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The European Commission



Telecommunications and Competition in the European Union


American Institute for Contemporary Studies Workshop



Ladies and Gentlemen,

In the run up to full liberalisation Europe and NorthAmerica are facing similar and formidable challenges - and this the morethat we have taken on both sides of the Atlantic a common commitment on full liberalisation of the market in the WTO.

All Member States of the European Union are trying to cope with this task of a new dimension for the sector - not least this country where this conference is taking place. Therefore the effort of comparative analysis is most timely and welcomeI am honoured to have the opportunity to make a few remarks.

Let me start by making a general comment.

The 1rst of January 1998 will bring regulatory liberalisation. The major issue will then become the structural issue : how to transform the market structures inherited from monopoly.

Liberalisation implies a number of regulatory measures currently underway in Member States and at European level. It means new telecom laws in all fifteen +Member States. It also means independent regulators at national level. This is not an easy task and it needs substantial political determination. But it can be resolved within the given deadlines.

Addressing the structural issue hits deeper and implies basic competition issues. It will determine the conditions of competition in Europe

I believe that we will see three major tests ahead concerning Europe's capability to tackle these deeper structural impediments :

the access / interconnection issue :

Access to the former monopolists networks becomes a conditio sine qua for efficient market entry of competitors, given that European telecommunications is not starting on a green field but with dominant market positions inherited by the incumbents from the monopoly period ;

the alliance issue :

As markets are opened and old and new actors re-position, we will have to be careful that horizontal and vertical alliances do not, again, close the gates which have just been opened ;

the convergence and multi-media issue:

We must find a way forward in Europe to move towards convergence and multi-media without creating new overall communications monopoly positions. This problem is particularly acute in countries with cross ownership between telephone networks and cable, the vital entry gates into the multi-media age - as it is the case in this country.

Let me first say a few words on 1998 and then concentrate on these issues.

The 1st January 1998 will indeed be a watershed for European telecommunications :

The implementation record to date is far better than we would have hoped for ; and

The change is coming at the right time. The competitive threat on the world market has become such that only a strong and competitive market in Europe can prepare our industries to compete on the global market -. as is the case in North America.

Let me go into some more detail on our approach to market liberalisation.

As you know we have worked hard since the publication of the Telecom Green Paper in 1987 at progressively lifting restrictions on Europe's telecoms infrastructure and services which may be provided across it.

Let me just recall the latest most decisive phase.

Satellite communications was fully liberalised by the European Commission at EU level with an EU Art. 90 Directive adopted in Autumn 1994. This means full effective liberalisation of satellite systems across all of the EU. It breaks the grip of the incumbents on access to the space resource, particularly as concerns their privileged position as signatories of the International Satellite Organisations. Deep reform of the ISOs is in fact part and parcel of the logic of this Directive.

The next link we tackled in the liberalisation process was mobile communications. The mobile Directive abolishes all remaining exclusive and special rights in the mobile communications market, for both service provision and use of own and third party infrastructure and it requires licences for DCS1800 and DECT before 1st January 1998 throughout the EU. This will now lead to a new round of mobile licences across the EU and a substantial increase of competition in the European mobile market

The Cable Directive means unlimited use of all cable network licences in EU for liberalised telecoms services, including, from 1st January 1998 onwards, public telephone service. The UK is obviously an important model for this process.

The finale of the EU 1998 programme is the Full Competition Directive.

1st July of last year was the deadline for liberalisation of alternative infrastructure. The date for lifting of all remaining restrictions on provision of public networks and voice telephony is, of course, for 1st January 1998.

This is a great step forward indeed, but meaningless without the concomitant regulatory preparation in terms of licensing procedures, interconnection regime and fair rules on universal service obligations. Member States must notify these new regulatory frameworks to us so that they can be screened by competition rules

While the liberalisation directives were issued under Art 90 Eu competition law, the European Parliament and Council have put together the necessary framework for harmonising the future regulatory environment. The Licensing Directive was adopted in April. The ONP Interconnection Framework is in its final phase of adoption and substantial progress has been made on the other components of the ONP framework and issues like numbering. For Germany, the new Telecommunications Law , the TKG is translating this framework in international practice.

The implementation record by Member States is carefully followed and we will strengthen the mechanisms further. A communication will be issued soon to this effect. Derogation period for Ireland and Portugal have been shortened to 1st January 2000 and decisions on Luxembourg, Spain, and Greece are imminent. The large majority of Member States will be able to meet the 1st January 1998 fully.

. Let me now focus on the three major structural issues ahead which will be vital to open telecom markets effectively : access / interconnection ; restructuring / alliances ; convergence / multi-media.

Access / interconnection The framework created by ONP must now been filled in at the national level.

The application of competition rules to access cases must be defined. We are developing and defining our approach to essential facilities. The Commission has recently published a draft Notice on the application of Competition rules to the issue.

In the WTO context, the internationalisation of the principles concerning access has started. It will mean that we will have to develop similar concepts on both sides of the Atlantic - and of course we observe with interest the developments in the US in this area after the US telecom bill, and in Canada. At he international level, it , the new concepts to access will inevitably imply the ultimate break-down of the current accounting rate systems. It will have to be acknowledged that accounting rates are nothing else than access rates for terminating calls, and therefore cannot be differentiated forever from the general rules and discussions on national access and interconnection.

As regards access and interconnection in Europe, we seem to face continuing delaying tactics by incumbents in a number of countries while we see progress in others. We are still far from a satisfactory situation. We hope that incumbents in the end will manage a sound economic balance between their wholesale activities (i.e. their activities in providing access services to their networks) and their retail activities (i.e. their sales to final customers). Until we have to ensure fair access rates by carefully checking anti-competitive behaviour and applying sanctions where necessary. We will gauge forthcoming access agreements against best practice in the European Union, in order to ensure that access rates converge towards the lowest common denominator. The UK and Oftel have an advance in experience on others, but recent developments in other Member States such as France are encouraging.

Of course, we follow with interest, and in the context of ongoing case work, the developments in this country . We have made it clear in the context of the case concerning the DT's dial and benefit tariff scheme for the business market that the resolution of the issue of fair access for competitors is a vital condition from a competition point of view for the incumbent to go forward.


We assume a positive attitude towards new vertical and horizontal partnerships and ventures, as long we can be convinced of the real synergies and benefits which should form the underlying logic for the moves. If, on the other hand, it looks more like a defensive strategy to sew up markets and shut out competitors then the competition rules must be used without hesitation to block the agreement.
We are watching out very closely for bottlenecks - preventing the creation of new ones and ensuring fair conditions of access where we have a fait accompli - and for any extensions of existing dominant positions.

The original versions of the Media Services Group (MSG) in Germany, and Nordic Satellite Distribution (NSD) agreement in the Nordic market had to be blocked because they involved, amongst other things, network operators, enjoying essentially gatekeeper functions extending dominance into related broadcasting and content markets. With the same basic concerns in mind we launched investigations into the plans of national telecom operators in countries like Spain and Italy to venture into the cable-TV market. And we will carefully examine the new venture between BT and BSkyB in the UK.

In parallel with such cases, the whole question of joint provision of telecoms and cable-TV networks by dominant operators is being addressed by the Cable Review announced in the EU Cable Directive and the Full Competition Directive : cross-ownership and future relationship of telephone networks and cable.

The Cable-Review is now underway. The studies will assess different policy options based on results of an intensive analysis of the market itself and of actual and potential policy impact on the developing multi-media market structure.

This is just an example of our major objective : opening markets, avoiding market bottlenecks, opening the door to new development and technologies. We need the necessary incentives in the markets to fully exploit the new technological possibilities of telecoms networks on the one hand, cable networks on the other. This is what creates new markets and maximum consumer benefit.


We recognise that the distribution networks for the information products of the future will rely on combinations : of wired/wireless , terrestrial/celestial, telecom/cable, cable/satellite
This means that convergence and multi-media will be key characteristics of the future.

We have seen some gigantic partnerships, agreements and mergers spring up in both Europe and the US, and this trend will continue : on the one hand between alternative or complementary networks, on the other between the content producers and packagers of information and the carriage networks.

The Internet could develop into a link between current networks and the digital delivery systems of the future. To do so it would need to overcome current structural limitations and manage a breakthrough of an order of magnitude in speed and capabilities to reach true interactive video delivery . Recent signs of convergence of the new digital TV-channels and web access in the US may point the way.

The issue is the control of the gates between the components of the future systems. We must move towards multi-media without creating communications super monopolies. This is at the heart of the cable issue.

Let me then conclude

Of course, we recognise that enterprises must be allowed to adjust to the changing market structures, as they evolve out of demonopolisation and convergence.
At the same time, we must avoid the type of foreclosure which would slow down market development and keep prices high. The Commission has shown that it seeks to achieve the balance between risks and benefits in its application of EU competition rules. In the MediaService GmbH case in this country we have established the threshold at which point the concentration of market power in the whole value chain - content, distribution, cable becomes unacceptable. But we have also shown in a number of recent telecom and media cases, that we favour restructuring where this corresponds to a sound adjustment to face the future global telecoms and media challenge.


Let me conclude.

But, as I have said, the challenge is ahead. The European telecom market must experience deep structural change to become the innovation motor of the European economy which it should be. From an anti trust point of view, we will favour restructuring - and a number of competition cases have shown this, both horizontal global alliances cases as well as vertical multi-media alliances.

The future delivery systems of the Information Society may be combinations of broadband cable and Internet-type telecom backbones and integrated satellite and mobile systems. The distinction between interactive digital TV services and Internet audio-visual services may be increasingly blurred. PC-based services may compete with TV-based services . They may integrate and merge. Set top boxes or decoders may also turn into a web and telephone access device

While these developments may be seen as distant by those now entangled into the debates on digital TV channels in Europe, the Internet and its incredibly rapid market penetration has shown the potential of rapid change. Only market forces will be able to work out the right balance bertween the different avenues into the digital future. This is what makes the Countdown to fullliberalisation of telecommunications on 1st January 1998 so central

As attention will turn from opening regulation to opening market structures, competition and anti-trust policy will become more and more important for the sector - at national level, as at EU level where this has already largely taken place.

We must be careful that multi-media will not mean new super monopolies. We need many multi-media companies not only one. We need more horizontal competition, in order to be able to allow more upstream and downstream vertical integration and convergence. Market structure will be the future challenge, and we may have to go beyond pure liberalisation measures into envisaging structural measures, and safeguards in order to create the open, innovation-oriented telecom and media markets which Europe needs.

It is time for a fully competitive market.

During the last months we have seen major developments on key global telecom markets. Europe has to be able to move on key segments of the market and to absorb new technologies rapidly - it will be able to do so only by rapid introduction of more competition. This year has seen major developments which will change the future prospects of industry : rapid development in the field of global alliances, Internet and Intranets ; introduction of cable modems and a new role for cable networks, with the growing together in the US of digital telecoms and PC-based interactive services ; recent decisions in the US and Japan on CDMA-based third generation mobile systems.

All of this needs radical adjustment of structures in Europe. We need growth . Growth needs open structures . This is the very objective of the liberalisation of the sector.

Thank you..


Speeches and articles 1997 ]

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