Updated Monday, 20 October 1997. Next update
Monday, 3 November 1997.
From CommunicationsWeek International.
CWI is part of Emap Computing, a subsidiary of Emap plc, one of the
UK's leading publishers.
CWI News Listing for
Issue 193, Monday, 20 October
1997
Dusseldorf, Germany
By David Molony and John Blau
Europe's telecommunications service providers are pressing hard for governments to force incumbent operators to unbundle their networks.
In contrast to the United States, where unbundling of network elements is specified in the 1996 Telecommunications Act, European telecommunications legislation gives only general instructions to member states to provide unbundled network access. As a result, incumbents have generally been allowed to decide the extent of unbundling and the price of unbundled elements.
Now competitive operators and service providers in Germany and the United Kingdom are demanding the flexibility to buy at cost just those parts of the incumbent network they need. In particular they want the local connection to subscribers to be sold separately from the rest of the network.
"We want dark copper. No services, no interfaces, pure unswitched lines," said Ulf Bohla, general manager at o.tel.o Communications GmbH, of Dusseldorf.
Last month the high court in Munster ordered Deutsche Telekom to offer o.tel.o, Mannesmann Arcor AG and NetCologne GmbH unbundled
access to the public network at acceptable prices. The new agreement on unbundled access will apply to all licensed new operators in the country.
And the U.K. Service Providers Interest Group (SPIG), an association whose leading members include financial information provider Reuters Ltd. and networking systems developer IBM Corp., is lobbying the Department of Trade and Industry for an "alternative approach for the regulation of basic telecommunications" which would facilitate unbundling.
Analysts say the unbundling issue is critical to the development of real competition in the telecoms sector. Bill Dixon of London-based consultancy Goodwin Dixon said operators should be looking at unbundling as an opportunity rather than a threat. "It's actually a survival issue," said Goodwin. "The presumption has always been that the local loop was key to owning the customer, but this will not be the case. Billing and customer care can be done by service providers...Lineside access [unbundling] should be key for both sides."
New entrants in Europe's big markets will not be encouraged by last week's news from the United States, where a circuit court has refused a submission from the Federal Communications Commission that network operators should be required to sell packaged network elements at cost.
But they have some precedent for thinking they should get unfettered access. Smaller European countries such as Denmark and the Netherlands are already committed to allowing service providers to buy unbundled network at cost.
And in the United Kingdom, where the government and regulator are holding to a competition policy founded on infrastructure investment, service providers are determined to secure a change in policy. Some are demanding radical unbundling of all operators' networks, down to the ducting that carries fiber on trunk routes.
Radical measures
"Digital private circuits are available to operators, service
providers and users at the same rates. That's the way it should
be," said Phil Sayer, global communications manager at Reuters.
"The trouble is that outside London those rates are way too high,
because there is no effective competition in facilities. The
result is we can't get affordable services to smaller cities,"
said Sayer.
At the other end of the spectrum, service providers have an equally radical proposition.
In Germany, the so-called city carriers, which are building fiber rings in about 30 towns, want the cost of renting local loop connections to be stripped of the costs of local switch, telephone directories, customer services, sales and marketing, billing and debt collection.
"We want pure cable from house to main distributor frame," said Horst Schäfers, general director of Dusseldorf-based ISIS Multimedia Net GmbH.
And pure service providers, those without any facilities, also argue they should be able to buy just the physical links. They have no time for the incumbents' arguments that it is not "technically feasible" to separate out every network element.
"[BT] have taken elements out of the network [for their own service offerings], but they haven't made them available to anyone else," said Ashley Mirfin, business development manager at mobile services reseller Cellcom Ltd., in London.
SPIG proposes that investment in infrastructure should no longer be given preference over other investments, and that distinctions among operators, service providers and end users for purposes of determining prices paid for services from major network operators such as BT should be ended.
Geraldine Booth, an independent consultant who has worked with SPIG on policy, said the United Kingdom had a unique opportunity to develop a services sector for the whole European market.
"U.K. telecoms policy has been based on developing alternative conveyance infrastructure, but that has missed the point that it is services which compete [and which] people buy, and that is where they need choice," said Booth.
Distorting competition
In Germany, a group of legal experts have drafted a working paper
for Germany's federal cartels office (Bundeskartellamt), calling
for transparent conditions for network access in both the energy
and telecommunication sectors.
But incumbents counter that full unbundling could distort competition too, because it subsidizes service providers that have made no investment in expensive network. It may also lead to subscribers living in sparsely populated areas being expected to pay more for telecoms services.
A new study by London-based consultancy Ovum Ltd. points out that unbundling has its problems. "Network unbundling will inevitably lead to geographic de-averaging of line rentals for residential telephony users," said Richard Kee, principal consultant at Ovum. "People in rural areas would have to pay more, and that is a major political and social obstacle."
Kee said de-averaging would open a window for some operators to move into low-cost areas and undercut incumbents that are obliged to maintain geographically averaged tariffs.
A double jeopardy arises if the incumbent then raises rates in high cost areas to maintain profits.
Similar arguments have been heard in the United States. But one group that is puzzled by the agonizing in Europe and the United States is Canada's telecoms industry, which thinks the problem should be turned on its head.
"Pay a subsidy to operators providing services in high cost areas," said Willie Grieve, telecoms lawyer in Saskatoon, Canada, who advised on new local competition laws. "You risk low-overhead operators moving in for the subsidy, but it's better to have more competition than none."