Time for Liikanen and Monti to ring the changes

Date: 29/11/01

By Peter Chapman

LAST July, Telecoms Commissioner Erkki Liikanen launched an acclaimed package of streamlined rules to bolster Europe's bid to top the digital premier league.

He ended 2000 on a high, pushing through legislation at lightning speed to force old monopolies to open up their local networks - or "local loops" - to rivals in a bid to create competition for broadband services.

But as ministers and MEPs prepare to give their final verdict on the rest of Liikanen's reforms, the EU's telecoms sector has gone virtually pear-shaped.

Stocks plummeted as the markets judged that demand for third-generation services had been hopelessly over-stated and firms had paid too much for licences.

If shareholders in old state-run giants such as British Telecom took a beating, the picture was even gloomier for new entrants who saw their business plans disintegrate before their eyes.

And broadband has proved to be a big flop - because the old monopoly operators have played every trick in the book to keep out the few new entrants with any money left - despite the unbundling law.

So what can be done to steady the ship?

Liikanen is now actively encouraging internet "flat-rate services". The UK and Spain have already taken a lead in this; Italy, France and the Netherlands are planning to follow suit.

A clear signal to other member states straight away showing that flat-rate can, and should, be offered will do much to keep eEurope afloat. This could help to increase the demand for internet until broadband delivers.

Liikanen must also make good on his promise to promote competition for broadband infrastructure.

On the margins, efforts to encourage e-government and European content are also worth the effort.

MEPs and ministers would also give the sector a fillip if they could reach a sensible agreement on the new reforms that would enter into force in 2003.

Compromise is in the air on this vital issue.

It is crucial, however, that the Commission is given at least some rights to veto wayward decisions of national regulators - to protect the single market from the type of fragmentation that hit the launch of 3G services and hampers firms' efforts to enter foreign markets. But with that goal still a couple of years away, the market must live with the current set of rules.

And delegates at a conference of new entrants summed up last week what it is all about: "implementation, implementation, implementation".

The Commission's annual report on that very subject gave a mixed bag of results this week.

Member states are doing OK when it comes to transposing EU rules into national law. But problems abound in the market for leased lines - an evergreen problem - and broadband services.

In an interview with European Voice, Liikanen says infringement procedures will follow.

But the truth is that is unlikely to get naughty monopolists quaking in their boots. Infringement procedures are long-winded affairs measured in years rather than months - no good for a market as dynamic as telecoms.

However, if Liikanen's powers are limited, there is another possible saviour: Mario Monti.

The competition commissioner's team has already launched dawn-raids on mobile firms to find price fixing for "roaming" - when users make calls from abroad. Unless errant operators act soon, these raids are likely to be repeated elsewhere.

European Voice has learned that officials are sifting through the responses from new entrants to an investigation into their attempts to take advantage of the unbundling law.

They are hearing angry reports that incumbents are squeezing them out of the market for broadband DSL services that local-loop unbundling should have enabled.

Incumbents across the Union are failing to offer access, overcharging or displaying "strategic incompetence" - jargon for "accidentally on purpose" putting barriers in the way of new entrants.

Monti's cartel-police will present a report to their boss on unbundling of the local loop for the end of the year. Monti is also being tipped the wink by telecom users over price-fixing in the emerging market for text messaging services.

But righting the industry's wrongs is not all about punishing bad behaviour.

Monti also has the final say on whether to give a leg up to cash-strapped mobile operators - letting them share their networks with rivals to cut costs.

Cometh the hour, cometh the man.

Report on the current state of the EU's telecoms sector. Article forms part of a special report on telecoms.