TIME EUROPE
May 8, 2000 VOL. 155 NO. 18
Forcing Open the Market
Brussels plays the heavy to try to break telecom monopolies and allow high-speed Internet access
By JENNIFER L. SCHENKER Paris
Europe appears ready to go the last mile — literally — in liberalizing its telecom market, paving the way for competitive high-speed Internet access services for consumers and business. The "last mile" or local loop is the final stretch of telephone cable linking users directly to the rest of the world. The European Commission liberalized telecom infrastructure in 1998, allowing new entrants to build their own networks.
But last week the Commission found it necessary to threaten more action to boost competition. The problem is that while lots of competing pan-European and national networks have been built, some European carriers still retain almost 100% market shares for local calls and subscriptions. These firms have been slow to roll out new technologies because they would cut profits from existing services, so most European consumers are still stuck with excruciatingly slow dial-up service, charged on a per-minute basis. Low-speed access and the current pricing structure have caused Europe to trail the U.S. in Internet usage, slowing down both e-commerce and e-business.
The Commission is sending warning letters to Germany, Italy and Spain because the former monopolies there have kept a de facto hold on the local loop. They charge such low subscription fees that competitors are effectively unable to enter the market. But they subsidize low subscription rates with higher call charges. To date, it has been tough for new entrants to introduce competing services. "This is not to say the situation is satisfactory in the other 12 countries," said an official in the Commission's competition directorate. "We still have to look at this carefully."
Brussels also urged member states to speed up attempts to force dominant phone companies to unbundle the local loop — that's industry jargon for allowing new entrants to use the existing local networks installed by the incumbents. And the Commission warned incumbent phone companies that they must charge cost-based prices for usage. Such changes would help new entrants roll out high-speed technologies, such as digital subscriber loop, leading the way to flat-rate pricing for high-speed Internet access.
"We have seen lots of competition in the construction of pan-European networks like the kind we have built," says Richard Feasey, vice president for regulatory affairs for MCI WorldCom International. "But having large fat motorways without having access roads to connect to those motorways is not very useful."
The whole European economy will benefit since local loop competition "will bring affordable flat rates, more usage, more e-commerce and more users," says Uwe Heddendorp, managing director of AOL Germany. But, as new entrants point out, it is one thing to make an announcement in Brussels. It is another for member states to take the actions necessary to make sure reasonably priced high-speed Internet-access services actually reach the homes and businesses that are crying out for them.
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May 8, 2000
COVER
Europe's Jobs Challenge
Lots of people need work. Lots of companies need workers. So why aren't they hooking up?
EUROPE
Crime Busters
With the arrival of a new task force in Hungary, the FBI steps up its fight against organized crime
Viewpoint
The euro's current woes reflect Europe's structural economic problems
Viewpoint
The U.N. hopes to ease the woes of the world, but it cannot keep the peace
MIDDLE EAST
No News Is Bad News
Jittery after recent reformist wins, Iran's hard-liners shut down the country's liberal press
AFRICA
Back to the Future
Johannesburg's criminal reputation is only half the story as this city starts to rediscover its buried gold
BUSINESS
Wired for Competition
Europe's sports websites compete just as hard as the teams they cover in order to win in cyberspace
Forcing Open the Market
Brussels plays the heavy to try to break telecom monopolies and allow high-speed Internet access
SCIENCE
Brave New Cells
Despite a U.S. government ban, research on "cure-all" embryo tissue widens
FASHION
Battle Deluxe
Titans LVMH and Gucci vie for dominance in the fashion world
Tommy Hilfiger
From new wave to wavering
DEPARTMENTS
Techwatch
World Watch
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