(Updates share prices in eighth paragraph.)
Sept. 1 (Bloomberg) -- Vodafone Group Plc and Telefonica SA used a technology conference in Spain today to call for the European Union to focus less on new rules for phone companies and more on Facebook Inc. and Google Inc. to reduce their dominance.
The carriers are battling so-called network neutrality proposals, championed by Internet companies, that they say will hurt business and discourage new products such as driverless cars. The proposals are meant to prevent carriers from blocking access to some websites or slowing Web traffic.
“Network neutrality was invented by those who don’t want neutrality,” Telefonica Chief Executive Officer Cesar Alierta said through a translator in Santander today. “All we request is a level playing field for the whole sector, not only for telcos.”
Internet companies have generally favored stricter rules protecting the free flow of traffic on the Web. Google, Facebook and more than 100 other online companies wrote to the U.S. Federal Communications Commission in May urging the agency to protect the industry against service providers who discriminate against traffic.
These Internet companies have become too dominant, giving them the power to control what applications are developed and used by consumers, the carriers said.
“They’re so obsessed with us not having a market share of 40 percent in countries like Ireland, countries with 3 million inhabitants, but they’re not concerned about a well-known company having 90 percent of the market in search engines,” Alierta said.
Google spokesman Tom Price and Facebook spokeswoman Sally Aldous declined to comment.
Vodafone was little changed at 206.8 pence in London trading at 1:44 p.m. The Newbury, England-based company has declined 30 percent this year. Telefonica, up 2.1 percent this year, was also little changed at 12.08 euros in Madrid.
Vodafone CEO Vittorio Colao said that the proposed rules could require carriers to treat all data flowing through their network the same, which would hurt the development of new services and applications that require a guaranteed service quality.
“Driverless cars, health solution services, this will require a lot of bandwidth and a lot of speed and no delay,” Colao said at the conference. “You don’t want to be in a driverless car getting to a traffic light and the network is congested.”
The carriers also emphasized the importance of being allowed to merge into fewer, larger companies in Europe where heavy competition has spurred price wars and cut into profits. Colao said that the conditions on acquisitions in Germany and Ireland, where regulators required carriers to open their networks to allow the creation of competing services, will prevent the industry from recovering.
“We need to allow consolidation, to allow the creation of bigger companies in Europe,” Colao said. “Consolidation should be seen as a positive. If I see something as positive, I don’t want a remedy, I don’t want a mitigation, I say ‘Great.’”
Last year, the European Commission presented a package of reforms that were meant to unify the continent’s networks -- abolishing roaming charges, making spectrum auctions more uniform and establishing so-called net neutrality guidelines.
The European Parliament, made up of representatives from the member countries, then presented its own amendments to the proposal in April. That’s where the phone company says the laws became unreasonable.
The rules “are too restrictive and would severely impact the functioning of the mobile Internet across Europe,” said Markus Reinisch, Vodafone’s director of policy. “This would be really bad for consumers as well as the industry.”
The version being debated by Parliament would hurt carriers’ ability to guarantee that video streams seamlessly over their networks or to create new services that require specialized network management, such as driverless cars. Business customers wouldn’t be able to request that the carriers manage traffic in a certain way and the operators may be unable to implement parental controls, Reinisch said.
Neelie Kroes, the commissioner who oversaw development of the initial proposals, said that net neutrality legislation is inevitable, and it’s in the industry’s best interest to help create a Europe-wide set of rules. Kroes will leave her post after Nov. 1 as a new EU government takes office.
“My advice to telcos is to be constructive,” Kroes said in an e-mailed statement. “The European Commission is not the enemy of telecoms operators. European telecoms regulation has a long history of helping to grow the overall telecoms market. That is worth reflecting on.”
The European Council will hold a digital summit on Oct. 23. By then, the group made up of the heads of state of EU member nations will have considered the different proposals and come up with its own. The three versions will then be reconciled before the council adopts it into law.