Entrants irked by slow unbundling - U.K. and French regulations - Government Activity

CommunicationsWeek International, Dec 13, 1999 by Joanne Taaffe

Twin announcements by U.K. and French regulators last week that full unbundling of the local loop will not arrive until 2001 has left alternative operators disgruntled--particularly in France.

Last week the head of France's L'Autorite de Regulation des Telecommunications (ART), JeanMichel Hubert, and the Minister of Industry, Christian Pierret, indicated they want full unbundling of the local loop by the end of 2000. "Access to the copper pair is...considered to be the only way to assure that the new entrant has complete freedom to define services and form a relationship with the customer," said Hubert.

But operators were given few details about how digital subscriber line services will be regulated and priced, despite the fact that France Telecom has already launched ADSL services in pockets of Paris.

In the meantime, ART recommends that new entrants are able to offer services over France Telecom's ADSL network. But there has been no agreement of wholesale terms. "We need to have the conditions for competition in place," said Olivier Gainon, a spokesman for the alternative operators' association, AFOPT.

Observers say the French regulator would have preferred to have seen unbundling come sooner, but its hands were tied by political considerations. ART cannot rule on anti-competitive behavior, and final regulatory decisions are taken by the French Minister of Industry, after he considers the findings and recommendations of ART. "The ART was pretty firm. They wanted to move quickly and were in favor of copper pair unbundling," said Pierre Blanc, Parisbased analyst with Analysys Ltd.

In the United Kingdom, by contrast, regulator Oftel has prevented BT from offering ADSL until rental is available for competitors. BT is not expected to begin offering ADSL service until March, at which point the competition will be able to rent ADSL lines, although not to install their own equipment. BT's retail arm and its competitors will also pay the same wholesale price.

Oftel plans to let alternative operators install their own equipment at BT's local exchanges and fully control the service they run over an unbundled copper pair from July 2001. Although alternative operators would have preferred a faster implementation of full unbundling, they were generally appreciative.

"It's not soon enough," said a company spokesman for UUNet U.K., Cambridge, England. "July 2001 must suit BT better than us...I think it's rather sad that we're entering a new century without an unbundled local loop."

But the spokesman added: "The way Oftel handled this is a good model for the rest of Europe, in the sense that it restrained the incumbent from offering ADSL before the competition."

Alternative operators in France are of a similar mind, and are now demanding that a competitive wholesale xDSL offering is in place before France Telecom is allowed to build out its ADSL network any further.

"The absence of such a [wholesale] offer would allow France Telecom to capture...the high-speed access market, creating a highly damaging situation for competitive carriers that it would be impossible to rectify," said a statement from alternative operators associations, the AOST and the AOFPT.

One alternative operator, 9 Telecom SA, has already taken the matter to the French competition authority, a separate body to ART. The next step, the new entrants' associations threaten, will be legal proceedings.

What France, and to a lesser extent the United Kingdom, have established by putting off full unbundling until 2001 is a market framework that gives the incumbents a head-start, according to analysts.

"It's true that the regulators are giving them [BT and France Telecom] a competitive advantage," said Analysys's Blanc.

But he also acknowledged the difficulty of the regulators' task: they not only have to take into account complex technical issues, but also need to negotiate an agreement with the incumbent operator that will preclude any further delays.

ART's next step will be to consult on 15 December with operatots, including France Telecom, on the terms of unbundling. Even if access to the unbundled local loop would have proved cheaper for alternative operators, all is not lost. "With wholesale, the margins are lower, but at least they can get into the market," said Blanc.