European officials clash over liberation of internet sector

Europe's top industry officials have clashed over competition in the high-speed internet market, in a sign of rising concerns over the pace of liberalisation in the sector.

The strongly worded correspondence, seen by the Financial Times, between Competition Commissioner Mr Mario Monti and Telecoms Commissioner Mr Erkki Liikanen highlights their desire to avoid blame for the sector's problems. The exchange is part of a continuing battle between the two commissioners over who should take responsibility for the telecoms sector. Their differences became apparent in recent weeks with last-minute manoeuvrings over new rules.

In a letter sent to Mr Liikanen in November, Mr Monti says that, two years after the liberalisation introduced by the telecom commissioner, most of the internet market is still in the hands of former monopolists.

Mr Monti's letter, copied to Mr Romano Prodi, president of the European Commission, says it would take the EU a further 28 years to reach the level of competition attained by the US in six years. "If the current trend continues, local loop [liberalisation of the high-speed internet market\] will have turned out to be a wasteful experience, despite the involvement of significant human resource," Mr Monti's letter says.

The competition commissioner's remarks echo those of many new entrants in the sector, who have complained they cannot compete with the financial and technical capabilities of firms such as France Telecom or Deutsche Telekom.

Mr Monti urges Mr Liikanen to take action to push operators to reduce the prices they charge their rivals for the use of infrastructure and lines. But in his reply to Mr Monti, the telecoms commissioner rejects his colleague's analysis and urges Mr Monti to take action against former monopolists if they behave in an anti-competitive manner.

"I am not totally pessimistic about the potential for growth and the development of competition," Mr Liikanen's letter says. "If there is evidence of predatory pricing... I would strongly encourage you to take action, so that we can provide a clear signal to operators and member-states." He adds that more recent data show new entrants control almost a quarter of the market for high-speed access over internet lines "and this figure is rising".

Mr Liikanen's response also shuns Mr Monti's suggestion of a personal meeting to discuss the matter, recommending a meeting between officials instead. The Commission declined to comment but officials conceded the two commissioners were still at loggerheads on the issue.

Mr Monti has initiated inquiries into several telecoms operators, including France Telecom's Wanadoo and Deutsche Telekom. But the Commission has not reached a final decision on any of these cases. Despite Mr Monti's urging, Mr Liikanen did not set rules for pricing in a statement last year. He later produced "recommendations" for national authorities to police the sector in a joint paper with Mr Monti but the two commissioners' officials continued to feud.

In a report on the sector, the Commission concluded only 4 per cent of the 187 million telephone lines in the EU were broadband, most operated by the incumbents.