Europe's Difficulty Competing In the Global Information Economy

There is a dirty secret in the European telecommunications industry, the European Commission has initiated infringement proceedings against UK government because the government and BT have failed to comply with European law. The UK government has been ineffective at implementing and enforcing both telecommunications regulations and more importantly fundamental competition law.

The UK handling of unbundling, including carrier pre-selection (CPS), has been one of the most diabolically handled telecommunications disasters in recent European history. Consumers and business have been damaged to the tune of billions of Euros.  And BT and Oftel have failed to address how these damages will be compensated. Businesses and consumers need broadband like humans need oxygen. BT and Oftel have created a cost structure that makes it difficult for consumers to get cost-effective, reasonable access to broadband. Oftel and BT are effectively spitting in the face of the Prime Minister, who has rhetorically stated that integrating the U.K. into the global information economy is critical. While the UK Parliament has initiated preliminary investigations into this debacle, the problem is still not solved.

It is not only the UK where consumers and new entrants have had billions of Euro stolen, but market damage and havoc is being reaped in nearly every country in Europe. The question is how should new entrant phone companies and consumers be compensated for this?

For over 15 years there have been declarations from Brussels to liberalise the European telecommunications market. The European Commission's vision was that Europe should have an information economy that would be globally competitive. Today most European heads of states make passionate speeches about how their governments are preparing their citizens for a new information society. However, in most EU countries, below the political rhetoric there is bureaucratic friction at work which threatens to expose the politicians as emperors who are in fact, not wearing beautifully adorned robes.

National Regulatory Authorities and incumbents have stubbornly dug their heels into the ground and progress has been slow, painful and the result is the continued squeeze of billions of Euros from innocent European consumers.

Why have the National regulators been so ineffective?  There are at least three reasons:  

1) Many national governments own or have owned at the time of critical regulatory decisions major portions of their incumbent phone companies; 

2) Incumbents phone companies spend substantial resources on lobbing NRA and their national political apparatus attempting to support policies that are contrary to consumer interests; 

3) Many of the NRA do not understand the issues they are confronted with nor the damages they create in the marketplace from delaying decision making or as a result of making poor decisions. Because most NRAs do not have proper leadership at the top, technocratic civil servants end up ducking and weaving in a frenzied tactical fashion as opposed to solidly implementing clear, cohesive comprehensive
strategic initiatives.

Many telecommunications issues appear very technical so most consumers are generally unaware that they are being taken advantage of by their governments and their national phone companies. When an incumbent fails to provide Carrier Pre-Selection, or fails to unbundle the local loop, or provide reasonable dial-up internet access the man on the street generally does not immediately draw the logical conclusion that his government has effectively damaged him by not forcing the incumbent to comply with European law. Even if the consumer was both sophisticated and had the financial resources to initiate legal action, from a practical point of view he would be unlikely to endure the many years of legal proceedings that this would entail.  Importantly, many telecommunications issues are made to artificially appear more complicated so as to confuse the consumer. Very few issues are presented for what they are-which are fundamental competition issues, not obscure technical or number issues.

Under European law new entrant phone companies have legal remedies against law breaking national governments and law breaking incumbents. The painful reality for consumers however, is that the new entrants are often victims of a divide and conquer strategy that has been effectively pursued by NRAs and incumbents. Generally the approach is don't hold us accountable for our legal violations and our damages and we promise to provide your company with advantageous treatment in the future.

How can consumers and new entrants tap into compensation owed to them by governments and incumbents? First, when the next wave of incumbent consolidation takes place the EU Director General for Competition can demand that compensation funds are established by incumbents, to be paid to new entrants and consumers. The distribution of those funds could be handled by the Commission or an organisation appointed by the Commission.

Parliament's in each of the EU member states should initiate long-overdue Parliamentary investigations of both incumbent phone companies and their NRAs. Executives of the incumbent phone companies should provide sworn questions and answers into the strategies that their companies have successfully executed which has slowed down the development of Europe's information economy and created billions of Euro's of damage. One day there will be the equivalent of the digital Nuremberg trials and those that conspired to hold back Europeans from low cost access to telecommunications services
will be held accountable.