EU: Mobile Operators Abusing Market Power

BRUSSELS (01/27/2000) - Mobile telecom operators took the brunt of criticism during a two-day public hearing earlier this week on telecom policy in the European Union.

The mobile sector was referred to repeatedly, noted Robert Verrue, director general of the European Commission's telecom and innovation division. "It is clear that there are divided views as to the extent of effective competition in this sector," he concluded yesterday, at the end of the two-day hearing.

Although the hearing was called by the Commission to discuss the future direction of EU telecom policy in general, regulation of the mobile sector became a prime target for criticism due to its key role in future development of the market, especially that for Internet services.

Indeed, the comments from smaller telecom operators -- including Colt Telecom, Infostrada and GTS -- suggest that large mobile operators such as Vodafone AirTouch PLC have replaced the former national monopolies as the prime obstacle to competition and lower prices in the European Union.

The smaller operators complained that larger companies abused their dominance in the sector to deny their smaller competitors fair access. Several complained that although EU regulations require companies with significant market share to negotiate access for the smaller companies, the interconnection fees they demand for this make it impossible for new entrants to compete in the European market.

"We must find a solution to such disputes," said Verrue. He suggested relating interconnection fees to costs in a manner which could vary depending on the market.

One participant suggested that the Commission or the relevant national regulatory authorities "should look at rates of return on capital to ensure a fair and reasonable return" in such cases.

Vodafone AirTouch expressed its opinion that EU law should not be used to establish a fair price, and that this determination should be left to the competition authorities.

"The NRA's role should be limited to mediating disputes only, and should not be able to impose price levels. This should be left to the competition authorities," the Vodafone spokesperson said.

In their defense, several large operators explained that they must be allowed to recoup the cost of the huge investments, and any move to undermine their profitability would undermine their ability to invest in their networks for the future.

There were also claims that the large mobile companies were using their positions to extend their dominance to other market segments.

"The Commission must look at how dominant suppliers extend their dominance to related markets, notably call termination," a spokeswoman for Infostrada said.

Verrue seemed to agree, concluding that although there was no unanimous view on which markets required specific EU rules to deal with anticompetitive behavior, "Call termination does represent such an uncompetitive market."

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