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August 3, 1987

WEST GERMANY SET TO MOVE CAUTIOUSLY ON TELECOMMUNICATIONS LIBERALISATION

By CBR Staff Writer

There is still a month or so to go before the commission set up by the West German government two years ago is due to report, but the main drift of the recommendations has been leaked, and according to the Financial Times’ Frankfurt correspondent, the government has indicated that it will accept the proposals. The most important recommendation is that as a first step, West Germany should follow the early stages of liberalisation in the UK at the turn of the decade and separate posts and telecommunications, dividing the 550,000 employee, $27,000m a year Bundespost into two, the existing name staying – logically enough – with the postal side, while a new organisation, dubbed Telekom, takes over the phones. Telekom would retain its monopoly over the network, but would be run on business rather than civil service lines; its monopoly over supply of subscriber equipment would be ended, which is potentially good news for the likes of Racal, Plessey, STC and CASE here, if they are able to position themselves competitively in the market. However, there is no clear indication that it will be any easier for foreign companies to win Telekom orders for switching and transmission equipment. Value-added communications services will be open to competition, although again it is unclear how far this liberalisation will go. There is no likelihood of competiting telecommunications carriers being permitted. The recommendations in their leaked form have already excited the opposition of the postal union, which is muttering about strikes. The Bundespost has its committed supporters, who seem to be ready to go to the stake to defend it from the slightest breath of criticism, so that asking why one can’t make a reverse charge call in Germany is regarded as heresy, but its champions certainly do not include the likes of Nixdorf Computer AG, whose pioneering and innovative 8811 Data Telephone was doomed to commercial failure by an obstructive Bundespost regulation that forbade the use of a single line for both speech and data. That failure drove Heinz Nixdorf to invest the cash he garnered from his percipient backing at start-up in Amdahl Corp across the Atlantic rather than at home; Nixdorf now has a $150m or so US business. Another implied criticism of the present telecommunications infrastructure is contained in an item in yesterday’s Financial Times, which runs a table drawn up by an unidentified leading US company, which shows that taking West German charges for leased lines as 100, British Telecom charges are only 36 (Mercury claims to be even cheaper), against 43 in the US, 83 in France, 104 in Japan, 115 in Switzerland. Moreover in Germany, leased line tariffs include a charge for traffic volume, the moral being that Germany is not a good place for multinationals to site European headquarters.

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