Plea for more time mars telecoms launch

Date: 31/10/1996

By Chris Johnstone

TELECOMS liberalisation promises to be one of the Union's success stories, with a 1 January 1998 date set for full competition in voice-telephony.

But some of the key guests are threatening to spoil the launch party by turning up late.

Ireland, Portugal, Greece and Luxembourg are all asking for more time to get their local monopoly telephone companies into shape before they face up to competition.

Meanwhile, Spain's right to buy extra time is being used as a bargaining chip in its negotiations with the European Commission over clearance for its partially state-owned phone company Telefonica to take part in Unisource, an international telecoms alliance.

In addition, some telecoms companies are already warning that the Commission simply does not have the tools or the teeth to police adherence to the open market.

Commission officials are currently considering requests from the quartet for more time, conscious that if they give too much ground, the industry's liberalisation could turn into a lengthy, foot-dragging process.

Top officials have already warned that they expect to see a substantial reduction in the extra time being claimed by the 'derogation countries' when the Commission reviews are completed this month and next.

Ireland is likely to be among the first countries to be judged and provides a useful example of the issues the Commission must address. Dublin has asked for an extra two years after 1998 for voice-telephony and infrastructure liberalisation, until July 1999 to open up alternative infrastructure for liberalised services, and until 2000 for mobile phone network interconnection.

The Irish appeal has come under attack from 14 companies, some of whom would like to take on Telecom Eireann (TE) and claim TE will use the extra time to abuse its dominant position and keep out competition. The Commission has warned that Ireland will have to trim its overall demands. Officials say that competitors have complained that the extra four-year delay being sought for mobile interconnection, in particular, is excessive. But TE claims that it would lose a significant share of its international traffic if mobile interconnection allowed callers to avoid its high trunk rates.

TE's position as the biggest shareholder in Ireland's main cable network, Cable Link, is also posing problems for the Commission. It would like to see cable companies develop as serious competition for established firms where they are strongest and dominate the local telephone network. EU rules should allow cable companies across Europe to offer phone services from January 1998.

“It may be questionable whether TE's majority shareholding in the cable operator should be allowed to continue alongside a derogation until 2000 for voice telephony and public infrastructure,” warned a Commission official.

The picture is similar in Spain, where Telefonica has a major stake in the country's main cable company.

British Telecom (BT) is warning that liberalisation à la carte will be on the menu after 1998 whatever the Commission's success in shortening the derogation delays. “We are seeing signs of this already,” said Larry Stone, BT's head of EU affairs.

The British firm has been critical about appeals for delays in Ireland and Greece. “We are not against derogations per se, but the analysis put forward in these cases does not support their demand,” explained Stone.

The response to a 1990 package of directives opening up competition for value-added, data and corporate voice services was ragged, with some countries taking four or five years to fall into line. This time, the directives are more complex and the stakes are higher, as established phone companies have more to lose.

BT says the EU rules are so vague in key areas that they risk being moulded into 15 different versions by national regulators working to their own self-made guidelines and agendas.

While some regulators, such as the UK's Oftel, could favour competition, others may try to protect established operators. BT says the result would be different price and service levels across Europe and tainted competition between telecoms operators and alliances based on the degree of regulation on the home market.

Because of this, the company is calling for 'real-time' financial penalties to be imposed on out-of-step firms or countries, and a shake-up of the EU's regulatory structure. It argues that a committee of national phone regulators, chaired by a Commissioner, should provide guidance on market-opening details and keep the regulators in line.

This last demand could be difficult to achieve, however, with the Commission already having largely lost a battle with national regulators over who should oversee the open network provision, interconnection, and licensing directives.

One argument in favour of trimming derogations and strictly enforcing competition rules is the EU's desire to give a lead on telecoms liberalisation in multilateral World Trade Organisation (WTO) talks. With negotiations set to end early next year, the EU's claim that it is leading by example could begin look a little shaky if a string of its own members have won extra time.

Whatever the pace and effectiveness of liberalisation, one thing is certain - established phone companies will continue to dominate their domestic markets for years to come. They have huge investments locked up in their local networks which rival cable companies are not likely to attempt to reproduce, an established market presence, archives of valuable consumer data and the advantage of customer inertia.