Finland tops Union technology charts

Date: 25/04/1996

By Fiona McHugh

THAT Helsinki restaurant managers phone waitresses working in the next room to check on tables will come as no surprise to seasoned travellers to Finland.

One of the first things which visitors to Santa's land usually notice is that most Finns have mobile phones - and they like to use them.

While some of its EU partners are only now thinking about breaking up phone monopolies to make way for the much-vaunted information society, Finland is already approaching the end of the liberalisation road.

Since 1987, when the government launched its market-opening drive, fierce competition has pushed operators into crossing cosy old boundaries, forcing them to develop ever-more sophisticated telecommunications tools and services and reach out to previously untouched customers.

With half of the population now hooked up to a fixed phone, one sixth in possession of a mobile phone and one in three homes plugged into the Internet, Finland has a set of statistics which would make Industry Commissioner Martin Bangemann's mouth water.

But this love of all things whose names begin with 'tele-' is not new to the Finns.

Just one year after Alexander Graham Bell patented his invention, the first phone line was already up and running in Helsinki. By the 1930s, when most European countries counted themselves lucky to have one telephone operator, Finland had 800.

Over the top? Not, say the Finns, if you live next door to Russia. For most people, the phone was, and still is, seen as a small black guarantee of freedom and independence - hence the emphasis on mobility.

“Telecommunications were considered vital to the country's development - and keeping the companies local, and thus in Finnish ownership, was essential,” explains Kurt Nordman, head of the Finnet Group of private phone firms.

Its unique history and the early introduction of competition are responsible for the country's high ranking in Europe's technology charts.

The liberalisation process began with the 1987 Telecommunications Act, which gradually introduced competition into the market. Until 1994, when voice-telephony was opened up, Telecom Finland - or Tele as it is known - had a monopoly grip on long-distance and trunk calls, while the Finnet group controlled local ones.

On 1 January of that year, the government opened both segments to competition. The result was a revolution in the long-distance market, and a standstill in the local one. Within four days, Finnet, an association of 46 local phone firms, had snatched 60&percent; of the long-distance market from the incumbent - a virtually unimaginable feat which the umbrella organisation puts down to its closeness to the customer base.

“We went out and knocked on every door,” explains a smiling Pekka Eloholma, strategy director at the Helsinki Telephone Company, Finnet's largest member.

At first glance, onlookers might imagine that 'liberalisation' must be another word for 'disaster' in Tele's books. The company made a paltry 33.6 million ecu on long-distance calls in 1995, a dramatic drop from the 134 million taken annually just ten years earlier.

In fact, however, thanks to successes in the mobile and data transmission markets and an increase in the overall amount of phone traffic, Tele's total revenues have remained more or less stable - though admittedly the no-longer-overweight state company has had to sprint simply to stay in the same place.

It is the Finnet Group, however, which has emerged the winner so far, swooping into the trunk and international markets and taking over substantial parts of both, while at the same time maintaining its hold on local calls.

That Telecom Finland has survived a skilled attack on its business is, in itself, an achievement and one on which the company hopes to build. Having shed jobs and musty old structures, Tele is now planning a counter-offensive, which its bosses hope will allow it to outstrip Lazarus in the comeback stakes.

“Once the EU open network provision rules come into force, we will be able to gain access to Finnet local networks. That, together with the radio phone which we have just launched, will allow us to challenge Finnet's dominance of the local loop,” says Vannamo Pekka, president and chief executive officer of Telecom Finland.

So far, fierce competition has delivered the expected benefits to customers: prices have toppled and the quality of services has improved dramatically. Phone bills in Finland are, on average, one-third lower than in Germany and the United States and complaints are seven times less frequent than in Portugal. Advanced new services are continually coming on to the market as operators' imaginations are pushed to new heights.

“If you cannot continually come up with new products and services, then you will lose your share of the business,” explains Aimo Maanavilja, head of research at the Helsinki Phone Company.

On the jobs front, the news is also good, according to a Price Waterhouse study carried out for the telecoms ministry. Although Tele shed half of its workforce in less than a decade, the overall number of jobs in the telecoms sector rose by 4&percent; - thanks to the startling achievements of firms such as Nokia.

Given Finland's success story, it is little wonder that phone companies there are casting nervous glances at Brussels.

“In Finland, the telecommunications industry has become more or less a normal business which is governed by normal business rules, as it should be,” says Jukka Alho, a director of the Helsinki phone company.

He shudders at the thought of companies being forced to give the Commission two months' advance notice of planned tariff changes. “In a competitive environment, firms need to be able to change prices overnight. This sort of legislation could set our market back years.”

In terms of dispute settlement, there are certainly grounds for concern. According to Harri Pursiainen, who acts as a telecoms referee for the ministry, it takes just two weeks to process the average complaint in Finland. Such a rapid response from the Commission's competition authority would be rare indeed.

But the EU's liberalisation plan does not just pose a threat to Finnish phone firms. It also offers new opportunities. As lean companies trained in one of the Union's most competitive markets, they are ready to pounce on easy European prey.

For the state-owned hulks, such as Deutsche Telekom and France Télécom, which will have to fight them off, they offer a word of advice: “The sooner these companies realise that this process is inevitable and stop promising to safeguard jobs which they cannot afford, the better for them.”