EU getting tough on telecom companies

The European Parliament on Wednesday voted overwhelmingly in favour of getting tougher on telecommunications, approving a proposalthat will letnational governmentscompel companies tosever their network operations from their retail divisions.

The European Union's legislaturevoted 597 for the plan, with55opposed and 29 abstentions.The package of reformsaims to boost competitionin cellphone and internetmarkets.

The approved measures, authored by EUMedia CommissionerViviane Reding, also include the creation of a single oversight group, the Body of European Regulators in Telecoms, which will be made up of representatives from all 27 EUmember countries.

Aconsumer protection plan, where telecom providers will have to fully disclose any restrictions on their services, was also given the green light.

The proposalsmust now beapproved by the governments of member states. If they go ahead,national regulators will have the power to force the split of telecom companies into one business that runs its network and another that sells services such asphone and broadband internet over that network. The two businesses would bedistinct units of the same company, but would have their own sales quotas and report separatelyto the chief executive.

The idea waspioneered by Britain's regulator, Ofcom, which forced the country's big phone provider, BT, to split off a separate network business in 2006. The new division, called Openreach, sells access to BT's network much of which was built using taxpayer money when the company was a state-controlled monopoly to competing firms, who then sell their own internet services to customers.

Prices plummet

Industry analyststold CBCNews.ca thatcompetition for high-speed internet customers has greatly accelerated in Britain since the move, and subscription prices have plummeted.

"It's better but not perfect," said David Harrington, head of regulatory affairs at the Communications Management Association in Britain. "Most people recognize it's still early days."

New Zealand followed suit with the splitting of its incumbent phone company, Telecom New Zealand, earlier this year. Although it is still too early to measure the impact of Chorus, the new network company, industry observers there say the competitive mood has changed for the better.

"It's changed the entire character of the industry," said Ernie Newman, chief executive of the Telecommunications Users Association of New Zealand. "The imbalance of their thinking between the interests of their shareholders and that of other stakeholders has pretty much disappeared now."

Phonecompanies in Britain, the rest of Europe and New Zealand have argued againstmoves toward such operational separation and have threatened to invest less in building new infrastructure, but both Harrington and Newman say the opposite has happened network investment has gone up, both by incumbents and by competitors.

In Canada, successive Liberal and Conservative governments have moved further and further away from regulating telecommunications companies. Canada's standing in international broadband rankings has dropped in lockstep.

According to the Organization for Economic Co-operation and Development, European countries hold eight of the top 10 spots in a ranking of broadband subscribers per capita, with Denmark topping the list. Canada held theNo. 2spot in 2002 but has since dropped to 10th out of the 30 OECD members.