Tempers fray over liberalisation

Date: 21/12/1995

By Fiona McHugh

NO wonder EU telecoms ministers were angry. It had been a humiliating year for them.

Faced with continuing member state reluctance to open up national telecoms markets, the European Commission, its patience wearing thin, had changed tack. For over a decade, it had tried to coax national governments into giving up their cherished phone monopolies, and for over a decade it had failed.

This year the Commission dropped that softly-softly approach and adopted a distinctly aggressive stance. It steered clear of well-trodden legislative paths, reaching instead for powerful monopoly-busting tools granted under Article 90 of the Treaty of Rome. Those tools are viewed with hostility by ministers and MEPs alike, because they allow the Commission to issue laws without their approval.

It is thanks to them, however, that the drive towards liberalisation picked up speed in 1995, reaching a climax in autumn when several such orders were issued.

“I would say that 1995 has been a watershed year in the push for liberalisation of the EU telecoms sector,” commented one industry expert.

A string of Article 90 directives adopted during the second half of 1995 should inject some competition into the telecoms sector ahead of the big liberalisation bang due in 1998. One, adopted in October, forces member states to allow cable television companies to carry certain telecoms services from the beginning of next year - two years before the agreed deadline.

Another, provisionally agreed this year, met with such strong opposition from member states that final adoption was put off until 1996. It would force EU countries to keep their political promise to open all services now reserved for their monopolies to the winds of competition on 1 January 1998. It would also strip government-owned phone companies of a key monopoly right by allowing owners of “alternative infrastructure”, such as that run by utility and rail companies, to carry certain telecoms services.

France and Germany rebelled against that draft law. But both backed down after the Commission forced their hands, threatening to block a crucial joint venture between Deutsche Telekom and France Télécom.

Both Article 90 directives amend an earlier directive which created competition in some telecoms services, but allowed state phone firms to retain monopolies over networks and basic voice-phone services - the bread and butter of the industry. By easing state companies' hold over infrastructure, the Commission hopes to free up bottle-necks by introducing more capacity.

This year also saw a steady stream of regulations aimed at creating the right legal environment for a liberalised market. An Open Network Provision (ONP) Directive, laying the ground rules for liberalised voice-telephony services, was adopted after years of argument. Two other ONP directives, which have begun their legislative rounds of the institutions, should be adopted before the end of next year. The first forces national operators to allow rivals to hook up to their networks on fair terms, the second obliges governments to put more space between regulatory departments and those involved in the day-to-day running of phone businesses.

A licensing directive establishing “objective, transparent and non-discriminatory” procedures for authorising new telecoms players was also proposed.

Given the frenzied pace at which liberalisation directives were adopted or proposed this year, it is hardly surprising that telecoms ministers staged a revolt against the Commission in November. A majority of member states accused the Commission of moving too swiftly and behaving undemocratically. Elio Di Rupo, Belgium's telecoms minister was the most outspoken. He told fellow Belgian Karel Van Miert, that the Commission needed to show “more humility and modesty”.

But these are virtues unlikely to feature on the Competition Commissioner's 1996 agenda. Far from repentant, he is said to be gleefully awaiting a chance to break open yet another area of monopoly. If telecoms liberalisation can be characterised as a hare, then energy liberalisation can only be described as a snail. Five years of twisted negotiations in the Council have produced little more than a few sparks, despite a flurry of last-minute meetings in November and December.

The main sticking point is whether or not distributors, as well as producers of electricity, should be included in a liberalisation deal, with Germany and the UK insisting that they should and France demanding their exclusion.