Monica Horten

Effective competition in telecommunications is not a matter of choice. It is a necessity. The point was made by Paul Waterschoot, head of division in the European Commission's competition directorate, at a London conference on telecommunications contracts.

The Commission has two reasons for wanting a more competitive industry for Europe. First, business is depending increasingly on telecommunications in order to function. As David Gillick, of PA Consultants, points out: "Telecommunications services are the backbone of the new global economy based on the exchange of electronic information."

Competition among equipment vendors and service providers should therefore result in a more efficient telecommunications network infrastructure, giving users better value.

Second, telecommunications is now a global business in its own right, and European companies cannot compete against the Americans and Japanese if they are constricted by outdated rules, regulations and working practices set by a number of relatively small national monopolies.

The beginnings of the Commission's telecommunications policies were set out in a Green Paper in 1987. But the first real action was the issuing of a directive on telecommunications terminals in May 1988 by Peter Sutherland, then the competition commissioner, now succeeded by Sir Leon Brittan.

The directive aimed to open to free competition the market for all types of customer equipment including telephone systems, modems, data terminals, telex and mobile telephones. The directive obliges member states to work to a timetable, from the date of issue until June 1990, by which time all monopolies on the sale of equipment should, in theory at least, have disappeared.

Sutherland used the now-controversial Article 90, a previously little-known article in the Treaty of Rome which allows the Commission to impose a directive on member states, without using the normal procedures. But France has argued in the European Court that the use of Article 90 had been inappropriate. A decision is awaited.

The Commission's moves this year to use Article 90 to put through another directive, on telecommunications services, have also met criticism. Services involve everything from domestic telephone lines to public data networks or private circuits for businesses. They are the main source of revenue for the national telephone operators, and that largely explains the strength of the resistance to the Commission's desire to introduce competition.

In fact, the national operators would be allowed to retain their monopoly of voice telephony, which accounts for 90 per cent of their income from services. The introduction of a competitor, such as Mercury in the UK, would be at the discretion of national governments.

A further directive defines technical standards for connection between the national operators and third-party services a principle known as open network provision (ONP).

What is under dispute is data services. A row which has been brewing for the past few months came to light at the meeting in Brussels this month of ministers responsible for telecommunications. It concerns the definition of basic data services, and the type of restriction, if any, that should be applied to third-party operators wanting to connect to the public networks.

France proposed that licensing of companies running value-added data networks be restricted to those which can prove that the value-added component is 85 per cent of their revenues. Supporters included Spain, Portugal and Italy, while Britain, West Germany, the Netherlands and Denmark supported the Commission.

France probably stands to lose most. It has a highly developed public data network service, called Transpac, and competition could directly threaten its revenues.

A decision was deferred to a second meeting, to be held on December 7. However, there can be no mistaking the fact that Sir Leon is determined to see things through. In a speech given in London three days after the meeting, he made two clear statements. "In too many cases," he said, "they (the national telephone operators) have persuaded governments to protect them from the Treaty of Rome. And that is not to be tolerated."

He ended: "The Commission has not wavered one iota in its determination to apply the treaty in the area of telecommunications services to the general benefit and I look to the business community in particular to help persuade governments of the necessity and urgency of that task."

Monica Horten is editor of Communications Management