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| Backbone Required Deregulation in the European Union by Diana Brebner The European Union's recently deregulated communications sector has experienced a year of fierce financial deals, intense political activity, a sharp increase in network rollout and a few significant surprises. For the last decade, the member countries of the European Union have moved towards deregulation of the communications industry. This move was stimulated by a growing recognition that Europe was falling behind North America and Japan in promotion of information and communications technology, and the implementation of specific applications. Yet deregulation in Europe has taken on a distinctly European flavor. Change is tempered by the European Union's philosophy of universal, affordable access for all citizens—values reflected in the comments of Pascal Lamy, European Commissioner for Trade: "The EU rejects the notion that unfettered market forces should dictate our way of life, our culture, and ultimately the nature of our society and our core values" (European Commission in Canada 2000). Turf wars Despite such comments, communication service providers have been pushing the envelope to compete on the European scene. The unprecedented hostile takeover of Telecom Italia, Italy's former state telephone monopoly, by cash-strapped, but eager Olivetti S.p.A. in the spring of 1999, made economic history in Europe. The hotly contested takeover bid came as a shock to the complacent European communications community and was a portent of things to come in the spirit of unfettered market forces. A plethora of similar attempted, and often successful, deals by companies such as Germany's Mannesmann AF, Britain's Vodafone AirTouch Plc and the French communications and utilities group Vivendi Communications have followed. They all continue to move full steam ahead against or with each other or other major players, such as the United Kingdom's Orange Plc Group, the Netherlands' KPN Telecom NV, Spain's Telefónica S.A. and Germany's Deutsche Telekom AG. The positions and alliances seem to change on a daily basis and the level of activity doesn't promise to settle down any time soon. Keeping the incumbents in check In July 2000, the European Union proposed legislation to ensure that the incumbents provide "full and shared unbundled access to their local copper loops on fair, reasonable and non-discriminatory terms" (Commission of the European Communities 1999).
Both European and international investors maintain that the established companies are dragging their feet in this area and that prices, terms and conditions for new entrants are unreasonably high and discriminatory. These conflicts are occurring in countries such as the Netherlands and France where the copper line infrastructure is extensive and in good condition. Backbone Required, cont.Indeed, the quality and extent of the fixed line infrastructure is inconsistent among the 15 EU countries. While private sector investors can be readily found for expanding fiber optic networks and DSL provisioning, less interest can be found for laying the groundwork for universal access in countries such as Spain, Portugal and Greece. In Italy, where wireless has taken a strong hold in the last year, the fixed line infrastructure needs significant upgrading. Large amounts of funding have been provided in the form of loans from the European Investment Bank, which is associated with the European Union, to both Infostrada S.p.A. and Telecom Italia. Loans have also been made in the communications sector to companies in countries such as Finland (Sonera Corporation) and Portugal (Optimus Telecomunicações SA). 2000 and Beyond The business emphasis in 2000 has been on positioning and consolidation through mergers, takeovers and alliances. In terms of technology, it has been a year of, literally, laying the groundwork for an anticipated surge in demand for service in 2001 and beyond. Pan-European fiber optic network build-out by companies such as COLT Telecom Group plc and VersaTel Telecom International N.V. are underway. COLT, formerly City of London Telecommunications, builds on its success as a service provider to large corporate clients. Using Nortel Networks Corporation products, the COLT network, in alliance with the American company Level 3 International Inc., will incorporate terabit speed in its European fiber backbone, serving 24 cities by the end of 2000. Versapoint N.V., a partnership between the US company NorthPoint Communications Group, Inc. and the Netherlands' VersaTel, plans to offer DSL over a pan-European network serving small and medium size businesses. Profits and problems A stumbling block has emerged in recent months as European governments react to the unprecedented profits (22.5 billion pounds, $34 billion US) earned by the British government after its decision to auction off its 3G spectrum licenses instead of levying a straight licensing fee. Other governments have followed suit, and as a result, business plans have been thrown awry and debt loads have become crushing.
The French have been commended by some for their elegant, civilized, but expensive solution of setting a high but predetermined price (32.5 billion French francs, $4.7 billion US) and then running a "beauty contest," choosing among the most attractive proposals Companies reacted with outrage, however, as the Dutch prepared to auction five licenses in a country with five well-funded incumbents. Many telecom companies perceive winning Universal Mobile Telecommunications Systems (UMTS) as necessary for achieving future successin Europe. New entrants became so frustrated with the recent situation they sought redress from the European Union. In an open letter sent in late June 2000 to EU commissioners Liikanen and Monti, Gary Mesch, CEO of Versatel, states "Versatel cannot accept a closed shop arrangement for a limited group of incumbent operators, nor can we accept prices determined by rules which are discriminatory, anti-competitive, or which lack transparency" (totaltele.com). In the spirit of fairness The European Commission is taking this and other formal complaints concerning the 3G auctions and the resistance to the unbundling of the local loop seriously. They have promised an investigation to determine whether current practices meet mandatory principles laid down in EU directive 97/13, which requires that business practices be objective, non-discriminatory, transparent, detailed and proportionate. The Commission recognizes that inconsistent application of certain provisions of communications legislation is hindering development and deployment of services in Europe.
From Current OSS, Fall 2000, Vol. 2, No. 1. Published by Eftia OSS Solutions. |
Whatever
the future, it is clear that communications deregulation will be
undertaken in a distinctly European spirit. The flurry of change
already underway in Europe is bound to continue, but it will be
tempered by the European Union's guiding principles of universal
and affordable access.