High price to pay for telecoms merger

Date: 09/09/1999

By Peter Chapman

EUROPEAN Commission regulators are insisting that Swedish and Norwegian telecoms rivals will have to pay a high price for their plans to create a regional giant.

Commission competition sources say the institution will force former Swedish monopoly Telia and Norwegian counterpart Telenor to agree to wholesale sell-offs of their cable TV assets, as well as demanding that they open up local networks to full competition, in return for approving the merger announced earlier this year.

The Commission held a hearing behind closed doors with company officials and third parties in Brussels during the August holiday period. But sources say those meetings failed to quell the competition watchdog's doubts over the deal, which became the subject of a detailed 'second phase' Commission investigation in June amid fears that the two firms involved would control too much of the region's telecoms and media infrastructure.

Telia spokesman Ulf Bäckman said this week that the operators had already promised to offer 'local loop unbundling' to win the Commission's approval for their merger.

This means that rival operators will be able to rent the 'final mile' of the state-owned Telia and Telenor networks to customers' homes, allowing them to compete in local markets without having to build their own 'local loop' at massive cost.

However, a spokesman for outgoing Competition Commissioner Karel van Miert said cable TV sell offs would also be "necessary to address all our concerns relating to media distribution markets".

Cable TV networks are increasingly seen by regulators as a key 'alternative infrastructure' to traditional fixed telecoms networks, which themselves can now carry TV and multimedia services via the Internet. Opening up these networks, they argue, would inject greater competition into telecoms and new media markets.

Telia has 1.3 million cable customers in Sweden, while Telenor serves 300,000 viewers in Norway.

Telia's Bäckman admitted these networks were already capable of carrying advanced telecom services and Internet services as well as traditional TV.

The clock is now ticking towards the deadline for both operators to strike a deal with the Commission.

The institution has set a mid-September deadline for 'negotiations' on possible concessions, with a final ruling on the deal due by 19 October.

Meanwhile, incoming Enterprise and Information Society Commissioner Erkki Liikanen has revealed that the institution is nearing the end of the first stage of its complete overhaul of the EU's detailed telecoms regulations.

The former Budgets Commissioner promised at last week's European Parliament 'auditions' that the Commission would unveil its planned telecoms policy targets next month. "That will be the big priority," he said, adding: "From that basis we must be ready to present proposals early next year."

Ahead of this, independent consultants are preparing to unveil the interim results of a raft of technical studies launched earlier this year to investigate the need for changes across the whole spectrum of Union telecoms regulation.

The current raft of EU legislation was drawn up in the late 1980s and early 1990s to ensure the old state-owned operators did not abuse their monopolies before effective competition kicked in.

Rules were laid down to ensure that operators opened up their networks to competitors at prices related to costs, while guaranteeing that citizens would have access to basic telecoms services at a reasonable price.

But the Commission is under pressure from the industry's biggest players to lighten the regulatory burden on the former monopolies now that the fully liberalised regime introduced by the EU last year has had time to foster competition in many European markets.

France Telecom board member Gerard Moine told European Voice this week that his company wanted the Commission to make wholesale changes, putting greater emphasis on EU competition rules while maintaining a lighter regulatory regime that addresses key issues such as the scope for universal service.

"The Commission must understand that they are not preparing for tomorrow, but for another world," he said. "In our view, the new regulatory approach must be in line with the revolution that is currently emerging in Europe. The Commission should try to forget the old scheme."