Ruling puts Austrian WLL auctions on hold - Government Activity

CommunicationsWeek International, May 8, 2000 by Peggy Salz-Trautman

Alternative carriers are up in arms over a ruling by Austria's highest administrative court that the country's incumbent operator should not have been excluded from an auction of wireless local loop frequencies.

The ruling means Telekom Austria has effectively blocked the award of licenses to new competitors. New entrant operators that were expecting to get licenses in April and to start new network build immediately will now have to wait while the Austrian government reviews the country's creaky telecoms law.

"This [postponement] came out of the blue and benefits no one--and especially not the Austrian customer," said Dov Bar-Gera, chief executive of RSL Coin Austria AG, of Eisenstadt.

RSL Coin is set to build a high-speed Internet access and ATM network, but is now "forced to freeze" tailor-made projects such as broadband data services, multimedia applications and IP products for small and midsize business customers, according to Bar-Gera. "This [decision] jeopardizes Austria's place in the new e-conomy."

The public sale of the 14 frequency packages in 10 regions to the 18 prospective licensees, scheduled for April, may now be postponed indefinitely and could take place as late as next year. A decision was originally awaited in April.

While sources close to the telecommunications regulatory authority privately agree Telekom Austria had little right to veto the procedure, an action that clearly puts competitors at a disadvantage, they point out that the incumbent has cleverly made use of a loophole in the country's vague telecommunications laws, which do not specifically exclude Telekom Austria from new licensing procedures.

"We are watching the situation closely but there's not much we can do," notes Robert Condon, president of BroadNet Holdings BV, of Brussels. "It's a competition issue and it's pure nonsense to include an incumbent [in the auction. I We will make every effort within reason to lobby the government and see that this process get started and not be bogged down."

Hindering progress

With four WLL frequencies in Switzerland and 42 in Germany, BroadNet is particularly eager to roll out broadband voice and data services across German language countries in Europe. "This certainly slows down our progress," Condon added.

The drama started in November last year when the Austrian traffic ministry, responsible for frequency allocation, decided to leave Telekom Austria out of the running for WLL licenses altogether. Telekom Austria promptly challenged the decision.

"We need the frequencies to bring broadband services to our customers that we can't reach with cable," a Telekom Austria spokesperson said, noting that the rural terrain of Austria makes it impossible to provide internet services any other way.

Now, Austria's highest administrative court has ruled in the incumbent's favor and given the ministry a choice. It could either invite Telekom Austria to bid or stop the auction process altogether.

The ministry has already decided to pass the matter onto the federal government, which is currently rethinking its Telecommunications Law and deciding whether to grant more power to the independent regulatory authority Telekom-Control GmbH (TC) in Vienna. As it now stands TC functions primarily in a consultant capacity advising the ministry on technical issues.

Government decision

A change to the law would potentially grant Telekom-Control the authority to restart the auction and even grant licenses--provided the government agrees to fine tune the law in the first place. At the moment the government has not taken a decision one way or the other.

"We have more the responsibility of a consultant in this matter, but this could change depending on which amendments are made and what they entitle us to do," a source close to the regulatory authority commented. "We might either pick up where we left off or start over again," the source added.