Telecoms firm calls the Commission’s bluff

Date: 11/09/1997

By Peter Chapman

THE message from the European Commission is that full telecoms liberalisation in the EU, which begins on 1 January 1998, will bring lower prices, better service and greater choice.

But who is going to deliver this promise? And how are they going to fight off the former monopolies with their massive networks, fat wallets and huge market share?

Lucien Gaumier, managing director of Brussels-based European Telecom, says his company and ones like it will be a major force in the new telecoms era offering cut-price long-distance and international calls.

European Telecom is a reseller of capacity offered by large telecoms operators, buying big chunks of time on the long-distance networks from firms such as British Telecom and MCI's Concert, Global One and AT&T and reselling them in smaller chunks to businesses.

European Telecom attracted its 4,000 business customers by undercutting the traditional telecoms operators such as Belgium's much maligned Belgacom.

“In Belgium, we do this at the rate of Belgacom less 25-30&percent;. On top of voice services, we also do fax and data. That is our core business,” says Gaumier, adding: “In the US there are thousands of resellers like us who are profitable. There is room for everyone.”

Founded in 1988, and fully owned by just four executives including Gaumier, the company was based on exporting an American idea to Europe, with the 'European Telecom' name being registered across the EU.

It started in Belgium, expanded to the Netherlands in 1995, to Luxembourg in 1996 and, says Gaumier, is now looking to open offices in Greece, Spain and Austria this year. Customers range from small companies to big concerns such as Belgian airline Sabena.

European Telecom is only allowed to sell services to groups of business people or their families in what are known as 'closed user groups'. This restriction will be lifted when Union market liberalisation finally takes off.

The company is limbering up for full competition by offering hefty discounts to businesses on long-distance 'interzonal' calls inside Belgium by linking up its offices in Wallonia, Flanders and Brussels.

This service will be rolled out on 1 January to ordinary customers willing to spend 221 ecu for a special box to adapt their telephone to use the European Telecom network. The firm plans to assemble cheaper boxes costing just 24 ecu at its Brussels office in the future.

But Belgacom, in a move likely to be repeated by former monopolists across the EU, is not taking this challenge to its lucrative long-distance market lying down.

“Belgacom then said: 'We will increase our local call charges and decrease the interzonal charges a little',” explains Gaumier, adding: “This is not fair from Belgacom. That is what I don't like about them. They can take the decision to increase their price, but they have no idea what the cost of a call is.”

Even as liberalisation moves forward, barriers remain to further expansion in the form of red tape and the reluctance of operators to do business, he claims, retelling a familiar story among challengers to the EU's telecoms status quo.

“I am talking to the French authorities about opening an office in France, but that could prove difficult. With Italy and Germany, there are also big question marks. It is really difficult to operate with Deutsche Telekom,” says Gaumier, although he adds with an air of defiance: “Before 1999, we will have the European Union covered.”

Gaumier welcomes the Commission's efforts to set up a bench-mark for the level of charges which big operators across the EU charge other firms, such as European Telecom, for interconnection on to their networks - a major cost factor.

The aim is for operators charging high interconnection rates to be shamed into lowering them and for regulators to have bench-mark rates from other countries to compare with those at home as well as the method used for calculating them.

Gaumier says Belgacom has offered to charge 0.03 ecu (1.3 BF) a minute for handling part of the calls made by his customers. This figure is set to be approved in March next year after Belgian government scrutiny.

“We need bench-marking. I think the European Commission is doing the right thing in encouraging this. We have good relations with the Commission. It sees us as a benefit for competition. It sees that if there are ten or 20 resellers like us, competition is there,” he says.

In the future, says Gaumier, European Telecom, with its 12.3 million ecu turnover, will be floated on Europe's new EASDAQ market for high-tech stocks. But this will take time.

“For EASDAQ there are 150 parameters which we have to follow with our accounting and financial reporting. This is not an exercise you can do over a weekend.”