Brussels rings the changes: Tim Jackson finds Sir Leon Brittan heading for a phoney war as he takes on the national networks

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The Independent Online
AFTER years of inaction the European Commission is at last trying to get to grips with the sorry state of the EC's telephone networks and the national monopolies that run them.

On Wednesday the Commission published an innocent-sounding consultative paper that may turn out to be a devastating blow to the status quo.

It outlined four possible options, ranging from doing nothing to legislating immediately for fully free competition.

The consultation is not entirely open-minded, however. 'It is our duty in presenting the paper to make it clear what we think the advantages and disadvantages of the options are,' Sir Leon Brittan, the competition commissioner, said.

Sir Leon knows the problems he has to deal with affect every facet of commercial life in Community member states.

Telephones, fax and direct transmission of data between computers are every year becoming more important to international business. How much companies pay for these services is a growing element in how competitive they are.

Here they stand at a disadvantage - even the best European telephone services lag far behind those of the United States or Japan. Their prices are higher, the quality of their services is lower, and they are backward in introducing new technology.

Customers in Tokyo or New York routinely expect to get a new telephone installed the day after they ask for one. After the phone has been plugged in they can then expect to pay less for using the system.

A 10-minute evening call between Brussels and Washington costs almost twice as much going west across the Atlantic as when it goes east.

Anyone needing first-hand evidence of how bad European telephones are need go no further than Brussels, the central focus of the Community.

To get a telephone installed in Brussels takes an average of four months. Forget to pay the bill and the line is liable to be cut off without warning, and getting it restored can take weeks and half a dozen pleas.

Even calling directory inquiries is a nightmare. The operators are surly and unhelpful and you can wait 10 minutes to get through to them.

Symbolically, in the meantime the phone company plays lugubrious Belgian martial music.

But bad as the Belgian telephone system is - and it does make BT look good by comparison - it is no worse than those of many other EC countries.

Analysts believe that there is a link between the backwardness of European telephony and the fact that European governments allow much less competition than either the US or Japan.

On the eve of the EC's much- vaunted single market, due to come into effect at the turn of 1993, almost nothing has been done to allow efficient new operators to offer telephone services to consumers.

So far the European Commission has done little more than tinker at the edges.

Using its wide-ranging powers under the 1957 Treaty of Rome, it has forced national governments to allow competition in value- added services such as packet- switching and other kinds of data transmission and in the supply of equipment.

But the overwhelming bulk of the telephone companies' business - voice telephony - remains untouched. Only Britain has allowed competition into a noticeable share of its voice telephone market.

Sir Leon's clear preference is for demanding free competition only in international calls between member states.

National telephone companies will hold on to their monopolies for domestic services and, less defensibly, for international calls to countries outside the Community.

Limited though it is, this plan is a start all the same. That it will benefit consumers looks almost undisputable, proved by the storm of wrath that fell on Sir Leon's head from some national telephone companies.

One attacked his plans as showing the prejudices of 'Anglo- Saxon' logic. Others have lobbied more subtly to have them delayed indefinitely.

But none of the companies can escape the fact that after a consultation period of three or four months the Commission is likely to set to work on cutting the cost of those intra-EC international calls.

The first sign of change is likely to be that the gaps between pricing in different EC countries will begin to narrow.

After that, international call prices should begin to float down towards their real costs. Monopolies will no longer be able to punish customers who make overseas calls with high prices to subsidise those who do not.

Although Britain has probably Europe's nearest equivalent to a free market, British consumers may still benefit from this process. BT has already indicated that it wants to reduce the cross-subsidy between international and domestic calls, so prices should fall further.

Even if they manage to stymie Sir Leon's reforms, however, the Continental telephone companies know that they cannot escape the effects of ever-advancing technology.

At least two US companies already allow EC customers to avoid the high prices of their own phone companies by dialling a free number in America and routing calls from there.

Little by little, consumers are beginning to find out about such services. Unless the price gaps begin to close Europe's telephone companies may soon find their customers disappearing - and being beamed, Scotty-like, across the Atlantic.

(Photograph omitted)

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