Moves by the European Union’s top telecommunications official to take control of national regulatory powers are raising concerns among the Continent’s biggest telecom operators, who fear their operations may be broken up.
Over the past year, Commissioner Viviane Reding has said in several speeches that she plans to propose an overhaul of the EU’s telecom regulations in October. She has said she wants to take over some of the regulatory powers held by national governments and that some national operators should be split up to create more competition in the industry.
Ms Reding has long argued that Europe’s largest telecom companies, such as France Telecom and Deutsche Telekom, are using their control over existing telecom infrastructure to stifle competition from new entrants. Her aides say she would like to see breakups in the French, Polish, Slovak, Romanian, Greek, Bulgarian and Irish markets, where competition in broadband Internet service is too weak for her liking. Given that the Commission has just acted in Spain, it might also happen there.
Some national telecom operators are resisting these proposals, arguing that investment in national networks and customer services will suffer if they go ahead.
The struggle comes amid increasing competition in Europe to bring telephone, Internet and television services to consumers. A new breed of companies has appeared to challenge Europe’s biggest, established telecom companies. But the biggest telecom operators in Europe, most of them former state monopolies, control what is known as the last mile of copper network into homes in most EU countries.
The clash illustrates the EU’s effort to implement US-style regulation and legislation to harmonize rules across the 27-nation group in the face of resistance from powerful national companies and governments. Any changes that Ms. Reding will propose will ultimately need to be approved by the governments of the member nations, so national telecom operators are lobbying hard in Brussels and in their local capitals to try to limit her overhaul plans.
Ms. Reding has said she wants some national telecom operators to split their operations into two, one unit to run and invest in the national telecom infrastructure and the second to offer customer services for that network, in competition with other companies, an idea known as functional separation.
Competitors argue that “functional separation” would make it easier for customers to shop around for their telecom services and would force dominant operators to be more transparent.
France Telecom is expected to be one of the companies Ms. Reding would like to see split off what is known as its local-loop infrastructure, according to one of her top aides. France T’l’com is unenthusiastic about the plan.
“We think functional separation is a false good idea — it looks like a good idea, but it’s not necessarily,” the company said in a response to questions last month. The company argues that a carve-up would degrade the quality of the network’s infrastructure because the separated unit in charge of running and granting access to the network would have less incentive to maintain high standards.
As a model for the breakups, Ms. Reding is looking at the United Kingdom’s BT Group, which in 2005 split its network-access division off from its consumer operations, naming the new unit Openreach. While BT is still full owner of Openreach, the unit gives rival operators equal access to BT’s network. This kind of split, to which BT voluntarily agreed, would be less drastic than the US’s forced carve-up of AT&T, which split ownership as well as operations, a move that is now being reversed by an overly sympathetic government that is allowing consolidation.
In a prepared statement earlier this week, Deutsche Telekom warned that a split of its operations could be so expensive that it would do more harm than good. “The costs to the network providers could be higher than the benefits to the consumer or the market,” it said.
Companies have been trying to get their message out through their industry lobbying group, the European Telecommunications Network Operators’ Association, or ETNO, which represents 41 large telecom firms operating in the EU. Over the last year, ETNO has hosted conferences and seminars designed to show that competition in EU telecom markets is improving quickly and warns that forced splits could cripple the entire market