Telecommunications & Media 2017: Discussion
Who’s Who Legal brings together Michael Schmittmann at Heuking Kühn Lüer Wojtek and Henry Levine at Levine Blaszak Block & Boothby to discuss recent consolidation within the sector, the increasing focus from competition authorities and the growing role of in-house counsel in the space.
Have there been any significant regulatory or legislative developments in your jurisdiction? If so, how have these changes impacted the services that you provide to clients?
Michael Schmittmann: This summer the German Telecommunications Act has been amended by implementing EU Directive 2014/61/EU. The topic is reduction of costs and a quicker penetration of high speed internet where Germany is relatively weak now. Unfortunately, the legislation went too far: the housing industry and any landlord must now agree to grant access to in-house infrastructure by any net operator without compensation. We see that as a violation of the guarantee of property in the German Constitution.
In the media sector only small changes of minor importance have been enacted. The market is, however, expecting of the EU Commission’s copyright initiatives: namely the strengthening of technology-neutral approach for IPTV/OTT. What Commissioner Oettinger has presented this autumn is heavily disputed.
The telecommunications and media space seems to be undergoing a period of consolidation, with major players looking to diversify their portfolios by branching into new markets or new spaces in the media industry. Is that something that you’ve seen in your practice? What do you think is driving this consolidation?
Michael Schmittmann: What we see in the market is that mobile solutions of content distribution are key. A lot is going on; Deutsche Telekom AG and others are developing that segment with fantasies and money.
Strong new players in the media market include Discovery, having acquired Eurosport and the TV rights of Deutsche Bundesliga and Olympic Games. But we haven’t seen everything yet: John Malone will be the Formula 1 owner, which is certainly another entry into media exploitation.
Henry D Levine: There’s an old saying that everyone’s strategic plan is to get into everyone else’s business, and it’s as true in telecoms as it is elsewhere. The headlong rush of traditional carriers (AT&T, Verizon, et al) into cloud services is one of several good examples; another is the (not new) eagerness of the same companies to get into content.
What’s less commented upon is the de-emphasis by those same companies on their traditional telecommunications businesses. Sprint has virtually exited the wireline network services business; AT&T and Verizon are now basically cellular dogs with enterprise wireline tails. Increasingly, enterprise network services and (increasingly ethernet-based services) are provided by the likes of Level 3.
What’s driving the various expansions, consolidations and migrations is the desire to improve returns. Whether that will happen remains to be seen.
Practitioners have reported that competition authorities are increasingly assertive and aggressive. Have you noticed this in your jurisdiction? If so, how has this development affected the services that you offer to your clients?
Michael Schmittmann: The analysis in the question is partly right as far as the German Federal Cartel Office (FCO) is concerned – but not in the case of the German Federal Network Authority. However, the players involved are, more and more, submitted to the Brussels Competition Authority and thus the next milestone change in the cable market – the merger of Vodafone/Unity Media – will be decided out of the country. The general aggressiveness of the FCO leads to a higher awareness of clients in competition issues, and therefore we are involved in many more cartel law matters than was the case 10 or five years ago.
Has market maturation and growing sophistication on the part of clients and their in-house counsel affected competition in the legal market in your jurisdiction? How do you plan on distinguishing your practice from competition in the future?
Michael Schmittmann: Our strategy up to now was to be first address for the “independent” market players, not the incumbents or the market dominators. This concept is right in upcoming markets (such as IPTV platform providers where we would see ourselves at number one), but overruled in mature markets with only small competition (such as traditional TV broadcasters who enjoy a consolidated TV advertising market with static shares). For us, this means: smell the developments and be a part of new, modern applications!