Telecoms giants told to clarify accounts

By Peter Chapman

Date: 03/06/04

EUROPE'S telecoms elite will be told to make their opaque accounts clearer in a bid to bolster competition in the sector.

The European Regulators Group (ERG) - the forum of telecom watchdogs set up to oversee the implementation of new EU rules and regulations for the sector - wants to make sure operators cannot deploy creative accounting to wriggle out of requirements to open up their networks to rivals at a fair price.

The old monopoly operators have long been under an obligation to grant their rivals so-called cost-based interconnection to their networks, built up with taxpayers' money, subsidies and monopoly profits.

However, their competitors say the system has not worked well because many national regulators and operators have failed to apply strict accounting rules to make sure the prices reflect the true costs.

The regulatory blind-spot, they argue, has allowed the old monopolists to charge costs to the wholesale parts of their business that were incurred elsewhere - making their costs artificially high.

These costs have, in turn, been passed on to their rivals - making it hard for them to compete for business and retail clients.

Under the ERG blueprint, up for discussion at a Brussels conference next Friday (11 June), companies that are dominant in their local markets will be given far clearer, pan-EU guidelines for how they should account for costs.

Companies would be allowed to veer away from the guidelines - but would have to offer their national regulators a good explanation as to why they think their systems are better.

Andy Tarrant, regulatory affairs director of the European Competitive Telecommunications Association, says that the ERG guidelines are a big step forward - adding that clearer accounting could be the key to fairer competition.

"This rather technical subject lies at the heart of deciding if you can compete or not," said Tarrant, adding that only the UK and Ireland have a satisfactory system in place.

He said cross-subsidization has long been an issue amongst new entrants vying to compete on the home ground of the former monopolies.

However, he said the past focus of CEOs has been on a 'quick fix' of the overpriced products, such as leased lines or interconnection rates, rather than the underlying cause.

That is because regulators are often quicker to act against high headline prices which can be compared relatively easily.

The European Regulators' Group wants to ensure Europe's telecommunications operators can't use 'creative accounting' to avoid requirements to open up their networks to rivals at a fair price.

http://ec.europa.eu/comm/energy/electricity/regulators_group/index_en.htm http://ec.europa.eu/comm/energy/electricity/regulators_group/index_en.htm

---