Regulators support breakup of Euro telecoms

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BRUSSELS -- The controversial plans to break up Europe's telecom and cable monopolies were backed Thursday by the European Regulators Group, which gathers all 27 EU national regulators.

The plans -- drafted by Media and Information Society Commissioner Viviane Reding -- call for an overhaul of EU telecom rules and allow regulators to split the services and network arms of telecom companies.

But ERG chairman Roberto Viola told Reding that regulators backed the split as a remedy to boost competition.

Splitting services from networks, a process known as functional separation, would create a fairer market, the ERG said in a formal opinion. "By creating a separate business unit with business incentives based on the performance of that unit ... it is more likely that the business unit will deliver the services that its customers want," the ERG said.

Functional separation "does not imply any legal breakup" of telecom giants, the ERG said, and only should be introduced on a case-by-case basis, looking at the cost and benefits of regulatory action and insisting that it be tailored for each country.

The ERG also referred to "the positive experience so far" in the U.K., where functional separation already has occurred, highlighting the benefits for competitors and consumers as well as on incentives to invest.

Reding wants to introduce the reforms to guarantee fair competition and speed up the development of multimedia in the EU. She said newer cable and telecom companies are struggling to gain a foothold in markets dominated by such former state-owned telecom monopolies as Deutsch Telecom and Spain's Telefonica.

Reding's plans are due to be formally published Nov. 13, but she is facing fierce opposition within the commission from EU Competition Commissioner Neelie Kroes, who has warned that the measures would simply amount to unnecessary bureaucracy.

But speaking alongside Viola, Reding denied that Kroes was trying to block the plans. "There is no disagreement," she said. "I am working in the closest possible cooperation with Mrs. Kroes. As for functional separation, the European Regulators Group is unanimous on functional separation, and nobody can ignore this presentation of 27 regulators and 27 different countries."

Kroes on Wednesday told the European Parliament's Economic and Monetary Affairs Committee that the measures were unnecessary and would add bureaucracy to the sector. "Competition has been developing without unbundling," she said, adding that there had been "significant market entry" as new services were rolled out for cable television, Internet and voice services over fixed-line telephones, mobile phone networks and fiber networks.

Kroes is backed by Europe's former monopolies, the so-called incumbents, who say that under the plans they will have to finance most of the expected spread of fiber-optic cables but then be forced to grant access to new market entrants.
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