Italians up in arms over Internet services

Date: 11/06/1998

By Peter Chapman

ITALIAN Internet service providers are set to appeal to EU anti-trust watchdogs amid claims that Telecom Italia is unfairly squeezing them out of the market.

Marco Barbuti, president of the Italian Internet Service Providers' Association, said small service providers were planning to turn to the European Commission for help. He added that they had lost patience with Rome's anti-trust authorities because of their failure to deal with complaints about Telecom Italia's behaviour.

“We sent a very large memoir to anti-trust officials in Italy in February, but they have still not sent us a response,” explained Barbuti, who is also an executive with Italia On Line.

In the meantime, he claimed, Telecom Italia was continuing with a predatory pricing policy which has seen its Internet market share rise from zero to 70&percent; in two years and threatens to drive smaller rivals out of business.

Barbuti said Telecom Italia was only charging its customers one-ninth of the actual cost of providing Internet services as indicated in its financial accounts.

At the same time, lines leased by the company to competitors to offer their own rival Internet services cost more than the European average - a fact not contested by Telecom Italia sources, who claim the company has no option but to pass on high government charges for its public telephony licence.

“Telecom Italia was the last to arrive on the market. Two years ago it did not exist. Now the company is approaching it with the logic of cost being nine times revenue,” said Barbuti. “The situation is that, in a very few months, an operator who had zero market share now has 70&percent;.”

Barbuti said the Italian story was being repeated across the EU in member states such as Germany and France, as old monopoly telecoms operators moved into the market with their own services in a bid to fend off competition.

This is causing concern among rivals, who claim the former monopoly companies are abusing their dominant position as suppliers of most of the telecoms infrastructure inside their home markets.

France Télécom was recently asked by national authorities to withdraw a specially subsidised scheme offering Internet access to schools after competitors such as British Telecom complained that they were unable to compete with its prices.

Service providers in Spain are also up in arms over moves by a coalition of local Basque government-owned organisations to offer free Internet access.

Commission competition officials say such cases should normally be looked at by regional anti-trust watchdogs. However, one added that if local officials failed to act, the institution would be ready to step in to prevent the abuse of dominant positions.

“Competence is shared between the countries' regulatory authorities and the Commission,” he said. “But companies faced with this kind of situation where there is an abuse of market power under Article 86 of the EU treaty, or where they are faced with prices below cost, can file a complaint with the Commission.”

The official added that the Brussels body was being inundated with complaints over telecoms market abuses by the former monopolies.

“The Italian issue is the kind of case we are hearing about daily. Telecom operators will try to leverage their positions down to the Internet,” he said.

“Service providers are being squeezed on one side through high costs for leased lines and on the other side by attractive offerings from the incumbents.”