BT kept waiting on lines to Europe's free market

THE MONDAY INTERVIEW; Sir Iain Vallance, chairman of BT, and Michel Bon, president of France Telecom, stake their claims to reign supreme in the expanding European telecommunications market. Each scents victory, but can they both win?

There is an air of scepticism whenever Sir Iain Vallance is asked about European liberalisation. Keen as the British Telecom chairman is to embrace the market, the changes he wants implemented have been a long time coming, in spite of the rhetoric in Brussels and worthy words from governments in member states.

BT takes every opportunity to bang the drum for a more open market in Europe. This, he believes, is one of the consolation prizes for being exposed at an early stage to the cold winds of competition on its home ground, even if the telecommunications giant still dominates the UK market.

"The Commission has got the bit between their teeth and that opens up potential opportunities for BT. We have already gone through the 'painful adolescence' of passing from state ownership to private ownership and of liberalisation in the marketplace. We are all set and ready to go."

But according to Sir Iain, no one really knows when competition will really happen. Full competition right across the board, with genuine choice and the level of maturity seen in the UK market, could take 10 years, he said.

The problem from BT's point of view is not so much the introduction of directives on which competition will be based, but the length of time it can take directives to be implemented in national law. Even then, as Sir Iain observes: "They are not necessarily observed."

He added: "In spite of good words about hitting the tarmac with the wheels running there will be some dragging of feet. But directionally it is right - the Commission in Brussels wants it and customers want it.

Some countries interpret directives very narrowly in their own law; others over-interpret. Asked whether the UK falls into the category of the over- zealous, he admits: "In our line of business that is my experience."

Sir Iain's view is that the competition directorate charged with making things happen has its heart in the right place but not enough resources in enforcement terms. "A key to getting a move on is strengthening of the enforcement arm in enforcement of directives. I am happy with the directives coming up. All the right items are on the agenda. Our concern is not the agenda; it is getting it into national law and getting it enforced. That requires a will and a determination."

He believes that BT and the Government at least are "shoulder to shoulder" in this drive for liberalisation, and that any future Labour administration would also take the same line. In spite of differences between the two parties on Euro-issues. Sir Iain points out: "This is Treaty of Rome stuff. It predates Maastricht."

From BT's position, it has not only a lot to gain from the ability to compete freely across the continent, it has a lot to give in terms of lessons learnt.

The consensus is that other member states have barely begun to tackle the thorny issue of regulation. Without that there is little point in having an open marketplace, which would be all too easy for dominant players to abuse.

"We need regulation which is independent of government. That is extremely important and it is very difficult to achieve while some public telephone operators are state-owned," Sir Iain said.

"We need a proper licensing procedure and interconnection terms. If we had the same interconnection terms across Europe as we have here in the UK we would be laughing. We are not asking for anything pro-competitive. The best we can hope for is something that is not anti-competitive."

He went on: "There are no signs yet of any country in Europe or indeed anywhere else which would lean over so far to encourage competitors as we do in the UK."

Sir Iain rejects the notion that Europe needs a large and powerful new body along the lines of the UK's own watchdog, Oftel. Unsurprisingly, he warns against detailed interference in the day-to-day business of the industry - a tendency of which BT accuses Oftel and constantly rails against.

Sir Iain believes that a Euro Oftel is not necessary. "The main interest of the Commission should be deregulation. That is where the supremacy of Brussels over national governments is an imperative.

"Beyond that we need general terms and principles laid down as guidelines What we must avoid is over-regulation of the detail. Otherwise you get distortion if you get significant differences in regulation in different member states."

The main global telecoms alliances

Name: Phoenix

Partners: Sprint (US long distance operator); France Telecom;

Deutsche Telekom

Status: The two European telcos are still awaiting EC approval for their

joint venture, Atlas, the prime vehicle for the two companies'

business services. Atlas is to join with Sprint to form Phoenix.

Name: Uniworld

Partners: AT&T (US telecoms giant); Unisource (joint venture between

the telcos of Spain, Switzerland, Netherlands and Sweden)

Status: Unisource is still awaiting EC approval. Subsequent link to

AT&T subject to regulatory review on both sides of the Atlantic.

Name: Concert

Partners: MCI (US long-distance operator); BT

Status: Up and running. Package of services for business customers is

distributed in Europe through various equity partnerships, joint

ventures and alliances in several countries.