WRITTEN QUESTION E-3285/97 by Marie-Paule Kestelijn-Sierens (ELDR) to the Commission (20 October 1997)

Subject: Telecommunications

We are aware that liberalization of the telecommunications market is to take place on 1 January 1998, and that this will encourage competition.

Is the Commission empowered to take other initiatives to ensure that the tariffs charged by telecommunications companies in the European Internal Market are not influenced by internal borders?

Answer given by Mr Van Miert on behalf of the Commission (12 November 1997)

The Commission has taken and will continue to take all initiatives within its powers to tackle the cross-border effect in the tariffs of the telecommunications organisations. The main reasons why cross border tariffs are higher than domestic long distance tariffs are, firstly, that the former are still not cost-oriented, secondly, that the current networks have been designed on a national basis and, thirdly, that high interconnection or settlement rates are applied to terminate cross border calls.

Under Directive 96/19/EC of 13 March 1996 amending Directive 90/388/EEC with regard to the implementation of full competition in telecommunications markets ((OJ L 74, 22.3.1996. )) Member States have to allow their telecom organisations to re-balance their tariffs before 1 January 1998 and, where such rebalancing cannot be completed before that date, to provide the Commission with a detailed time-table for the future phasing out of the remaining imbalances.

Under Article 12(1) of Directive 95/62/EC of the European Parliament and of the Council of 13 December 1995 on the application of open network provision (ONP) to voice telephony ((OJ L 321, 30.12.1995. )), Member States have to ensure that voice telephony tariffs are cost oriented. This obligation will be maintained in the revised wording of this Directive (now Article 17), which is currently in final process of adoption. A number of Member States have nevertheless not yet ensured that their telecommunications organisations implement a cost accounting system allowing monitoring of the effective implementation of the principle of cost-orientation. However, the entry of competitors in this market segment will in any case lead to further tariff rebalancing.

The second reason for the tariff differences between domestic and cross-border calls is that the underlying infrastructure was designed on a national basis in the framework of the national monopolies. To address this cost structure, new infrastructure must be established, e.g. alongside the railway tracks. Since 1 July 1996, Member States must allow the roll out of such networks for the provision of services other than voice telephony and from 1 January 1998, the remaining special and exclusive rights on the establishment of such infrastructures will have to be lifted. On the other hand, the Commission is taking the possible contribution to the establishment of cross border networks into account when authorising global alliances under Article 85 of the EC Treaty.

High cross border tariffs also result from the current level of interconnection tariffs and international settlement rates. The Commission will scrutinise these tariffs and their justification on the basis of the principle set out in its draft 'Notice on the application of the competition rules to access agreements in the telecommunications sector', which will soon be finalised. In particular, Article 86 EC Treaty prohibits operators in a dominant position from discriminating between similar transactions, and also prohibits them from charging excessive prices. The price charged by operators for call termination should be related to the actual costs of providing the service, and operators can only discriminate between national and cross-border call termination charges to the extent that there is a genuine cost difference to the operator in providing these services.

Article 7(2) of Directive 97/33/EC of the European Parliament and of the Council of 30 June 1997 on interconnection in telecommunications with regard to ensuring universal service and interoperability through application of the principles of open network provision ((OJ L 199, 26.7.1997. )) will also oblige incumbent telecommunications organisations to offer cost oriented interconnection tariffs from 1 January 1998 onwards, which means that at least within the Community the current high settlement rates will no longer be applicable. Cross border interconnection tariffs will from then on be subject to interconnection negotiations, which should lead to a considerable decrease in tariffs for cross border calls within the Community. On 15 October 1997, the Commission agreed a recommendation on interconnection pricing (to be published), which sets out recommended 'best practice' interconnection charges based on the prices in the three lowest cost Member States.

Finally the amendment of Directive 97/33/EC which will impose the introduction of carrier selection on a call by call basis or pre-selection and which is currently discussed in the Council, will reinforce the impact of these measures.