Telecoms firms overcharging for local loop, says Commission

Date: 10/05/01

By Peter Chapman

PHONE companies are squeezing out rivals trying to buy access to their once-protected local networks, European Commission officials say.

Legislation adopted last year forces former monopoly operators to let competitors onto their local networks without paying dearly to build their own infrastructure.

'Local loop unbundling' was expected to spur use of the Internet by opening the market for digital services that turbo-charge the old copper networks from local telephone exchanges into customers' homes and businesses.

But the EU executive, in a paper obtained by European Voice, says the companies are set to charge prohibitively, way above 'cost prices'.

The Commission's paper - presented to national telecom officials last week - says former monopolies would be breaking the law if they did so.

National regulators (NRAs), the Commission argues, must step in to crack the whip. Although it does not name names, the paper cites price lists published by the former monopolies as alarming.

It also says former monopolies could be tempted to charge sky-high rentals for firms to set up equipment on their property - one of the technical necessities of unbundling.

This could make it difficult or even impossible for rival firms to compete with the established companies already offering their own fast Internet services to consumers.

"Cost orientation of all tariffs should ensure that new entrants are not squeezed out of the market because of the set prices or because they are prevented from entering the market," the report adds.

Telecoms chief Erkki Liikanen's team of experts says prices charged for unbundled access should be similar to the line rentals operators charge rivals wishing to offer voice services because the technical demands are similar.

But they say the differences could be compounded by distorted prices in these services.

EU rules say local call charges - which were for years subsidised by high international prices - should be in line with costs. But the Commission says four member states have still to 're-balance' these tariffs.

Phone companies are squeezing out rivals trying to buy access to their once-protected local networks, European Commission officials say.