EC steps up pressure for unbundling - European Commission's 1999 Communications Review - Government Activity

CommunicationsWeek International, Nov 15, 1999 by David Molony

The European Commission is preparing to name countries with the highest local call rates across the European Union, in an effort to shame governments into allowing competition. The figures will be published early in the new year. Results of the Commission's similar review of leased-line costs will be published before the end of this year.

Preliminary data on local call charges gathered as part of a wide-ranging Communications Review show that rates in the highest-cost markets are two or three times the average across the European Union. It also shows that rates are highest in countries that have yet to give competitive carriers unbundled access to the incumbent carrier's local copper.

The Commission believes the best way to persuade governments to allow competitive access is to publish the best and worst tariffs. It will recommend that regulators ensure that incumbents' prices are brought down to be within a range defined by the three lowest rates in Europe. "We are preparing tariffication of the local network," said Robert Verrue, director general of the directorate for enterprise and the information society (the former DG XIII). "We want to get ahead with unbundling of the local loop."

But some industry observers want stronger measures. "If they want to make a difference, they should be looking at retroactive legislation to compensate people who have been ripped off," said Michael Potter, vice chairman, the European Competitive Telecommunications Association, of Wokingham, England. "Eventually, in a slow evolutionary fashion, the local loop will get unbundled. But what about all the inefficiencies consumers have had inflicted on them?"

Nonetheless, operators that have argued for local loop unbundling welcomed the announcement that the Commission would extend the leased line investigation into local network access.

"To some extent the...unbundling issue has been answered by national regulators," said Richard Feasey, London-based director of regulatory affairs at MCI WorldCom International. "But it's important that the European Commission intervenes, because pricing issues could be controversial and cause delay."

The Communications Review could lead to new directives or statutes for the telecoms and broadcast media industry, but no new legislation is expected to take effect before 2002. The Commission is currently finishing work on its leased lines recommendation, before turning its attention to local networks.

It is two years since the Commission published benchmark rates for national and cross-border interconnection prices between telecoms operators (CWI, 22 September 1997, p.1) and MCI WorldCom's Feasey claims this been directly effective in bringing charges down, because it helped build consensus on an issue previously thought too complicated to manage.

Verrue is more cautious. He said that it is hard to prove the Commission's intervention had forced rates down, but that "experience shows transparency and improved public knowledge makes the job of the national regulators easier."

It is in that spirit that the Commission wants to tackle local call charges. "We have done this for interconnect tariffs," said Verrue. "We will do a similar thing for leased lines, including cross-border. Then we will come up with recommendation for local network access."

The 1999 Communications Review was launched last week with the publication of a document from the EC entitled Towards a New Frame-work for Electronic Communications Infrastructure and Associated Services.

The Commission has been working towards consolidating separate directives affecting the telecoms and media industries, and the paper says from next year the same legislation should apply to all networks and their services, whether telecoms or broadcast (see box).

The paper also says the Commission is considering ways to make it easier for service providers and end-users to get cheaper leased lines from incumbent network operators. Verrue said this would be done by extending the existing interconnection directive to apply to leased lines and the local loop.

Verrue said the rates for 64-kilobit-per-second leased lines gave a good idea of the comparative costs of renting local loop in different European countries. For a 64-Kbps leased line, taking the three lowest-cost member states, "the recommendation we would make would be e80 per month."

That would be far below the rates in most member states, said Verrue. The most expensive markets are Spain, the United Kingdom, Sweden and Belgium. The three lowest-cost countries are Germany, Denmark and France.

Under existing European legislation leased lines are supposed to have been cost-based since 1994, but the EC's studies, and others, show that has not happened, even in countries that liberalized early.

INTUG Europe, an industry association representing major business telecoms users, keeps a database of leased line tariffs, and has been lobbying the Commission to do something about high rates since 1996 at least.

"It's a pity they didn't do this three years ago," said Ewan Sutherland, executive director of INTUG Europe in Brussels. "But it is good news. In some countries it will make a significant difference to prices--for example in Spain."