EU getting tough on telecom companies

The European Parliament on Wednesday voted overwhelmingly in favour of getting tougher on telecommunications, approving a proposal that will let national governments compel companies to sever their network operations from their retail divisions.

The European Union's legislature voted 597 for the plan, with 55 opposed and 29 abstentions. The package of reforms aims to boost competition in cellphone and internet markets.

The approved measures, authored by EU Media Commissioner Viviane 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 EU member countries.

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

The proposals must now be approved 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 as phone and broadband internet — over that network. The two businesses would be distinct units of the same company, but would have their own sales quotas and report separately to the chief executive.

The idea was pioneered 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 analysts told CBCNews.ca that competition 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."

Phone companies in Britain, the rest of Europe and New Zealand have argued against moves 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 the No. 2 spot in 2002 but has since dropped to 10th out of the 30 OECD members.