Telco separation the hot European potato
Travelogue Europe – Greetings from Brussels
As elsewhere, the European incumbent telcos are having a tough time coming to grips with the rapid changes that are taking place in the market. All are fighting these changes, but change is inevitable.
Regulators envisage a period with fewer regulations (based on anti trust legislation only) once the incumbents have gone through the process of change. But there is a clear understanding that we are not there yet and that stronger regulations are needed first before the reigns can be loosened a bit. There is a sense in the market that we are currently reaching the peak in regulations, and these are mainly focused on the bottlenecks of access and of termination rates.
Exhibit 1 - Interconnection costs comparison
The Swedish regulator PST showed an interesting comparison between the costs of interconnection as a percentage of total telco costs: |
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Indications are that all interconnection rates, once services are delivered over NGN networks, will move towards the 0% (Internet) model. In principle this should put to bed the endless disputes between incumbents and their wholesale customers. |
(Source: BuddeComm based on PST data)
While it is preferable that incumbents take charge of this process themselves, it has become clear that a growing number of countries are embracing the regulatory tool of functional separation to get incumbents moving on the issue of change.
While there is considerable scepticism about functional separation, despite the perceived economic benefits (which are still poorly understood), at the same time there is such dissatisfaction with the incumbents that these changes will be forced upon them rightly or wrongly. The major aim is to get them to change their behaviour, and the early results of that can be seen in countries such as Britain, The Netherlands, New Zealand, Ireland, and Italy.
However, if there is no cooperation from the incumbent then functional separation makes no sense, and only structural separation will force them to truly change (this is where Telstra has positioned itself so far). Only full separation will be able to eliminate the deliberate abuses of the incumbent telcos.
For more information, see the following reports: