Deadline set for call costs crack-down

Date: 03/09/1998

By Peter Chapman

EU COMPETITION watchdogs have told telecom regulators in seven member states that they have up to six months to clamp down on operators overcharging for international phone calls.

Officials warn that the European Commission might intervene, using its competition powers, if abuses of market strength in the setting of accounting rates are not dealt with by the spring.

"If national regulators take action and there is still no positive response from operators, then the Commission will step in," said one telecoms competition official. "The six-month period is a sort of indication of the time that regulators have to see if the problem can be solved."

The timetable is included in a recent 'access notice' which outlines the role of the Commission and national regulators in Union telecoms markets.

The move follows a Commission-led probe into EU operators, launched last December, which concluded that dominant operators in Ireland, Italy, Greece, Finland, Luxembourg, Austria and Portugal might be guilty of overcharging.

The Commission study focused on firms' use of telecom 'accounting rates' which operators in one country charge for handling calls originating on a foreign network.

Accounting rates were established in the days of analogue telecom networks and were meant to represent the true cost of carrying international calls. But the Commission fears the fees charged by some operators may no longer reflect the lower costs of carrying calls on modern networks.

In its investigation, the institution targeted companies whose accounting rates averaged more than double the published national interconnection fee plus an additional amount to take account of extra costs specific to international calls.

Under existing EU rules, the interconnection rate - the charge an operator makes to a rival for 'terminating' a call on its network - must also reflect the true costs of providing the service.

Although the rates are not the only factor affecting the prices the customer ultimately has to pay, experts say they are a major component.

Telecom Italia, one of the companies implicated by the Commission investigation, claims that it has since changed the fees it charges other operators, in line with market values. Finland's Sonera also denies that it has been overcharging, adding that it is negotiating lower accounting rates.

Telecoms operators have also attacked competition officials for launching their accounting rate probe in the first place.

The industry claims the accounting rate system is already on the way out, thanks to competition in most world markets including the EU, and argues that this competition, and not anti-trust rulings, will automatically lead to changes.

It also points out that the International Telecommunications Union, which sets policies for the world's phone market, is proposing reforms to the system. These include a plan to ease the pain of developing countries which might suffer a huge loss of income if the regime were abolished.

The competition official said the Commission also expected accounting rates to fall, but added that the institution wanted to force reluctant operators into line.

"Accounting rates are coming down and we would expect to see them come down even further," he insisted.

The Commission limited its action to alleged accounting rate abuses involving calls made within the EU, although its probe covered routes to the US and Japan.

Anti-trust officials will revisit this issue when international negotiations on these routes are concluded at the end of 1998.