EU softens its line on telecoms

Date: 04/01/1996

By Fiona McHugh

THE European Union and the United States are edging closer to an agreement on telecoms liberalisation, following a flurry of pre-Christmas meetings at the World Trade Organisation in Geneva.

According to key delegates from the two blocs, bilateral negotiations have yielded positive results, notably on the thorny issue of whether or not to include competition rules in the global liberalisation deal due to be reached this spring.

Washington has insisted from the outset that strong competition safeguards must be written into the final agreement. But, until now, the EU has disagreed.

Signs have begun to emerge, however, of a softening of the Union's stand. While no formal agreement has been reached, EU negotiators now say they are willing to include rules in the package to ensure that new market entrants are allowed to hook up to existing networks at a reasonable price.

Addressing another strong US concern, the 15-nation bloc has also agreed to put more ground between member state governments' regulatory functions and their operation of national phone companies.

The EU, meanwhile, has won assurances from the US that European operators will be allowed to provide in-state as well as inter-state phone services.

“We were worried about how open in-state markets would be. Now it looks like the final offer will be quite liberal,” said one senior EU delegate.

While progress has been made on these key issues, it is also clear, however, that major problems remain to be resolved in the coming months.

Europe is concerned that US state authorities will be given too much leeway when granting permits to operate certain phone services, and wants a firm commitment from Washington to tighten licensing rules. So far, such a commitment has not been forthcoming. The Union is also unhappy with America's unwillingness to extend full market access to state phone companies, a reluctance which stems from concerns that government-run companies would have an unfair edge over private ones.

“The feeling is that if we let state-owned companies in, then we would never have a truly competitive situation,” explained one of the American negotiators.

But, according to his European counterpart, that is simply a ploy to fend off competition from Europe's top phone companies, most of which are currently owned by governments.

For its part, the US is likely to continue to insist that all barriers to foreign ownership of European phone companies be dropped.

At the moment, the EU wants to maintain restrictions on foreign equity in four of its member states - with a limit of 20&percent; in France, 25&percent; in Spain and Portugal, and 49&percent; in Belgium.

Further afield, both blocs say they are disappointed with offers detailing the extent to which Korea and Japan plan to open their phone markets to outside competition, which were recently lodged with the WTO.

“We really are very disappointed with their offers, which do little more than maintain the status quo,” commented one EU negotiator.

The EU and the US, the main players in the WTO talks - which are aimed at liberalising the world phone market - face scepticism from many developing countries who fear that big phone companies will use a free global market to destroy weak national firms or state-run bodies.

A final push to overcome such scepticism, resolve all the differences standing in the way of an accord and get agreement on a world-wide pact by April will begin this month.

Telecommunications - which range from the basic provision of phone services to the latest multi-media services - generated world business worth some 400 billion ecu last year, and the industry is growing at a rate of around 7&percent; annually.