BRUSSELS -(Dow Jones)- In a move that could shake up Europe's telecom industry, the European Commission has written to national telecom regulators giving them a mid-February ultimatum: come up with proposals on how to coordinate their powers into an EU-wide regulatory body, or forfeit those powers to the commission in Brussels.
The ultimatum is contained in a letter from EU telecom commissioner Viviane Reding which has been seen by Dow Jones Newswires. The letter is addressed to the EU's 27 separate national telecom regulators.
The commissioner referred in the letter to the existing umbrella organization, the European Regulators Group. This, she said, must transform itself into "a more efficient and more accountable permanent body, with independent powers for ensuring consistency" in the enforcement of EU telecoms and competition laws.
She said that if the national regulators fail to produce a satisfactory proposal for such a transformation by Feb. 16, she will push for greater powers for the commission over national markets, in updated telecom rules which the EU is due to finalize by 2008.
Reding is threatening that the updated rules could include provisions allowing the EU Commission to force national regulators to punish telecom companies who break EU regulations, to dictate what form these punishments should take, and to set deadlines for imposing these penalties.
Reding's letter is accompanied by a three-page questionnaire requesting the regulators' opinions about the best way to strengthen the enforcement of EU rules across the 27-nation bloc.
Currently, the national regulators are in charge of enforcing telecom rules and dealing with infringements themselves. They monitor their own telecom markets to see whether EU telecom rules are working and competition increasing, and periodically present their findings to the commission.
The problem, say both commission insiders and outside analysts, is that the national regulators take quite different positions in interpreting the same rules. Whereas the UK has cracked down on former monopoly provider BT Group, commission officials complain that Germany has allowed Deutsche Telekom to keep a grip fixed-line local loop and even receive permission to build a new high-speed Internet network without sharing access with competitors.
The solution, Reding says, will be to create a European version of the US Federal Communications Commission, or FCC.
Up to now the European Regulators Group "has been like a club or a trade association, getting together in nice places to enjoy fine wine and have a jolly good chat," said Nigel Hickson, head of European telecom policy affairs for the UK's Department of Trade and Industry.
"Due to political interference and having many regulators' staffs' pay set by the governments, many regulators aren't truly independent," he said.
The commission, along with newer entrants to the telecom markets, echoes these complaints, warning that too many national regulators are shackled to their national telecom operators and to the governments which hold large stakes in them.
However many national regulators fear that Reding's push ignores the wide gaps between Europe's different telecom markets. Too much blanket regulation too soon would widen these gaps, not close them, they warn.
"As long as we have such a fragmented situation, we cannot act from one single place," warned Georg Serentschy director of Austria's telecom regulator RTR.
Broadband Internet use illustrates the fragmentation that Serentschy speaks of: Broadband internet reached 30% of Danish citizens in the first quarter of 2006, but only 15% of German citizens and a measly 2% of Greek citizens in the same period, according to a recent study by the European Competitive Telecommunications Association. The association lobbies for new telecom operators competing against national incumbents.
Critics of Reding's plan say this shows that while policies for Greece should focus on encouraging more players to offer broadband Internet at lower prices, policies for Denmark should concentrate on increasing competition in other areas.
Yet Reding's threat of transferring the regulators' powers to the commission has hit home. As much as regulators may dislike the idea of a single regulatory body for European telecoms, they say it is far preferable to ceding their powers to the commission.
They are now scrambling to draw up a proposal for a Europe-wide equivalent to the U.S.'s FCC which would satisfy Reding's requirements for a strong, independent central regulator, while still leaving some power in the hands of national authorities.
"There's a fierce debate as to exactly what powers (the new regulatory body) should have," said Simon Bates, a spokesman for the UK's telecom regulator Ofcom.
-By Anne Jolis, Dow Jones Newswires; +32 2 741 1488; anne.jolis@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 2nd February 2007
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