Equal Access via Structural Separation Called ‘Wrong Good Idea’
BRUSSELS -- The U.K. has chosen a “desperate solution” to the problem of assuring British Telecom (BT) rivals equal access to the incumbent’s networks, said France Telecom (FT) Exec. Vp-Regulatory Affairs Jacques Champeaux. Earlier this year, BT, facing an antitrust probe, vowed to provide what the U.K. telecom regulator calls “equivalence of access” to competitors. As part of that, the telco is creating a new entity assigned to ensure alternative providers are offered the same wholesale services and products as BT’s own retail arm. Speaking Fri. at the European Competitive Telecom Assn.’s regulatory conference here, however, Champeaux said in the long run structural separation isn’t practical.
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France and the U.K. come under the same European Union controls, so their telecom sectors should look alike with regulatory harmonization, Champeaux said. In fact, the 2 nations’ sectors differ significantly. France has around 2.7 million unbundled lines to the U.K.’s 140,000. Over 30,000 lines are unbundled each week in France; in the U.K., 5,000. It takes 2-3 days to unbundle a line in France, 8-12 in the U.K.
Why the differences? French regulator ARCEP told FT to offer an extensive set of wholesale products to competitors and gave FT enough incentives to unbundle, Champeaux said. The regulator took great care with operational issues such as the unbundling process. ARCEP, with FT and alternate operators, specified how unbundling would work.
Ofcom’s settlement with BT addresses a specific U.K. issue - unequal access, Champeaux said. Structural separation may be appropriate in situations involving slow product development, inferior service, poor transactional processes and general lack of transparency. But FT sees equivalence of access as conceptually akin to -- and to be treated like -- non-discrimination. Equivalence doesn’t imply structural separation, Champeaux said.
Making BT split its retail and wholesale arms may prove slow and complex and could have been avoided if Ofcom had been efficient in applying competition and sector-specific regulatory principles, he said. Ofcom could have mandated equivalence of output -- barring BT from offering any retail product or service without an equivalent wholesale offer -- and greater transparency via publicly available quality-of-service indicators. Instead, its approach is “dramatic and drastic, the wrong good idea.”
Structural separation is the “last expression of a copper line-focused regulation,” he said, characterizing oversight as based on dominance by fixed access and telephony providers whose main goal is to “sweat” as much value from assets as possible. Under existing rules, incumbents have no incentive to invest, he said. The game’s logical end is a regulated -- and perhaps state- owned -- public utility.
Telecom needs oversight that accounts for intermodal platforms (fixed-mobile), Champeaux said. Incumbents will have to spend heavily on fixed networks to keep Europe from falling further behind the U.S. and Korea. As convergence opens the field to new, unregulated players such as software and Internet firms, regulators must create risk-rewarding conditions for investment.
In 2003, Telecom Italia (TI) agreed to split its retail and wholesale businesses, and was told to provide effective equivalent products to its retail division and competitors, said Roberto Viola, gen. secy. of Italian regulator AGCOM. It’s too soon to rate the scheme’s efficacy, he said, but Italy has risen to 2nd in Europe in local loop unbundling and 4th in retail DSL line growth. AGCOM believes in the equivalence regulatory model and wants it harmonized across the EU, he said. It’s not about competing with other regulators but about getting a “single market moving.” BT Group Strategy Dir. Clive Ansell disputed Champeaux’s claim that BT’s corporate restructuring is a separation, saying it’s more complex than that.