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EC Moves to Cut Internet Access Costs

BRUSSELS – The European Commission moved last month to achieve “a substantial reduction in the costs of using the Internet” by demanding that member states provide “full unbundled access” to local phone loops by December 31.

The “unbundling” recommendation was submitted by competition commissioner Mario Monti and technology commissioner Erkki Liikanen. At issue is the “last mile” to a user’s home phone whose high cost has curbed Web access.

The last mile, Liikanen said, “is among the least liberalized parts of Europe’s telecom market” and therefore represents a major obstacle to easy and affordable surfing of the Net 24 hours a day.

Only lower access costs and flat rates for Internet use would allow Europeans to use the Internet as easily and as readily as Americans do already. Member states would have to force recalcitrant telecoms to toe the cost line.

Monti also announced that he would take legal action against Germany, Italy and Spain for distorting the telecom cost structure. The Germans especially charge too little for having a phone and too much for using one. Charges, Monti said, should reflect actual costs.

Judging from the militant German reaction, Monti won’t have an easy time of it. The government agency responsible for telecommunications answered with a barrage of statistics designed to prove that costs were in line.

What’s more, the German agency said, the EU had not issued guidelines about the cost of basic telephone services. As a result, officials said, the basis for the EC criticism is unclear.

Deutsche Telekom issued a statement rejecting the EU demands out of hand and basing its argument on a different interpretation of costs. The German government backed the former monopoly.

The minister of economic affairs told his EU colleagues last week that German costs of the “last mile” were out of line compared with other EU members who had not done or spent as much as the Germans had and could simply leapfrog ahead of DT.

Still, Brussels has the legal clout to make its wishes stick. And it argued that a relationship did exist between the recommendation and EC competition rules “under which incumbent operators have an obligation to provide unbundled access to the local loop.”

Unbundling, Liikanen and Monti stressed, will give “businesses and consumers access to an affordable advanced communications infrastructure and a wide range of services.

“This will enable Europe to seize the full potential of the digital, knowledge-based economy in growth and jobs (and unbundling) will be a major new step towards . . . the accelerated development of Internet services.”

The commissioners’ foray comes just a month after the March EU summit in Portugal, which mapped out a strategy for moving Europe towards an information society and in the process creating 20 million new jobs.

Moreover, they said, “full unbundled access” would allow new entrants into the telecom markets to “deploy all types of new technologies and to provide competitive services to consumers, including new broadband services.”

Competition rules do apply, the commissioners stressed, and “refusals by dominant operators to open the local loop to competitors requesting access may imply various forms of abuse of dominant position.”

In other words the commissioners claim the legal tools – and the political will if need be – to take laggards to European Court of Justice, an often a lengthy and tedious procedure.

But this case, observes said, may not take as long because some members have already unbundled or at least set a deadline for doing so. They include Austria, Denmark, Finland, Germany, Italy, the Netherlands and the UK.

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