Commission fails to define ‘affordable’ phone services

Date: 14/03/1996

INTENSIVE lobbying by public operators, consumer groups and some member states failed this week to persuade the Commission to adopt a tougher approach towards the provision of 'universal service' in a liberalised telecoms market.

The Commission declared in a communication adopted yesterday (13 March) that all EU citizens should have access to a telephone once national telecoms markets are opened to competition in 1998.

Hoping to address fears that unprofitable customers will fall by the wayside once markets are liberalised, the Commission embraced the universal service principle, saying phone firms must provide everyone, from fishermen living on the Isle of Skye to businessmen working in Paris, with quality services at an affordable price.

But the Commission failed to spell out what it meant by 'affordable', prompting angry reactions from those who have lobbied hard in recent weeks for a clause to be inserted into the communication forcing phone firms to charge customers the same connection fee regardless of where they live or how many calls they make.

The Commission decided instead to leave it up to member states to define affordability. In the UK, where liberalisation is already well advanced, connection fees vary by up to 30&percent;.

“This essentially means that operators will be allowed to charge whatever they like,” complained one consumer representative.

Similarly unsuccessful were attempts to make operators connect every home to the high-capacity ISDN phone lines which will be needed to receive many of the new information services likely to come on stream in the coming years.

The Commission decided that “any broad extension of universal service obligations is felt to be premature at this stage”.

Currently, state-owned monopoly operators guarantee everyone access to a phone at a standard fee by subsidising loss-making services with money from profitable ones. But once the market is opened, cross subsidisation will no longer be feasible, so phone companies will be forced to divide the cost of providing a universal service.

The Commission gives some clues, but no answers, to the question of exactly how that cost will be shared.

It suggests that phone companies should either pay a sum of money into a 'universal fund', in proportion to their share of the market, which would then be used to operate universal services, or that the incumbent operator should provide a universal service and recuperate its costs by charging new market entrants to hook up to networks.

But the Commission decided to allow member states to choose which scheme they will operate.

On the quality front, consumer groups won assurances that firms would be obliged to provide customised bills, have phones installed within a limited amount of time, make sure technical hitches were rare and not keep customers waiting long for a connection. They have also guaranteed places on a panel to oversee the provision of universal services in a free-market age.