EU warned telecoms reforms will harm sector

The State's two most important regulators have told the European Commission that proposed Europe-wide regulatory reforms will damage the telecommunications industry here.

The Director of Telecommunications Regulation and the Competition Authority have jointly warned that liberalisation of the telecoms market could be derailed if the European Commission presses ahead with plans to curb the power of national communications regulators. The agencies point to the current low levels of competition in the mobile phone market and the broadcasting market for pay-television services as potential problem areas where regulators need to retain strong powers in intervention.

In a joint submission to the Commission, the State bodies say its proposed directives on the communications market could lead to significant delays in addressing anti-competitive behaviour.

The new directives may also create uncertainty for operators at a time of difficult market conditions and when competition in the sector is weakening, says the joint submission.

The Commission is proposing to limit the power of telecoms regulators to intervene in certain markets unless it is established that an operator is "dominant" - a characteristic determined using complex criteria within competition law.

Previously, regulators used a concept known as significant market power, which was reasonably simple to establish because it usually took effect when a firm gained 25 per cent market share.

The Commission also wants regulators to shift their focus from regulating retail markets - such as the current price caps on Eircom's retail arm or on NTL's prices - to wholesale markets, the fees that operators charge each other for using networks.

The Commission believes the directives - which are due to be introduced by mid-2003 - will bring greater harmonisation to European regulation. It says the directives will create greater certainty for firms located in Europe.

But the strongly worded submission published yesterday by the telecoms regulator and the Competition Authority shows that both parties believe the market in the Republic is not yet ready for the directives. "Ireland was one of the later member-states to liberalise the communications market and, like other countries, is experiencing a weakening of competition so that it is not appropriate that the range of relevant markets be reduced," according to the document.

The submission specifically targets the mobile market as one that is subject to "limited competitive pressure" and in which the barriers to entry remain high. This is of particular importance as the average revenue per user in the Irish mobile market is the highest in the EU. "While larger volumes of traffic contribute to this, these higher traffic patterns per handset are not matched by relatively lower tariffs," it says.

Both agencies recommend that the retail mobile market and the broadcasting markets should warrant further examination and allow regulation, according to the report.

If this does not occur in the market for broadcast services, the level of protection for consumers of broadcasting distribution services in terms of price, quality and choice would be negatively impacted, the report continues.

The submission also criticises Commission proposals that would require regulators to undertake extensive analysis of particular markets - not already subject to regulation under the directives - before they can be regulated.

"This appears to raise the threshold at which market analysis can be envisaged and leads to the potential for significant delays in addressing bottlenecks and anti-competitive behaviour," the submission says.

This procedure may be open to legal challenge and would create market uncertainty that could deter market entry, it adds.