Unbundling stalemate heads for penalties - Government Activity

The European Commission will this week meet national regulatory authorities for an urgent review of progress on local loop unbundling. But competitive network operators are urging stronger action by regulators--including fines--to combat anti-competitive behavior by incumbents which is often described as a "deny, delay and degrade" policy.

"Unbundling has had an abysmal start in most countries, and national regulators have only given it half-hearted support so far," said Maev Sullivan, an independent consultant who chaired a recent conference on local loop unbundling in London. "By 2004, less than 2% of lines in Europe will be unbundled."

The Commission's unbundling regulation requires incumbents to publish reference offers from December 31, 2000. Where offers are available, most regulators are currently embroiled in disputes over the details, which range from unrealistic restrictions to overly high tariffs. For example, France Telecom apparently included a provision to take back a copper line from a competitor to meet universal service obligations, according to Cedric Gouliardon, data and IP interconnection manager at 9Telecom, based in Boulogne Billan-court, France.

Although a principal at the Commission said he was "confident that things are happening quickly," others are not so sure.

"They are putting on a brave face," says William Melody, chair of economics and infrastructures at Delft University in the Netherlands. "I and many others cannot believe they are happy with the pace of most countries. The pace of reform has slowed dramatically."

Phil Evins, managing director of the European Competitive Telecommunications Association, which launched a local loop Unbundling scorecard, brands Europe's unbundling progress as terrible. "Germany brags about having unbundled 600,000 lines, in three or four years, out of 47 million. I worry about this rate of progress," he said.

Fines offered as incentive

The discouragingly slow pace of unbundling in Europe is prompting national regulators to threaten incumbent operators with fines. In Germany, the RegTP can already fine Deutsche Telekom for not meeting interconnection requests, and recently sharpened the ruling to help shorten delivery times. The regulator is also considering imposing fines for delays in provisioning other unbundled elements like colocation space.

"Penalties could also be a way in the future for solving these [unbundling] problems," said Ernst Ferdinand Wilmsmann, the assessor in the RegTP's Ruling Chamber 4, who was speaking at the unbundling conference.

Competitors believe threats of fines are necessary. "Our hope is thaat if Deutsche Telekom doesn' provision [unbundled loops or colocation space] in time, then there should be a penalty," says Gerd Eickers, chief operating officer of QS Communications AG, based in Cologne. "There should be a penalty to incentivize Deutsche Telekom more."

Even though Germany has had unbundled loops for three years, QSC said that it was only last year when competitive operators started using digital subscriber line (DSL) for broadband services.

"We're happy to see that we lead the European Union in unbundling, but just 0.6% of all lines are unbundled. At this pace, it would take another hundred years to get a 50% market share," says QSC's Eickers.

The issues in Germany have shifted to shortening provisioning times for colocation space and the incumbent's tariffs.

"The most important task for the Regulatory Authority over the next few weeks until the end of March will be approving the new rates for unbundled local loop access," says Wilmsmann (see Page 4).

"Another key task is finding a long-term solution to the problem concerning provisioning times for lines and colocation space," he added. "A sharp increase in orders from new entrants has meant that Deutsche Telekom has had problems in meeting the orders on time."

In the Netherlands, competitive operators are in continual dispute over the incumbent's charges for colocation, backhaul and provisioning delay tactics. "KPN uses provisioning processes as obstacles for third parties," said Josee van den Berg, head of regulatory affairs at Versapoint, based in Amsterdam.

KPN recently added to the colocation bill a "broadband tax" of[epsilon]4, which van den Berg views as a mystery cost. The down payment is 60% of the total charge, she adds.

"Looking at the charges [for colocation and backhaul] gives you the feeling that this business [DSL] will not work," says van den Berg. "We're better off renting a room in one of the most expensive hotels in the Netherlands, and breakfast would be included."

Van den Berg says KPN delivers everything but 1%," and that 1% could be the power supply or the key to the colocation room in the exchange.

"This puts a lot of pressure on regulatory bodies to understand what really goes on," she says.

In France, the incumbent appears to be trying the national regulator's patience. An Autorite de Regulation des Telecommunications (ART) spokesman said unbundling was going "very slowly" and that they have issued a warning to France Telecom. The next step would be a fine--ART has the right to fine France Telecom up to 3% of their revenues. Although competitive operators are currently in unbundling trials with France Telecom, the incumbent has not released the tariffs for colocation, but it is expected by the end of February.

"I think we'll be surprised and we'll have to fight that as well," says Gouliardon. "The battle for 2001 will be pricing for the copper and transmission [backhaul]. We still don't know how much we'll have to pay for colocation."

"Even after ART has demanded France Telecom to provide information, they have not given it all, such as information about colocation space," says Gouliardon. "There might be a financial sanction from ART against France Telecom for delays and refusals to meet colocation orders. France Telecom is one of the best incumbent's in the world at protecting its business."

In Belgium, Belgacom has 50,000 retail ADSL subscribers and is acquiring 2,000 new subscribers each week. The incumbent published a reference offer, but competitors argue that it is incomplete and has not been formally agreed. For example, Belgacom does not include a reference to synchronous DSL (SDSL) in its offer, which forces competitors to use other symmetric DSL options that create more interference.

"SDSL is not in the scope of our offer at this moment," says Paul Maertens, general manager of regulatory and public affairs, Belgacom SA, based in Brussels. "We want to go step-by-step for technical reasons,"

"We may be late, but in the field, the cooperation between Belgacom and new entrants might be more efficient than in some other countries," says Maertens.

Rolling out before the law

In Spain, despite having bitstream local loop unbundling since the summer of 1999, there were still only 50,000 DSL subscribers by the end of 2000.

Recently, government forced Telefonica to act on unbundling in line with the EC December deadline but the rush itself has caused problems according to Analysys consultant, Christoph Althoff: "Spain acted quickly but we are now till in the process of seeing the regulations being modified." He added that this put a question mark over tile operators rolling out services while the law was being fine tuned.

COPYRIGHT 2001 EMAP Media Ltd.
COPYRIGHT 2001 Gale Group