Businesses condemn phone operators for overcharging

Date: 11/02/1999

By Peter Chapman

THE EU's former telecoms monopolies are massively overcharging customers for leasing international lines a year after the industry was fully liberalised, according to a damning new survey.

A report by the International Telecom Users Group (INTUG) claims that companies are paying up to 607% more for international lines than for national ones.

Telecoms operators argue that it is far more expensive to provide international lines because they have to liaise with rival operators across borders to service their clients and ensure their networks link up correctly if the technology they use is slightly different. They also argue that the economies of scale are much lower for trans-frontier lines because the market is much smaller.

But INTUG says its survey revealed massive differences in the charges levied which could not be explained by the extra costs which telecoms firms incur by linking up with foreign counterparts to offer international lines.

"The experts who contributed to the survey told us that the extra costs of running an international line could be around 30%. But we were more generous and we accepted a mark-up of 50% as being

reasonable. That would see costs of 150% more than for a national line, but we are coming up with figures like 607%," said INTUG's EU affairs expert Ernst Weiss.

Weiss said the report showed that former monopoly operators were still holding on to enormous market power and squeezing out competitors from the market. "It shows that the old monopoly operators are just setting the price as they want it," he claimed.

The INTUG survey compared the cost to firms of leasing lines crossing international borders with the price of renting similar length lines within one country. It concluded that operators in Spain, Austria, Belgium, Italy and the UK were most guilty of overcharging for leasing international lines, used by many private businesses to link up with sites or clients in other countries as well as rival telecoms operators offering international services.

The survey found the worst cases of overcharging in the new market for high capacity 34-megabits-a-second lines. In this hi-tech category, Spanish operator Telefónica charged 607% more for the Spanish half of a 770-kilometre international line than for a comparable 335-kilometre line inside Spain. Other serious offenders included Belgian operator Belgacom and British Telecom, which charged 474% and 455% more respectively.

German operator Deutsche Telekom and Swedish firm Telia offered the cheapest rates for international lines, but even they charged 208% and 159% more respectively than for national lines of the same length.

Weiss said the survey's findings had been forwarded to the European Commission's Open Network Provision (ONP) committee, which oversees the actions of the former monopoly operators, and would be discussed at its next meeting in March.

Under the terms of the EU's liberalisation directives, the tariffs set by telecoms firms should reflect the cost of providing a service plus a reasonable mark-up. The INTUG study is the latest in a series of surveys into the leased-line market, which was supposed to have been liberalised in 1993, five years ahead of voice telephony.

A Commission telecoms official said the institution was studying its findings and discussing them with member states. "We will go on talking about it to see what we can do to remove these apparent anomalies," he added.

But British Telecom regulatory affairs manager Mike Corkery denied that his company was overcharging and questioned the methodology and figures used in the survey. He claimed it was "misleading" to compare the ratio of costs for international and national lines, because BT's rates were much lower than most other operators for both types of line. He also said the study's findings were based on BT's published rates and failed to take into account the big discounts the company offered its customers.