to sovereign solutions, obviously, which you've seen across across Europe. Huge role for telcos and and how they how they play in this. So fingers crossed that this

is more than just a plan that we actually see those blueprints do something. But let's get to the second the second piece not chosen. and you know we've talked a bit about this in in the past. but the second piece that wasn't chosen was some move on the telco front, SKT and KT in Korea announcing their own investments in AI and

In cloud services. I think the big one, KT, was talking about $12 billion for a combination of networks, data centers, sub-sea cables, cyber cure security solutions over the next five years. what I think is interesting here, right, and this is all linked to sort of you know capabilities and and AI, because everything's linked to AI, is that you know almost half of that.

just under half was was around networks, right? Meaning 5G advanced and 6G. And so you see this. Yes, there was there was some, I think it was just under a third on a data center, one gigawatt data center, two and a half billion for cybersecurity, which they kind of have to do because there's obviously been some cybersecurity issues that we all know of that have been in the news in Korea. But I think it's interesting that almost half of that's being directly linked.

To 5G advanced and 6G and this connection between AI and advanced networks. is that, I mean, from your perspective, is that just sort of a, I know I have to invest in 6G at some point and I have to get ahead on 5G advanced, and so I might as well connect this to AI because then I'm giving myself a rationale, or does that feel like there's some, there's some there there?

Pau Castells (14:08)

So I do think that the Korean model, you know, it has been a concerted effort from the government to bet and actually not just bet, but take meaningful action towards connectivity and high tech investments as a as a central part of their economic growth strategy. That's that's clear, cannot be taken lightly because it has actually been delivering significant results. we have

Yeah, the the the growth and development story of of Korea is is actually quite quite extraordinary and and you know digital technologies have played an significant part in it. So I do see this as a as the next chapter in in that story. And maybe linking to the to the previous discussion we were having as to the the European plan for security in AI. Well, actually that that sort of looks more like a concerted real plan with meaningful action already taken.

taking place. And yes, obviously, you know, it leverages connectivity and advanced connectivity through 5G advanced and 5G SA. But that, you know, nowadays the the the this cannot be disconnected or it cannot be put forward as a meaningful strategy without actually investments in infrastructure that support AI, that support other aspects of the of the internet value chain. So

I do see these as a as a good example, a bold example of of a I guess government, private sector working hand in hand. Obviously the Korean idiosyncrasies are different than the European ones. It's hard to see that model exact working exactly like that in in Europe. But yeah, I mean that that might be potentially one one way forward.

Peter Jarich (15:58)

And I think, and for those of you who think that we or suspect that we might just pick these randomly, my notes here at the end say almost exactly to what Pau said, which is is might just seem like build up for the sake of build up, but definitely feels like it's more consequential than than the EC's recommendations. So I think I think you do see an interest interesting balance here, right? Both are important, both are talking about how we build out important capabilities for society, for digital services.

But at least there's there's money here. We kind of know there's a roadmap we kind of know what's gonna take place, at least per the plan in Korea. And it's worth reminding, because I know we mentioned this, I believe, in the past. This does come on the heels of a one trillion dollar investment plan that was mentioned previously in Korea, which includes a a lot of build-outs around AI and chipsets and robotics. And I think we mentioned sort of

Part of that was pushing out, using these investments to meet other societal needs, like driving manufacturing capabilities outside of the Seoul area. And so this is all part of it, and that's actually the the SKT story is part of that, right? SKT was looped in there as as one of the companies that's gonna help drive a 15 gigawatt data center build. 15 gigawatt seems like a lot. So I think we need to take all these with a a

bit of a pinch of salt because we're talking

Pau Castells (17:26)

Is it a lot? I don't know. I mean I've I'm

I'm I'm almost almost yeah illiterate when it comes to to energy consumption units.

Peter Jarich (17:35)

That is a that's a really good point. Like like these numbers are and we're gonna get to that in the end because I think there's another interesting story of of number come on, Pau, you're your chief economist. These numbers should yeah, the the the the the I've heard

Pau Castells (17:50)

Not not chief energy scientist, fortunately, fortunately for for GSMA Intelligence.

Peter Jarich (17:56)

I heard s I heard an example, I believe the example is somewhere it's like

roughly around three gigawatts being a city the size of Los Angeles. so fifteen feels like a lot.

Pau Castells (18:10)

Like five like five Los Angeles consuming at the same time. So that that's that's a that's a fair bit.

Peter Jarich (18:15)

So that is that is that is a lot, which is I guess why they're all building their own capabilities. yeah, so I think it it's an interesting, definitely an interesting contrast here, right? Of both sort of looking at important things. Obviously, there's a cybersecurity angle in in both of them, KT building out capabilities, the EC talking about them, but with actual numbers there, and of course the connection to

5G advanced and six G. so yeah. let's see how that plays out. I think we have until what is it? twenty twenty nine is when we're gonna see the first stages of that build out from SKT in terms of the data centers. hopefully by that point memory they get those chipset memory factories online so that we can actually afford smartphones again at at some point. but yes, so

Other things. This is now where we move to the on our minds and and on the road section. This is the first one for Pau, so he doesn't know that that this is the point where we sort of stop and we we listen for the the the theme music that brings it in. We're still waiting for someone to send us the the Willie Nelson inspired On the Road Again, combined with Always on My Mind theme song as we transition to this part of it. So send it in.

Willie, Willie has said that he's okay with it. on our minds, I've got some recent sort of travel things. but and actually let me start with that before I come to the I'll bookend you, Pau. first thing I was gonna say is is last week did two two interesting things, kicked off the sales week here for the GSMA. as many of you probably know, the GSMA has many different commercial offers, which means we have a sales team.

And for the last few years I've I've joined them to kick off their sort of inspirational summer meetings where they do their planning to give them a view into the themes of what's going on. they keep asking me back for some reason. and then later in the week went to an analyst event being held by Huawei. And what I was thinking was interesting is that as always and and and you know, can't share too many of the details because some of the announcements are

still upcoming. but but as always, the the Huawei presentation full of just impressive tech innovation, right? Particularly within the radio access network. anyone who's been to MWC, anyone who's who's seen their booth, right, you could just, you know, you'd be familiar with that. What was interesting is, and where I saw a connection here, is you know, he had a lot of the other analysts in the room who, you know, bless their hearts, sort of

looked at this tech innovation said this is interesting, but but how are you how are you selling this to operators? Like what's the what's the value? Like how are you how are you selling the value of the investment? And and from their perspective, it's hey, it's obvious. Look, if if I'm talking about things that can deliver better efficiency, better capacity, that's that's but sort of trying to make this explicit connection to how this will help them make money, I think is sometimes something that we all miss in in selling tech innovation, which was

You know, it i I bring it back to when I talked to our sales team about about the trends that they should think of as important, right? B2B services, the renewal of B2C services, AI, the transition from 5G to six G, you know, within each of those, there's a whole litany of of sub things that are important, right? Sovereign AI, right? Or SA build outs, or as we think of consumer voice two point

But at the end, the one thing that matters is how am I going to make money from this? and it got to be a bit of cliche, like, look, hey, what's the most important, what's the most important aspect of all this themes that this, this, this, that. And at the they're like, nope, clearly it's making money, right? Because 'cause we don't necessarily make the connection for operators. And I sort of saw that two days later at this at this analyst sort of going, Hey, hey, how how you explaining how these cool tech innovations help operators make money? I mean, Pau, that was a lot. So, so so

Are you seeing that? I mean, from your perspective, is this a do you think the industry does a good enough job actually explaining how you're gonna make money from the tech innovation that they're always talking about?

Pau Castells (22:45)

Well so so I think we are still a bit, you know, as an industry, in the hangover of the five G experience, which put all these challenges very much, you know, black black versus versus white, right? As in made made them very, very, very clear. because I think clearly the returns or or at least the revenue growth opportunities from five G, I think the returns are

A more complicated story because you you also factor in there the cost side of things and 5G is really a more efficient technology with you know in dealing with data growth than than 4G was. So there are some cost savings there. but when it comes to the revenue growth opportunities and the use cases, which is I think the the the key element here, clearly 5G has not delivered the revenue growth opportunities that that were talked about, right? Or at least not not.

in a uniform and consistent way across many many operators. So I do think and I've seen increasingly these challenges coming to to vendors as to okay, let's know we're talking now about 6G so and 5G advanced, but okay, but what's what's what's in it for me? And how I can see that this is a superior technology, but how do we actually turn that into a positive business opportunity and a positive investment case? which

I think it's something that sometimes is absent from the say the standard making process in 3GPP, which different companies bringing their technological innovations in and through a you know complex process of discussions, technical meetings, consensus, it all gets built in. I think what what we are now seeing from operators who are the ones actually then buying the equipment and delivering those to consumers is

some of this challenge actually becoming becoming a bit more apparent. which is I think a a a nice discipline to have. So it's it's not all about technology for the for the sake of it. It there needs to be a business case, otherwise no no investments will will flow in.

Peter Jarich (24:57)

And telcos don't have I mean, I think it's also a reminder that you know in the last couple episodes we talked about things like like smart glasses, right? And I think to some extent telcos haven't had the luxury of throwing something out there and saying, Well, we don't know how it's gonna make money yet, but let's give it let's give it some time, right? Hey, let's let's you know, it it's it's the classic, you know, Amazon, I'm gonna spend money and spend money and just capture eyeballs and I'm I don't know how long.

Losing money, but eventually I'll make money, right? Or you see that from sort of the hyperscalers of, okay, well, I'm losing money, but eventually this is gonna pay off. And I think, I mean, to be fair, you saw the end of that, let's say, with Meta and the metaverse, right? At some point, shareholders are like, look, you're spending a lot of money on this thing. We don't know when you're gonna actually make money. And they pulled back on that, but you can't sort of there can't be this never-ending build-and I think to to be fair, right? There was a

Bit of that early on, as much as we had some some clear ideas of how 5G could be monetized, there was also this, and I think you still see this and I think it's a little bit worrying, right?

so I think that it's interesting because because you still hear some of this conversation of when we built out 4G, we we didn't have the app economy, and 4G enabled the app economy, right? So you had to have the networks first, and then that gave birth to those things. And I think as much as we entered the 5G era with a view of hey, we kind of know there's B2B revenues.

You still see a bit of this. Well, you gotta build it, and then the apps can get on top of it. I think it's a reminder that if if you're a telco who has shareholders, and you've gotta earn some revenues to to prove your value, then it's not always that that easy. But speaking then of telcos and earning revenues, I was surprised when I was in the office this week and everyone was talking about

Lauding a recent piece of research that we did. I I saw a number of operators who were on social media talking it up. I saw some sort of of announcement from from Vodafone about it because we've been talking about this for a while, but we finally released the work on European competitiveness. and and Pau, the short story is Europe isn't as consolidated as the rest of the world.

And that's a problem? Is that is that is that the short is that is that is that is that the easy short story?

Pau Castells (27:36)

Yes, I think I think that's a that's a pretty good three second summary, Peter. I think we can now all pack up and and go home. I think the the the the the message has has been delivered.

Peter Jarich (27:43)

Good. Yeah, we can we can we c we can go well

what is what is the problem? I mean I mean you're you know you're a chief economist, but but I remember from econ one one competition is good. Competition brings down prices, competition is you know, it it's it's it's what makes the world go round and and and you know improves things for consumers, which which means

Clearly you're anti consumer if if if you're saying that that we need less competition, right?

Pau Castells (28:14)

Yes. So so certainly competition is a is a good thing. however, what's been happening in European markets in particular, not not just in Europe, but in European markets that's been particularly more important because of the very low levels of concentration that we have in European markets, is that especially as some of these new opportunities like five G have not really delivered this revenue growth that we were all expecting, we have seen revenues per user coming down.

costs have been sustained, and that's been squeezing and squeezing and squeezing margins. To the point that the both the capacity to undertake investments, which in this case actually generate not just you know better quality networks, faster access to new innovations, but also lower prices in the in the long term because new technologies are delivering data more cheaply. So what's what's been happening is is that

In markets with lots of operators, the average scale of each operator has become a lot smaller. And that's come head to head with a basic question of this sex sector, which is that fixed costs are very substantive. So you need to deploy for each operator, you need a fixed network that covers the whole of the country. you can of course

Come into network sharing agreements here and there, but you still need a very significant infrastructure. So, in this context of declining revenues per user and with the same costs, one logical solution to keep on being able to sustain investments is to increase the number of users that you are sharing those fixed costs among. And one way to do that is through consolidation, right? So we have seen in the last 10 years or so.

in pretty much all the regions of the world, an increase in the average scale of operators. And that's come either through mergers or through some operators going bust, because they didn't have the necessary scale. which actually has has been able to, you know, in most cases to rebalance this this sort of, you know, yes, competitive pressure is good, but at the same time, if you don't have the necessary strength in terms of being able to have the, you know,

the scale, then you know you're not able to invest, right? So you might have lots of competition, lots of different players, but none which is able to or is actually incentivized to undertake investments, which which is not good for consumers.

Peter Jarich (30:55)

So in my in in my simple view, right, whenever we have something that is well particularly this complex, right? whenever we have something that that's this well received, and and you know, it might seem like a joke, but honestly, right, got in the office, heard from from my boss, heard from various folks, hey, you know, everyone's talking about they said this was really, really well done, really well received again.

European operators, not surprisingly on social media talking it up. a lot of times it comes down to like conveying a story fairly clearly. It's a 40-some page report, lots and lots of charts, but I think two help to make the story if if from my perspective, and I think one's fairly easy to understand. I think one we may need your help on. One is just a map of the world showing showing countries where there are we've had fewer operators or more operators or the same. And you see.

in in in most of the rest of the world, it's either the same or fewer operators, whereas you you don't see that same thing in Europe, right? That's a fairly put it together fairly, fairly clearly made the message. The other is the the U-shaped curve that I think I think it tries to convey the value of investment and competition. And I think it it does it once you understand it, but it's a fairly

it's a fairly nuanced concept. Maybe you can and I think was it chart eleven, twelve, I forget what it is. So it comes in the earlier part, but but maybe maybe put a bit of context around that. And everyone's cause because everyone's

Pau Castells (32:29)

Yeah, of course.

Peter Jarich (32:30)

gonna be looking at this, and they're gonna go straight to that chart and try and try to understand it.

Pau Castells (32:34)

So that that that chart what it what it shows in in essence is that the the there is a and it goes up back to this discussion we were just having, right? So having more players competing that can be positive to the extent that it generates competitive pressure. so one way to actually escape that competition or to get better is to invest. So if you are a monopoly, you have no incentives to invest, right?

So if you introduce another player, then actually that starts to create that competitive pressure and you know I need to get better to capture market shares. So your investments go up with the number of players. But that reaches a point where, again, you know, this competitive pressure has taken away so much revenues that there is no money left to invest. And therefore you're, you know, you have players that are not capable of investing.

At the same time, if you're not actually it's it's not just about the capability to invest, it's also about the incentives to invest, right? Because if you are not expecting to be making that much money, then probably you're not going to invest that quickly or you're not going to be as risky with your investments, right? And we're talking about this mentality.

Peter Jarich (33:52)

Yeah, your p your planned return on investment.

Your planned return on investment isn't that great, so why would you do

Pau Castells (33:57)

Exactly, exactly. So what what the report brings to to life is that Europe has clearly had a 5G problem. As in five G networks in Europe, objectively, they don't have the same functionality, they don't have the same speeds, they don't even have the same coverage if you look at the average coverage per operator, than comparable markets outside of Europe. That's that's a fact.

And at the same time, as we have this 5G problem in Europe, we also have this other aspect where Europe is quite different, which is when it comes to the average scale of operators. Right? Clearly the average scale of a European operator is smaller than of comparable markets. So what the study does is basically just ask this question, right? Are these two things related? Do we have a five G lack in Europe because of the fact that European markets don't have the right

scale to undertake the investments that lead to new technologies. And the answer is, and obviously we will not we'll not go through all the detailed analysis here, but the what the analysis shows is that in fact markets in Europe that have moved towards having greater scale in this period they tend to invest more per operator, up to 50% more. They tend to deliver better speeds for their users.

25% faster speeds, and all of that essentially at similar or comparable prices. So there's there's like a faster investment, better quality networks, faster access to new technologies at the same price, which from a consumer welfare perspective is net positive, right?

Peter Jarich (35:41)

Now now I saw you on Wednesday in the office, so so I I know you made it out alive, but you presented this on Tuesday. We launched it on Tuesday

in in Brussels.

Pau Castells (35:52)

Yeah, so so in on on Tuesday

I was in in Brussels and we hosted a breakfast session, Chat and House Rules. so I cannot share publicly what was discussed, but

Peter Jarich (36:03)

What what happens? Ca

ca ca c can I ask what happens if you break Chatham House rules? Is there a is there a is there like a Chatham guard that c is is I d I I like what I I often wonder, like I get it like

Pau Castells (36:10)

I'm not going to re I'm not going to risk it. There's a Mr Mr. Chatham comes

comes around and and punishes you for it.

Peter Jarich (36:18)

The four horsemen of the of of the Chatham house come and and

Pau Castells (36:22)

Yes.

Peter Jarich (36:22)

and well please don't don't risk it. We don't wanna our integrity is important.

Pau Castells (36:26)

No, exactly. So we had participants from the European Union, from the telecom industry in Europe, academia, very good session, lively discussion, where yes, you know, presented the findings of the study and then had a had a good discussion as to what these findings mean in the context of European telecom markets, more broadly, you know, from a competitiveness perspective.

Also, all of this obviously links into the ongoing review of the merger guidelines that the European Union is currently considering. So yeah, it was a a very, very good discussion and obviously we hope that this this input can serve to inform these these decisions going forward.

Peter Jarich (37:15)

And I know I joked a bit early on that we've been talking about this for a while, but I mean I mean w we've known some of these findings for for a while, at least it's been it's been several months, and and it's like give some context what happens between those initial findings and and where we got to, right? I mean, it it's fair to say that once you have sort of the direction of travel where you need to go, a lot of extra work takes place in terms of actually making sure that we have the story correct, right? So that it's not just a

back of the envelope, we think this is a thing, throw it out there.

Pau Castells (37:48)

Absolutely. So so we do we do obviously take our our jobs as researchers and analysts very very seriously, right? So in this case, what we have had for a number of months, and that's you know one only needs to look at the trends is that there is a significant difference in the behavior of markets in Europe that have say three players versus markets in Europe that have four players. So markets in Europe with three players, they tend to have again faster speeds, they have more investments going for connection.

And so on and so forth. That's not good enough, right? From a I guess economic research perspective, because there can be confounding reasons as to why markets that are more concentrated tend to have these better results and better performance. So, what we undertook to do, that's what we did in the last few months, is combine this trend analysis with a lot of deeper econometric research that tries to

And pick and isolate the effects of, in this case, scale on these key market outcomes, right? So that we can have some reasonable confidence when actually saying, look, it is important to increase scale because this will lead to better outcomes. And we are not just saying that in this report on the back of some trend analysis, we actually have robust econometric analysis that has looked at changes in market concentration, how they impact.

investments while controlling for other factors. We have looked at events of consolidation versus events of market entry, and with again sophisticated difference in differences techniques, try to isolate and understand the effect of those. And after having done all that, what one what one thing I can say, which actually adds to the confidence that we can have in the findings, is that all the results, so trend analysis, econometric analysis.

Difference in difference analysis, looking at it with one metric, with another metric, all of them point in the same direction. which is a what I think actually is is remarkable of of the study, right? That in the in the five G period.

Peter Jarich (39:51)

And not to and not to not

and and not not to argue with the how serious we take our work or not, but I mean if nothing else, you mentioned merger guidelines. We've seen the response from from European operators sort of talking about this. You know, I don't want to put too fine a point out to say this is high stakes, but this is not you know, it it's one thing if you're writing an interesting think piece about a particular trend and and maybe you're trying to throw something out there for discussion, right? There there's a lot at stake here.

Right. So so we we have to get it right or as right as we can. which is which is why you need to have all of that data and everything to back it up.

Pau Castells (40:31)

Absolutely. Absolutely. Yeah.

Peter Jarich (40:34)

last thing before we call it a day. And you know what? Depending upon, I think, I think some of you may be lucky because depending upon decision and and what we produce this next week, Pau might be back next week. Talk about another interesting piece of research that that that comes out. So so tune in next week for that. But I just wanted to flag one last thing. I think what I thought was interesting and for folks to go and check out this week is that a few weeks back we talked about some of the initial

Details coming out of our friend Elon's mind about what they plan to do at SpaceX in terms of AI data centers. we saw a little bit more details on that. So there's a brand now about that. It's called Starmind. if you go and Google Starmind, don't click the first link that you get. Not because it's not safe for work, but that because it's an actual company.

That existed before, I guess, called Starmind. so you'll be confused for a while trying to figure out what it is. you want the one that's SpaceX related. and it's interesting because I think it's actually a you know, it's really interesting to look at. We talked a bit about when some of the first details came out about what their their satellites would look like. They now have renders of of these, they have all the details which I think do match to what.

we mentioned before, i.e. things about 20 meters high, 70 meter wingspan, so that's around 230 feet, which means these things will be huge. they are not going to be small. Some interesting renders of what the the thermal radiators look like. no discussion of actually how they radiate in a vacuum, just the fact that there are redundant pumped loops.

On 110 square meters of deployable liquid radiator. So all the cool words that make you seem like that make you think that this will will work. So go check it out. I think we're all interested to see how this all plays together. Perhaps the most interesting part, at least for me, and we're always looking for any input here, is just also a vision of how this all fits with the broader, the broader integration story, right? Of of how you've got

User terminals and the solar cells and the chipsets and everything's gonna end up being manufactured and pulled together by one at one facility. So really not hiding from and really playing up the the vertical integration side of the story because yeah, because maybe the industry likes to fight integration on some fronts and telcos have to explain why integration is okay, but other people other people get

Get get get twenty some trillion dollar dams by playing up the the the role of integration. So good for them. Pau, any last thoughts before we we jump off and let people get on with their lives?

Pau Castells (43:34)

no, I think it's pleasure to be here and yeah, hope to be back soon again.

Peter Jarich (43:40)

Well, I think you may get that wish depending upon what we put out next week. Thank you all once again for tuning in. as always, please send us your thoughts. Please rate this so that people tune in. And until next week, thanks again.