Wisdom of EU telco plan questioned

Businesses and consumers across the European Union (EU) could look forward to cheaper mobile phone calls and more services if EU commissioner for telecoms Viviane Reding manages to carry out a widely reported plan to create a European regulatory body.

Provisionally dubbed The European Telecom Market Authority (ETMA), the body would have powers over and above those of the UK’s comms watchdog, Ofcom, and could potentially force mobile operators to give competitors equal access to their transmission networks. The hope is that such a move would lead to a situation similar to that which occurred after Ofcom’s settlement with BT in 2005, when the telco was forced to split its network and services businesses and create Openreach.
Through a process called local loop unbundling (LLU), Openreach allows BT’s competitors equal access to telephone exchanges to put in their own comms equipment. LLU is widely seen as having benefited users by providing them with greater access to cheaper and faster broadband connectivity.

However, some experts see little likelihood of this scenario being played out across Europe. Martin Gutberlet, research vice-president at analyst firm Gartner, said countries such as Italy and Spain are already investigating the possibility of splitting up former monopoly telcos into network and service companies, but added that he doubted that such moves would necessarily lead to the need for EU super regulation.
Gutberlet questioned whether there are any economic grounds for forcing telcos to open up their networks. “With continuous falling prices for bandwidth, the investment in infrastructure for network operators is getting more difficult, and separation of networks and service doesn’t necessarily lead to new network investments,” he said.
The operators themselves are understandably unenthusiastic about the idea of having to deal with yet another layer of regulation.

An O2 spokesman said the company believes competition, and not regulation, is the best way forward to deliver benefits to the customer. O2 argued that the creation of a Europe-wide regulation would be bad news for users. “The increased regulation through an extra layer of bureaucracy would curb competition and consumer choice,” the spokesman said. He added that the forced separation of companies could “undermine the stability and predictability that the markets would require in order to make the necessary further investments in next-generation networks”.

Orange also opposes the idea of a super regulator, arguing that because markets vary greatly in different countries, “you need to have expertise of a particular market to regulate it properly. We feel Ofcom has this knowledge in the UK and a cross-Europe regulator would not.”

As for the separation of a telecoms network from the services it provides, Orange said, “There’s no reason to do it. The market is fully competitive and there is no dominant mobile provider, so no need to break up the companies.”

According to The New York Times, the ETMA plan will be formally presented to individual national commissioners in November.