Rules for new EU telecom networks a political football?

Germany is said to be forcing the Commission's hand in setting rules to safeguard competition

The European Commission unveiled a long-awaited draft recommendation Friday for how to create new fiber-optic-based telecommunication networks throughout Europe, but the move was heavily criticized from both sides in the debate over next-generation networks.

In an unusually stern rebuke, a trade group representing companies trying to compete with the former telephone monopolies accused the Commission of "condoning collusion" between the incumbent national operators and one smaller rival of their choice.

One part of the draft recommendation states that if an incumbent operator joins forces with one other company to lay down fiber-optic cables, the obligations to ensure fair access at reasonable prices is lifted.

According to the European Competitive Telecommunications Association (ECTA), which represents smaller rivals of former incumbents, this amounts to a regulatory holiday for the incumbents.

"We are surprised and disappointed that the European Commission, which is meant to be the guardian of competition, appears to have compromised its strong stand against 'regulatory holidays' in the telecoms sector and appears to be condoning collusion," said its chairman, Innocenzo Genna.

Meanwhile, a trade group representing the interests of the incumbents said the draft recommendation "will discourage investors, whom the Commission proposes to bear onerous access and price control obligations."

The Commission said it is trying to strike a balance between the interests of the two sides in the argument. "The fact that they are both complaining seems to imply that we have struck a good balance," said Jonathan Todd, spokesman for Neelie Kroes, the competition commissioner, who together with telecom commissioner Viviane Reding, drafted the recommendations.

However, some people following the issue accuse the Commission of being biased in favor of the incumbents, and argue that political pressure from the highest levels has been brought to bear on the two commissioners in order to give incumbents what they want -- the ability to dominate the new super-fast broadband networks during their first years in place.

Commission President Jose Manuel Barroso is understood to have met with incumbents four times this year, in January, February, March and May, to hear their arguments in favor of a light regulatory touch with regard to next-generation networks.

ECTA also requested a face-to-face meeting with Barroso in order to make the opposing arguments, but the Commission president's office never responded to its request, said the trade group's director of regulatory affairs, Ilse Godlovitch.

"We would like to present our arguments to the Commission president, but although we have requested a meeting with him we are still waiting for a response," she said.

The Commission itself is very sensitive to accusations of political pressure, especially if it is alleged to be compromising the E.U. executive body's role in safeguarding fair competition in the E.U.

It also never admits to differences of opinion between commissioners over issues it has made public statements about.

Nevertheless, several people, including a telecom regulator, a diplomat from one large E.U. member state, ECTA, and even one person from within the Commission itself have said that the Commission's draft recommendation may be biased in favor of incumbents. Only ECTA spoke out publicly. The other sources insisted on remaining anonymous.

"There have been numerous meetings this week about the draft recommendation, and it does appear that political pressure has been brought to bear in favor of incumbent operators," said one person close to the discussions.

According to the diplomat, the political pressure stems from the German government, which is fighting to secure a better deal for Deutsche Telekom. "Germany is pressuring Barroso to intervene in favor of the incumbents. It is also lobbying other countries to do likewise," he said.

Barroso has publicly stated his interest in leading the next Commission once the current team's mandate expires in the fall. To ensure that he gets the job again, he needs the endorsement of the heads of national governments, and Germany's in particular because Germany is the biggest E.U. member state.

The draft recommendation could be amended after a public consultation with industry, consumer groups and telecom regulators, which closes next month. It won't become final until December, when a new Commission should be in place.

In the announcement of the draft recommendation Friday, Reding, who has been the loudest advocate for effective competition in the telecom sector, urged industry lobby groups "to contribute actively to the new public consultation in order to help us achieve the right balance."

Does this mean she feels that the draft published Friday lacks that balance? Her spokesman, Martin Selmayr, declined to comment. "That's a question for Neelie Kroes," he said.

Todd said the draft recommendation "strikes a good balance between the competing interests."

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