Rival calls for major changes to transatlantic telecoms deal

Date: 10/09/1998

By Peter Chapman

BRITISH Telecom's alliance with US carrier AT&T faces an attack from a major rival in the international market as the two bid for regulatory approval for the 10-billion-ecu deal.

Under the agreement, BT and the US giant AT&T plan to create a global joint venture to offer a full range of telecom services to companies and individual customers.

But rival operators fear the venture could control a powerful chunk of the transatlantic market, including a large slice of the profitable 'value added' and Internet services.

Nasdaq-listed company Esprit Telecom, which offers cut-price long-distance calls to customers throughout the Union, has already written to Competition Commissioner Karel van Miert urging him to force the partners to make key concessions.

Esprit president Michael Potter insists that regulators must act to end the special treatment which BT enjoys in the international call market, particularly from the UK.

He points out that BT customers who want to make long-distance calls with another operator have to dial long numbers to access the service.

Under EU rules, this system, known as 'easy access', must be phased out by the year 2000 to give way to 'equal access', whereby rival international carriers can be preselected by default. This is already in place in other parts of Europe, including Germany and France.

But Potter wants the Commission to force the UK to move earlier on the 'carrier preselection' issue as part of any decision to clear the BT-AT&T deal. At the same time, he says, BT should be forced to pay compensation to rivals.

“We think it is a competition issue. Basically the telecoms market was opened on 1 January 1998. The Commission should look at how much the market has been disrupted and distorted over the period since then and who should pay. It has a tremendous amount of power in these cases,” he explained.

“We think there were problems about market dominance even before this alliance was announced. The question is how to resolve this and the compensation issue.”

BT sources said the company and its new partner were now locked in talks with the Commission ahead of formal notification of the deal, and were sworn to remain silent on the matter.

But ahead of these talks with Van Miert's officials, company lawyers have rejected Esprit's claims that BT is abusing its market power.

“In terms of European coverage you can hardly call BT and AT&T dominant,” said one, who added that BT wanted the Commission to treat the deal as a merger rather than considering it under Article 85 of the EU treaty, which governs collusive behaviour.

“If it goes through under Article 85, there is no fixed timetable and there could be endless discussions,” he said. “If it goes through as a merger, then we have a strict timetable. The Commission would have to take an initial view in one month and, if it had serious doubts, then it could delay clearance for another four months. There is a lot less uncertainty.”

He warned, however, that the timetable for regulatory approval was more likely to be disrupted by investigations by the US authorities, who work to less exacting deadlines than their EU colleagues. “We could be looking at a year from now before we get clearance for the deal.”