Is the EC telecom market catching up?

• Author: Levine, Richard O.
• Position: The European Community - Industry Overview

After some meandering, telecommunications in the European Community should stand at least partially liberalized by 1998. Shouldn't U.S. and Canadian executives be more than observers?

Forgive European telecommunications managers if they didn't greet January 1, 1993, with wild celebration. As free trade began among the European Community countries, most companies saw few near-term positives in European telecommunications services. The promise of a liberalized market that offers low-cost, flexible and easy-to-manage Pan-European voice and data networks seems far away. But, reminds the European Commission, the next several years will bring changes in European telecommunications -- changes that will favor businesses with operations in several European countries.

To understand the European telecom manager's past problems, imagine the United States without the Bell system and without postdivestiture AT&T, MCI or Sprint. A consortium of independent monopolies provided telecommunication services separately to each state, and each state's telephone services were "managed" by the same government agency that ran the post office. European networks and services weren't standardized across borders, were expensive and weren't user-friendly.

Fortunately, in the late 1980s, EC leaders recognized the detrimental effect the telecommunications system was having on the European economy. (Watching the pro-competitive moves of the United States, Japan and the United Kingdom helped.) They knew they had to act.

SLOWLY BUT SURELY

First, the Commission issued a 1988 directive that required competition among telecommunications-equipment vendors and separated regulatory functions from the operation of the monopoly government carriers. When complying with this directive, many governments decided to also "corporatize" their national telephone operators, separating that function from the postal service.

Then, in 1990, the Commission issued a directive that required member states to open all telecommunications services to competition as of January 1, 1993 -- with two important exceptions: public switched voice services and the network transmission infrastructure. (More on these later.)

Some countries, including France and those in the United Kingdom, had already liberalized value-added services, such as electronic mail and electronic data interchange. And European businesses have been taking advantage of these early changes in such areas as value-added networks (VANs), particularly those based on packet technology (in which data are broken into segments, or packets, that are individually routed over the network). Through its acquisition of Tyment, for example, British Telecom uses its own network's nodes to provide data services to Europe's major cities. Sprint also does this, through Telenet. France Telecom's Transpac has acquired an interest in VAN operators in the United Kingdom and Germany, also to provide data services to multinational customers. And AT&T's London-based Istel subsidiary is expanding its European packet service.

Also, after failing with data networking by integrating their national packet networks, France...