REFILE-UPDATE 2-EU watchdog quizzes telcos over collaboration

Wed Mar 14, 2012 2:22pm EDT

* Big five companies, trade assoc receive questionnaire

* Not yet an official antitrust probe

* Relates to meetings held among top operators since 2010

* Technology standards on new mobile services part of questioning

* Deutsche Tel, Tel Italia say companies were open, transparent

By Leila Abboud and Claire Davenport

PARIS/BRUSSELS, March 14 (Reuters) - The European Union's antitrust watchdog is questioning Europe's biggest telecoms companies to see if their efforts to develop new technology standards for mobile services risk keeping out competitors and harming consumers.

Network operators, already targeted by EU regulators over their tariffs and roaming fees, are now attracting fresh scrutiny over coordinated plans to harvest revenues from the smartphone revolution that has seen the likes of Apple and Google grab a large slice of mobile profits.

To cope, telcos are increasingly working together to develop new services and ventures ranging from mobile advertising and payments to new messaging tools.

They see such moves as central to their ability to compete with Apple and Google, and key to making sure they can afford huge investments needed for new fixed and mobile networks.

The five leading European operators have been meeting informally since late 2010 and the industry group the GSMA has also worked to developed technical standards for these new services.

These efforts have now touched off EU competition concerns that became public on Wednesday.

A spokesman for the EU competition commissioner said a questionnaire it sent to Vodafone, France Telecom , Telecom Italia, Deutsche Telekom, Telefonica and the telecom operators' trade group, GSMA, was an information-gathering exercise and was not an official probe.

But in a 17-page list of questions, the regulator said it had information that the telcos may have "aligned their behaviour ... possibly to the detriment of third parties and consumers."

It requested information on a wide range of operator initiatives on mobile payments and advertising, so-called rich communications suite (RCS) technology that enables new video and picture chats mobiles, and also asked for details about how the industry sets technical standards, according to a copy of the questions seen by Reuters.

JOINT MEETINGS

The initiative to hold meetings among the big five telecom operators was started by France Telecom's chief executive Stephane Richard in late 2010. He cast it as a way for the industry to grapple with the broad challenges of new competition from the likes of Google and Apple, and how to get these technology giants to contribute to the cost of building out networks.

The most recent meeting of the group was held at the Mobile World Congress in Barcelona in late February.

At the time, the GSMA also announced progress on developing standards for so-called RCS messaging technology that can enable video and picture chats between anyone using mobiles.

The technology is central to the mobile operators' efforts to not be sidelined by free messaging tools like Facebook and Skype that people are increasingly using on their mobiles.

Now the EU is asking whether such collaboration on standards might not serve to block out competitors.

INNOVATION

In the past, European Competition Commissioner Joaquin Almunia has stressed his opposition to companies trying to block rivals via their patents and technical standards, which can result in interoperability issues and hamper innovation.

The Commission's biggest interoperability case was against Microsoft and its software in the last decade, which ended with the company settling with the regulator. The Commission can fine companies up to 10 percent of their global turnover if found guilty of breaching EU antitrust rules.

Industry sources expressed surprise about the regulators' questionnaire, saying the meetings among the top operators were done in a transparent way with precautions taken to address anti-trust concerns.

Lawyers were present and an account of each meeting was sent to telecoms and competition regulators in Brussels, they said.

Telecom Italia and Deutsche Telekom both defended the operators' initiative in statements on Wednesday saying they did not breach competition rules.

Franco Bernabe, Telecom Italia's chairman and head of the GSMA, said co-operation among operators was key to their survival.

"In the light of the strong competitive constraints pushing from outside Europe, only initiatives of this kind can allow the European industry to compete on the global market," he said.

The inquiry comes at time when relations between Brussels and Europe's telecom network firms are at a low ebb as fights over reducing roaming charges and how to finance costly broadband network build-outs come to a head.

The CEOs of Vodafone, France Telecom and Telecom Italia last month accused Europe's regulators of sapping the industry of capital.

Vodafone's chief executive Vittorio Colao accused the European Commission of an "auto-pilot regulation mentality" that risked crippling the region's economic growth, while France Telecom's Richard said the priority should be on investment not regulation.

In response, EU Commissioner Neelie Kroes, who has steered much of the telecoms regulation on pricing, hit back by saying she sided with consumers and "did not respond well to threats."

A spokesman for Kroes declined to comment on Wednesday.

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