Reding considers splitting telcos

Dominant players in telecommunications could be forced to separate their networks from their services as part of an overhaul being considered by the EU, the FT reported Thursday.

Using the UK as an example, EU Telecoms Commissioner Viviane Reding told the financial daily that “functional separation” worked and led to increased competition and faster adoption of services.

“The functional separation model is a very interesting remedy for the access problems in this market,” Reding told the FT.The report suggests Reding is considering introducing functional separation as part of a review of telecoms rules this coming July. A separation would make it simpler for smaller telecoms players to access the networks of larger firms, accelerating the adoption of broadband.

Such a proposal would require both member state and European parliament approval.

The German government responded to Reding’s comments immediately, dismissing her concerns over competition. Reding’s office and Deutsche Telekom have locked horns over the latter’s special treatment in Germany after a law was passed there protecting it from competition on its new VDSL network.

In September last year, DT was ordered to open the new network to rival services. By February this year, the EC launched legal proceedings against the government to have the law either changed or altered.

In a statement to the newspaper Frankfurter Allgemeine Thursday, the German government said: “If the Federal Republic was interested in relieving new markets of regulation, then that goal could have been achieved by doing nothing, or by sticking with old laws.”

While Germany rushed to defend its incumbent, Mark Newman, chief research officer at’s parent, Informa Media and Telecoms said the UK has set a precedent that is hard to fault. “Lots of regulators around Europe are taking a close look at the UK model where the incumbent (BT) was forced to spin off its access network business into a new heavily regulated company (Openreach) which sells capacity to third party service providers. Openreach has proved hugely successful in terms of introducing competition into the retail broadband market, driving down prices and driving up broadband penetration.”

However, Newman concedes that in the future, it is unclear how the UK model will adapt. “As consumers and businesses demand faster broadband services requiring the installation of fibre up to and into homes and offices BT’s business case for investing in these new network could be weakened if it has to provide cost-based access to these lines – and to its new next-generation network (21CN).”

According to the EC, Europe’s telecoms market generates Eur 290bn (£197bn) each year.

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