EC threatens nations with local loop legal action

The European Commission is threatening nearly all the 15 member states in the Europen Union with legal action on December 20 if they don't force former public telecommunication monopolies to open the local loop of phone lines into people's houses to competition.

          The European Commission is threatening nearly all the 15 member states in the Europen Union with legal action on December 20 if they don't force former public telecommunication monopolies to open the local loop of phone lines into people's houses to competition.

          Most member states have not gone far enough to ensure local loop competition, the commissioner responsible for telecommunication issues, Erkki Liikanen, says. The liberalisation process of the last segment of the telecom network to be freed from national monopoly control has failed to produce fair competition in the local loop to homes and in the market for local leased lines mainly serving as data feeds to businesses.

          Liikanen and commissioner for competition Mario Monti will propose initiating lawsuits on December 20 "in cases where incumbents are not offering an unbundled service," Liikanen says.

          Meanwhile, Monti's competition department is investigating the competitive provision of leased lines in the EU, Liikanen says.

          "He has opened individual cases concerning five member states," Liikanen says, but would not give any further details. "The commission's aim with this dual approach is to foster effective implementation of the sector-specific regulation on the one hand while applying competition law instruments in cases of alleged abuses on the other."

          Liikanen made his comments while unveiling the commission's seventh annual progress report on the telecommunication liberalisation process.

          The combined fixed line and mobile phone market in the EU will grow by an estimated 9.5% in sales this year, fueled mainly by growth in mobile phone sales, Liikanen says. Mobile phone revenue growth is estimated at 22.3% this year and average penetration of mobiles rose to 73% in August, against 55% the same time last year, he says.

          Prices are coming down, too. For long distance, the average price of a 10-minute call in Europe through the incumbent has gone down 14% since last year and 47% since 1998. A three-minute call has gone down 11% since last year and 45% since 1998, Liikanen says.

          The average level of internet penetration in EU households in June 2001 was just over 36%, up from about 28% in October 2000 and from just over 18% in March 2000.

          "This is a remarkable performance, and in our view shows that liberalisation continues to work," Liikanen says.

          However, problems at the local end of the telecommunication chain remain a problem.

          "Overall, the situation is very disappointing," Liikanen says. "The number of lines that have actually been unbundled is still relatively small -- just over 640,000. Shared access to the local loop is only available in four member states, and the number of lines is limited to a few hundred. Above all, our concern is that incumbents are continuing to develop their own DSL (Digital Subscriber Line) services in the absence of effective competition," he says.

          "We have recently heard the argument that in the present financial climate, implementation of local loop unbundling is no longer a priority. The commission strongly disagrees," he says.

          National regulators "need to ensure that incumbents offer a full unbundling and shared line offer, in line with the local loop unbundling regulation -- it will then be for the market to respond," Liikanen says.

          Regulators need to provide hands-on monitoring and set binding deadlines with credible penalties. Regulators also need to act to ensure that wholesale DSL is offered to entrants on nondiscriminatory

          terms, Liikanen says.

          Leased lines pose less of a problem for the commission, beyond what is being investigated by commissioner Monti's office, Liikanen says.

          "There have been improvements on prices, but the report also finds that differences in supply times between member states are difficult to explain," he says. Some companies complain that prices for leased lines vary by up to 300% across the EU, and that incumbents take up to nine months to activate a leased line.

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