Dirty tricks on the deregulation line
Times ; 25-Apr-1995
Since 1992, the European Union has been committed to
deregulating telecommunications to create an open market by 1998. Many in the telecom
sector assume that the process is progressing in a positive and
However, there is a wide gap
between the principles of EU directives on telecommunications and conditions in
most of the markets they cover. Throughout continental Europe, laws to promote
competition on international and national telecom services are being ignored as
a matter of routine.
For example, most of the
national telecom monopolies have failed to provide accurate data on their
underlying costs, as required by the EU more than a year ago. The national
regulators need this information so that they can bring telecom charges closer
to costs, one of the goals of the EU programme.
Just as important,
anticompetitive business behavior is common in many EU countries. These "dirty
- The setting of prices that are arbitrary,
discriminatory and lacking in transparency - for example, offering
individual customers special prices to ward off a competitor
- Using profits made in sectors such as local
telephone services where there is no competition to subsides activities in
competitive sectors such as provision of equipment.
- The abuse of privileged information the
national telecom operators obtain from their monopolies. For example,
when approached by new telecom operators who need to lease local lines to
link customers to their networks, some have used the information to
identify customers that are poised to leave their grip and mount efforts
to keep them.
Anti-competitive practices are
also occurring in markets that are competitive in theory, but controlled by the
national monopolies in practice. One such market is that for internal office
telephone systems or private branch exchanges which allow large business users
to control and route their telephone and fax traffic. New telecom service
providers must modify customers' exchanges to divert calls over their networks,
but in some cases, the national monopoly refuses to modify exchanges it has
supplied to do this.
Another strategy used by the
national monopolies is to circumvent restrictions on operations in their home
markets by moving into other countries through alliances.
While governments own monopoly
companies they are unlikely to encourage real competition with other telecom companies. In some cases, they also set up separate companies in their home
markets to compete against new entrances in segment that have been liberalized
- for example, mobile telecommunications. Safeguards to prevent such ventures
from benefiting from direct and indirect subsidies, as well as favoritism,
from their monopoly parents are usually hopelessly inadequate.
Telecom monopolies should not
be allowed to operate in liberalized markets while their home markets remain
closed. Consumers are forced to wait for lower prices and new services, while
their national monopoly suppliers stalk the globe in search of new
opportunities - subsidized by years of artificially high prices.
The regulators hear much of the
blame for the damage that has been done to the market as a result of such
practices. They have failed to force the national telecom operators to
separate monopoly services from those that are competitive to stop
cross-subsidization. They have also failed to enforce the laws on providing
data on costs, so that charges still do not reflect underlying costs.
It is not surprising that the
monopolies are unwilling to relinquish their dominant positions. But as long as
governments own part or all of their monopoly telephone companies, they are
unlikely to encourage real competition that will erode the value of their
stakes in these companies.
In the UK, privatization and liberalization
have resulted in the emergence of British Telecommunication as
an important international company and London as the telecommunication s hub of
Europe.† BT still has some outstanding
issues to resolve, such as the charges made for connecting competitors to their
customers through the local network. But the fact that BTís prices are
significantly lower than those charged by most European telephone monopolies is
compelling evidence of the benefits of successfully managed liberalization.
It is time the illegal
practices of the telecommunication monopolies were exposed. National operators
in almost every EU country are over charging their customers to the tune of
billions of Eu's every year.† All talk
of building a telecommunications superhighway in Europe is premature until
these fundamental issues are resolved.
The author is director of
Esprit Telecom, a telecommunications company.
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