Van Miert to take tough line on cable operations

Date: 27/11/1997

By Peter Chapman

EUROPEAN Commission competition chief Karel van Miert is set to unveil tough rules to force telecom operators to create totally new and separate companies for their cable TV activities.

Cable TV networks are being targeted by Van Miert because they can be updated to carry the same voice and data services as traditional telecom networks straight into the homes of consumers. Such a development could give a massive boost to competition at the local level.

Top telecom sources say that the regulations, which will go much further than the widely predicted requirement for accounts to be separated, are the first stage of the Commission's tough approach towards boosting competition in the Union's local telecoms markets.

Under the proposed rules, newly created cable ventures would then be subject to further scrutiny by the Commission under existing competition regulations. This could lead to a demand for totally separate ownership or a carve-up of the cable operation into smaller units.

The German operator Deutsche Telekom owns the largest cable network in Europe. This week it pre-empted the Commission's announcement by deciding to put its cable operations into a 100%-owned subsidiary with separate personnel, taxation and other management systems from the parent company.

"Since we know what the Commission is going to do, we are not going to sit around like a rabbit waiting for a snake to bite," said a company source.

If the partially privatised German telecoms giant were forced to sell off its new cable venture, German government officials have said the networks could be worth up to 10 billion ecu.

Other telecom operators which own big cable networks include France Télécom and Sweden's Telia. But the Commission's move is set to affect all operators across the EU with cable interests.

Graham Finnie, research director at the UK arm of the Yankee Group telecom analysts organisation, said the Commission's proposal, if confirmed, would give competition in local telecoms markets a shot in the arm.

"This would be a very significant step because it would make competition more likely at the local level," he said.

Finnie added that local competition had been held back because of the huge investments in infrastructure which faced potential competitors aiming to launch a challenge to the activities of former monopoly operators.

He said the big winners from a tough new regime would be residential and small business customers in those countries where cable TV and telecom networks were run by the monopoly telecom operators. But he warned: "For it to work, the separated cable and telecom operators would have to be genuinely competing with each other. If they were able to do that, it would be a big step forward."

Van Miert's proposals are likely to be discussed by the full Commission at its last meeting before Christmas, on 17 December.