Europe’s incumbent telecoms operators (former monopolies), represented by ETNO, and the challengers, represented by ECTA, are vying with each other in presenting arguments on how EU telecoms rules should be revised for 2010. One association laments any ground won by the other. This intensive lobbying is expected to focus henceforth on the construction of new generation very high speed networks.

Investing in such networks, such as optical fibre, was placed at the heart of the future telecoms package with the vote by the European Parliament’s Industry Committee, on 7 July. MEPs adopted relatively flexible rules for such investments, which does not exactly delight ECTA, unlike ETNO. The challengers see provisions such as financial ‘risk sharing’ as opening the door to a return of monopoly situations, whereas the incumbents associate them with the deployment of infrastructures that could take 15 years to build and cost up to €300 billion, according to ETNO.

The original aim of the legislative package proposed by the Commission in November 2007 and defended by Telecoms Commissioner Viviane Reding was to create more competition in a key sector for the EU - worth €300 billion - and thereby to give consumers a choice of faster and less expensive services. Everyone agrees up to there. Encouraging investment in the new networks – to catch up with the United States and Asia – without hindering it through excessive regulation is also in the interest of most of the member states. They have criticised the EU executive’s projects for erring in that respect. The French EU Presidency has made the new networks a priority of the debate and aims to secure a political agreement on the whole package at the Telecoms Council, on 27 November.

The Commission wishes to put out a recommendation in the autumn, which would assert that current regulations on copper networks also apply to optical fibre. As consolation prize for investing operators, it proposes a risk premium of around 15% on regulated prices at national level, which would be invoiced to competitors obtaining access to the new networks. This argument fails to convince the dominant operators, who want to see advantageous provisions written into the telecoms package. A recommendation, moreover, is not binding, except that the member states have to give reasons for not abiding by it.

OWNERSHIP UNBUNDLING

On the new networks, ECTA, whose members include the former monopoly British Telecom, is therefore the loser for the moment. The association has nonetheless secured ownership unbundling as one of the remedies available to national telecoms regulators to force the dominant operators, most of them incumbents, to open up their networks to competition. This very supervised use will require the dominant operator to isolate its network activities from its commercial activities. This is a threat to investments, claim ETNO members, who ceaselessly point out that British Telecom alone has had to adopt it, without this being convincing in their view.

Ownership unbundling seems virtually acquired, including in the Council. Yet it is a half-victory for ECTA, which says the provision is “buried” in precautions. The challengers also regret the hand-outs to the former monopolies: “We are happy to see that access to optical fibre networks is taken into account by the EP committee. That is a very positive signal,” commented ECTA Chairman Innocenzo Genna. He added: “But the devil is in the details: prices and conditions for access to the local loop have to be reasonable, otherwise the change will be ineffective and the dominant operators will obtain what they want, a return to a monopoly situation”.

MARKET DOMINATION

The incumbent operators have indeed gained ground. Risk sharing, explains ETNO, includes flexibility on prices for access to the new networks, co-financing or the possibility of negotiating contracts with competitors. Also acquired in committee is the concept of ‘geographic segmentation’ of regulated markets: the rules will apply where competition is lacking, notably in scarcely populated areas, with the others coming under competition law. In the absence of a cessation of regulation, they obtained a ‘revision clause’ three years after the entry into force of the package. Yet ETNO has its criticisms too. According to its Director, Michael Bartholomew, “these measures are contradicted by a number of amendments that pave the way to the systematic imposition of network access obligations or regulatory intervention without an operator having a significant position on the market and outside of the usual control mechanisms provided by the regulatory framework”.

The only common point is that both associations ensure that they are proposing the solutions needed to meet consumers’ interests, encourage competition and develop new very high speed networks. Those are also the aims of the Commission, Parliament and Council, which will have to agree on how to achieve them. The next step will be in late September, with the first-reading vote by MEPs in Strasbourg.