EC threatens more legal action over broadband

The European Commission is threatening to use competition law to improve the pace of local-loop unbundling, and so free up the broadband market

The European Commission has threatened to widen its legal action against Europe's incumbent telcos over the failure of local-loop unbundling.

Speaking at a public hearing into the issue of access to the "last mile" of Europe's telephone networks on Monday, Mario Monti, European Commissioner for Competition Policy, said the current situation was unacceptable. He is concerned about claims that incumbent telcos have been obstructing the process to ensure their domination of the broadband market.

"Despite the efforts deployed by public authorities at EU and national level, the results of local loop unbundling throughout Europe are extremely disappointing at this point in time. Fewer than 900,000 lines are unbundled," slammed Monti.

"Even in those countries where figures could seem encouraging, we have received strong signs of discontent on the conditions offered by the incumbent. In many countries unbundling has not gone beyond a merely experimental stage," Monti added.

Local-loop unbundling has forced incumbent operators -- such as BT and Deutsche Telecom -- to open up their local networks to other operators, who can then install their own equipment in or near a local telephone exchange and offer services such as DSL to ISPs.

But as Monti's figures illustrate, the process is proceeding at a sloth-like pace -- even though the takeup of consumer broadband is proceeding well in many countries.

Some in the telecoms industry say local-loop unbundling will never work because of the costs of building the necessary infrastructure. Monti, though, has warned that the Commission would be prepared to take additional steps in an attempt to ensure that the process succeeds.

"So far, the Commission has focused on the rights of access and price distortions such as predation or margin squeezing. It may well, in the near future, expand its field of action to the issue of discrimination, both with the tools offered by competition law and the unbundling regulation," Monti said.

Competition law allows regulators to take tough action against companies who are deemed to have used their power unfairly. The EC treaty states that the Commission can fine companies up to 10 percent of their annual turnover if it believes they have acted in an anti-competitive manner.

Local-loop unbundling has been a big disappointment in the UK. Many operators dropped out of the process last year, amid claims that BT was acting unhelpfully -- a charge the company denied. According to Oftel's latest figures, only 600 or so of BT's 28.9 million telephone lines have been unbundled.

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