Liikanen unveils tough new approach to telecoms

Date: 04/05/2000

By Peter Chapman

TWO years after the EU's telecoms markets were prised open to competition, Enterprise Commissioner Erkki Liikannen is preparing to unveil a raft of proposals to update the rules and regulations governing the sector.

The move reflects recognition that the heavy-hand of the regulators is no longer needed in some areas, but that in others - such as local markets and parts of the mobile industry - the situation is still far from perfect.

A key component of the reform package is the recommendation published last week urging European telephone companies to open up their basic local networks to rival operators by the end of this year.

Experts claim the move, known as 'local loop unbundling', would give the Internet and electronic commerce a massive boost by allowing rival companies the chance to offer new services - such as lightening-fast data transmission - without having to fund the massive expenditure needed to build their own local loop into households and business premises.

But the linchpin of Liikanen's plan is a tough but "flexible" new approach towards regulating the behaviour of powerful telecoms firms drawn up after his first proposals updating the 1998 package came under attack from users, member states and the industry for being too rigid.

Under the original proposals, which were included in Liikanen's 'telecoms review' consultation paper last autumn, the Commission said telecoms and network operators which had a market share of 25% or more should be prepared to open negotiations with rivals seeking access to their networks. Firms with 50% of their respective markets would also have been forced to offer cost-based interconnection to rivals.

But Liikanen now favours a "more flexible mechanism" which could result in companies outside the existing thresholds being forced to comply with a raft of rules and regulations, while others which currently fall within the regulators' net could escape altogether.

Under the plan, the Commission would issue a notice detailing areas in which it believed that regulations might be needed to police those parts of the telecoms sector where competition might not have taken full effect. National regulators would then have to decide whether the sectors targeted by Brussels experts warranted regulation in their own national markets or not.

Officials say this 'hit list' of problem areas is likely to be topped by the local access network, fixed-call termination and mobile-call termination, where an operator links up with rivals' fixed and mobile networks respectively to complete a call. National regulators would only be able to impose regulations in areas on the Commission's list.

The EU executive would also ask national regulators to inform it of sectors where individual firms actually enjoyed 'substantial market control'. If Liikanen's officials agreed with the national regulators' assessment, they would approve the imposition of "appropriate regulatory obligations" on the companies concerned to prevent them from abusing their market power.

This could include requiring firms to ensure "non-discrimination and transparency" by, for example, publishing separate accounts for different business units; charge rivals cost-based prices in areas where "competition is not effective in controlling prices"; and offer competitors 'unbundled access' to a particular service "where an operator controls that facility".

The Commission says there would be clear and unambiguous rules for national regulators setting out what sanctions they could impose and how they should be applied, and adds that its officials would have the power to overturn decisions they disagreed with.

Critics such as British-based mobile operator Orange claim the new approach paves the way for more regulation than ever before. They argue that the Commission should instead rely on competition probes into firms' behaviour to police the market.

But rivals such as pan-European telecoms operator GTS claim these take far too long to conclude and say companies should be forced to toe the line before they can inflict damage on their rivals.

Article forms part of a survey, 'Industrial liberalisation'.