November 13, 2007 / 6:38 AM / 12 years ago

EU plans shake-up of telecom rules

BRUSSELS, Nov 13 (Reuters) - The European Commission will propose a shake-up of European telecom rules on Tuesday that would allow national regulators to split dominant operators and give Brussels more oversight powers.

Regulators could force a split, with no divesture of assets, as a last resort in case of persistent competition problems, after checking the impact on investments in networks and getting green light from the EU executive, a draft shows.

The European Union executive argues its plan, which also includes creating an EU telecoms watchdog, is needed to boost competition in important sectors such as broadband and to create a single European telecoms markets.

“The current fragmentation (of the market) hinders investment and is detrimental to consumers and operators,” says a draft of the proposal, seen by Reuters.

Incumbents such as France Telecom FTE.PA strongly oppose the plan, saying they would be discouraged from investing in new networks if there is a risk of having their business and network arms split.

But new entrants back the Commission, saying its plans are needed to ensure fair competition.

National regulators are happy to be given more powers, but do not want the EU executive to be allowed to overrule their decisions and say they do not need an EU watchdog.

The European Commission expects the rules to be applied in 2010. They will need approval by EU governments and the European Parliament to become law.

Analysts expect EU states such as Germany, France and Spain to try to water down the proposals which could affect their former monopolies such as Deutsche Telekom (DTEGn.DE) and Telefonica (TEF.MC).

“Several of the national governments are opposed to the idea of giving more powers to the Commission,” John Davies, a telecoms analyst at Dresdner Kleinwort said. “There is scope for the final version to be quite a lot different.”

The EU executive will also propose that radio frequencies, used by the telecoms, broadcasting, aircraft and defence industries, should be opened to all businesses to boost what it estimates is a 250 billion-euro ($364.9 billion) market.

The EU executive wants to allow companies which do not use their allocated frequencies to trade them with others.

The European Commission plans to reduce a list of telecoms markets kept under close scrutiny from 18 to 7. The move is welcomed by incumbents and opposed by new entrants, but analysts say it will have little impact on these markets.

To view a related factbox click on [ID:nL12304514] Reporting by Ingrid Melander, editing by Leslie Gevirtz

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