Alarm bells ring over phone plan

Date: 22/02/1996

By Fiona McHugh

NEW guidelines designed to guarantee all consumers access to a telephone in a fully-liberalised telecoms market have been condemned as “too soft” for failing to stipulate exactly who should foot the bill.

The draft guidelines have been drawn up amid fears that once the market is opened to full competition in 1998, phone companies will only service profitable customers if left to their own devices.

The European Commission will insist next week that every citizen - from the remotest islander who makes just one weekly call to the cosmopolitan businessman who makes hundreds - has the right to a phone.

In a communication due to be adopted next Wednesday (28 February), the Commission embraces the 'universal service' principle, arguing that phone companies must provide everyone with quality services at an affordable price.

But it fails to define clearly what 'affordable' means, leaving member states to decide for themselves what fees may or may not be charged. It also fails to mention the need to treat all customers equally, an omission which would allow operators to charge rural customers more than urban ones to have a phone installed. Connection fees in the UK, where the phone market has already been liberalised, vary by up to 30&percent; in some cases.

This approach has come under fire from various quarters.

“We think that this is really a disgrace, because it will allow operators to penalise people who live in inconvenient places,” says Pierre Khalfa of the Federation Sud PTT, an association which represents state-owned telecoms operators.

His criticism was echoed by a spokesman for France Télécom. “In France, public service is, and always has been, extremely important. It is hardly surprising then that we think the Commission is being too soft on this issue, especially on the question of the equality of all customers.”

Consumer groups have also expressed their concern. “We feel that unless the Commission introduces price caps, or some other indicator, affordability would become an optional extra,” said Katrin Schweren of BEUC.

At the moment, state-owned monopoly operators guarantee a universal phone service at a standard fee by subsidising loss-making services with money made from profitable ones.

Everyone agrees that once the market is fully-liberalised, state firms cannot be expected to foot the bill while rivals clean up on lucrative beats. But a questionmark remains over how the financial burden should be shared.

The Commission does not say how the cost of a universal service should be calculated, but does suggest two possible cost-sharing schemes.

The first envisages a 'universal fund' into which each phone company would pay an amount in proportion to its share of the market. Under the second, the incumbent operator would pay for the service, but could recuperate that cost by charging new market entrants an additional fee to hook up to their networks.

The communication will suggest allowing member states to choose which of the two they want to use, a flexible stance which has angered a number of operators. “The Commission should have picked one or the other,” says Robin Seaman of British Telecom. “Instead they have left the question open, so there will be 15 different answers - and that of course will cause distortions of competition and will not further the single market.”

The communication does, however, give a clear definition of 'quality' service, saying customers must be given customised bills and have phones installed within a limited time, phone firms must restrict the number of calls they fail to connect because of technical hitches, and must not keep clients waiting too long for calls to be connected. It also provides for appropriate bodies to be set up to monitor universal service.