EC to End Local Loop Monopolies

BRUSSELS (04/25/2000) - The European Commission tomorrow will urge member states to require telecommunications market incumbents to end their exclusive control over the local loop by the end of this year, a European Union (EU) official who asked not to be identified said today.

Local loop refers to the last segment of a communications network that brings a transmission from the central switch to an individual home or office.

By opening up the local loop to competition, the Commission recommendation is designed to give smaller service providers access to the final consumer. Ending this remaining piece of the 15 national telecom monopolies, who formerly carved up the European Union between them, will increase competition and, in turn, lead to lower prices necessary for the take-up of the Internet and spread of electronic commerce, the EU official explained.

The recommendation is only concerned with traditional telecom networks and so does not impact fiber-optic or cable infrastructure, the official said.

The recommendation will translate into so-called "soft law" a political commitment made by EU heads of state and government in March to unbundle the local loop by the end of this year. Although the recommendation itself is nonbinding, member states are expected to make the local loop unbundling obligatory.

Germany, Finland, the Netherlands, Austria, Denmark and Italy have already ended this monopoly, and the U.K. has set July 1, 2001 as the deadline for unbundling in the U.K.

The Commission believes that unbundling the local loop will promote the rapid take-up of DSL (digital subscriber line) technology which enables high-speed Internet transmissions over copper wire, the EU official said.

Tomorrow, the European Commission will also issue a broad outline of its plans for a massive overhaul of the existing EU legislative framework for the telecom sector. The overhaul will involve replacing the 25 existing EU directives with five pieces of legislation. The legislative proposals themselves will appear in June, the EU official explained.

In addition to greater simplicity, the legislative framework's main innovation is greater flexibility in determining which large telecom operators must guarantee their competitors access to their networks.

Under the current system, anytime an operator has at least a 25 percent market share, the carrier risks being subject to the open-access requirements. Under the new approach, there will be no mathematical threshold for compliance.

Instead, the Commission will look at market dominance to determine whether a company should respect the access obligations. Dominance is measured by a series of criteria including whether a company has to take into account the behavior of its competitors in setting prices or conditions for supplying telecom services.

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