The European Commission’s directive on interconnection, which should be in place in the fall, aims to assure trans-European operability, competitiveness through interconnection and that the universal service concept cannot be abused to prevent new entrants from coming into the market. So said Detlef Eckert, assistant to Commissioner Martin Bangemann, at a recent Yankee Group Europe conference on European telecommunications. The Commission is working on another directive, on licensing, which aims to streamline authorization procedures as much as possible, he explained. Rather than continue licensing for individual services, Eckert says, the Commission wants member states to issue a general authorization as a telecommunications operator. Individual licenses should be required only where radio frequencies must be allotted, such as for voice or mobile services. Furthermore, he said, the Commission wants member states to agree that licenses can be limited only if radio frequencies are too scarce. For now, he said, member states regulate their own frequencies, but he said he believes that industry will increasingly call for, if not global frequency management, then certainly pan-European management. He added that his remark was not intended to mean that Brussels was asking to be responsible for such regulation. Eckert remarked on the sea-change in European politicians’ attitudes toward deregulation.
Seeing wireless replace fixed telephony
We’re no longer discussing when and where we need to deregulate, but how we do it. The result is that my speeches become a lot more boring, because they talk about interconnection and such, and that the percentage of lawyers in Brussels has skyrock eted, he quipped. Despite consensus on the prospects for growth in the mobile communications market, the same conference showed some divergence of opinion on exactly how much business is to be found in that sector. Keith Mallinson, Yankee Group Europe managing director, estimates it will hit $40bn by the Year 2000. In Sweden alone, said Bertil Thorngren, senior vice-president of corporate strategies for Telia AB, mobile penetration has gone to 26 per 100 this year from 16 per 100 in 1994, (wi th 40 per 100 in Stockholm), and should hit 40 per 100 throughout the country by the end of this year. In effect, we are seeing wireless replace fixed telephony, he said, adding that he expects fixed telephony to drop to 30% of Telia’s revenues in the next two years. All of that growth, said Tim Murray, director of the corporate finance division of Barclays de Zoete Wedd, means that the lion’s share of positive cash flow for phone companies will come from mobile communications. But Lena Ashu vud, a telecommunications credit analyst from Enskilda, one of Sweden’s largest investment banks, wondered how he arrived at such an evaluation. Many of the operators in Sweden are actually paying customers to buy subscriptions, something that is c osting them millions of krona, and they are not profitable. In fact the third-ranking operator in Sweden has become known as `the company whose profits are always in the future.’ At the conference, Yankee Group also presented the results of its 199 5 user survey, which showed that while only 50% of the respondents today are using alternative telecommunications carriers, 88% said they would use one if it were available, while 54% of the respondents said further that they would use an alternativ e carrier for cost reasons, followed by better quality service (31%). And 51% of the survey respondents said their biggest network headaches are network management, availability and reliability problems. These were followed by costs and tariffs (38% ) and change, complexity and network skills (31%). Private network and virtual private network operators in Europe have already seen their market expand. According to the Yankee Group survey, in 1994, the public switched telephone network represente d, on average, 77% of the aggregate voice traffic in Europe, while private networks comprised 11% and virtual nets only 7%. Just a year later, the numbers were 61%, 18% and 15%. On facilities management, about one third had evaluated and rejected th e option or not considered it. The rest were either evaluating (41%), were committed to doing it (2%), were committed and had requested proposals (5%) or had already done it (211%). Among infrastructure-based alternative carriers, Mallinson felt tha t energy companies were better placed than railways because they have money to invest, whereas railways are usually loss leaders. So how does a railway justify pumping lots of money into telecommunications? he said. Yet almost all Europe’s rail co mpanies are actively investigating how to get into telecommunications. Furthermore, Mallinson believes Hermes, the alternative carrier that is using Europe’s railway network infrastructure, has finally organized itself now to be able to grow and be profitable.
