EU Regulators to Tackle Large Telecoms

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euflag1.jpgThe European Commission is expected to create a new regulatory body that it hopes will spur telecommunications competition in Europe with the goal of reducing costs for consumers. This new body will have the power to separate telecommunication networks and access providers. It is believed that the large companies that now control these aspects of European telecommunications retards growth and inflicts artificially high prices on consumers.

The EU’s executive arm has called the existing panel of national telecom regulators a “do-nothing group” that hasn’t taken European Union consumer interests seriously. Today the EU’s executive arm will call for the creation of a European Telecom Market Authority that may push national regulators to aid small companies in their struggle with the large telecommunications companies that have a stranglehold over national markets.

This new body will initially concern itself with the high-speed Internet market in the EU but all good bureaucracies know how to nose their way into other areas. I’m sure it won’t be long before this new body looks at the mobile phone business. The EU recently addressed the high costs of cross-border mobile phone use by issuing a price ceiling on roaming charges.

The slow rollout of a high-speed Internet market in the EU is blamed on regulators’ unwillingness to take on the giant telecom companies. In Western Europe, only one in five households has broadband. These meager numbers are due to high prices and poor provider choices. It is believed Europeans have lagged behind the Untied States and Japan in Internet use due to these factors.

Major companies like France Telecom fear new regulations could harm investment in next-generation networks. The proposal to break up networks from service branches at incumbent operators “goes in the wrong direction” and would hamper companies’ ability to coordinate complex investment decisions, warned Jacques Champeaux, France Telecom’s senior vice president for regulatory affairs.

Instead of new regulations, France Telecom proposes that rival Internet providers could run new optical fiber cables alongside the incumbent company’s own lines, so rival companies could get their own capacity to compete with giants like France Telecom.

The plan to separate telecommunication networks and access providers has caused a division within the EU’s executive arm. Neelie Kroes and Guenter Verheugen, the EU antitrust and industry commissioners, respectively, have expressed concern that parts of the plan could harm investment and add to red tape.

I’m not sure how fast the EU works but I see this problem taking years to untangle. The large companies don’t want to breakup their lucrative business structure and I’m sure they have some money to spend to buy politicians and hire good antitrust lawyers. France Telecom’s proposal to let competitors use their right-of-ways isn’t a good compromise. This would only create expensive redundant capacity that the consumer doesn’t need but would have to pay for. It would also take years to implement. I don’t see any easy and quick answers that will give consumers better service and lower prices.

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