RUSSELS, July 8 — Former telephone monopolies in Europe are engaged in "methodological anticompetitive behavior," five of their largest rivals said today in a complaint letter sent to Mario Monti, the European Union's competition commissioner.
The chief executives of Cable and Wireless of Britain, Arcor of Germany, Cegetel of France, Wind Telecommunicazioni of Italy and QSC of the Netherlands wrote in the letter that despite a European Union law enacted a year ago to open up local phone lines to competition, they and other new entrants to the market "still face entry barriers."
The five companies urged the commission to take the local loop — the wires connecting customers to local phone exchanges — away from the former monopolies if they continued to thwart fair competition.
In principle, the commission is sympathetic to their concerns, and has said that separating the local loop from other phone services is vital to the spread of high-speed Internet access throughout Europe, an important political goal.
Mr. Monti said at a conference in Brussels today that his office was aware of discriminatory practices by the former monopolies beyond the two cases it was already examining — suspected predatory pricing by Deutsche Telekom in local service and France Télécom in support of Wanadoo, its Internet subsidiary. More cases may be opened soon, he suggested.
Only about 2 or 3 percent of local lines have been opened up to fair competition since the enactment of the new law. In the first quarter of 2002, an average of just 6,000 phone lines a week across the 15-nation union were unbundled to allow the subscriber a choice of local service providers, according to new research by the commission. During the same period, the former monopolies established 65,000 new high-speed Internet connections a week. Competitors can offer rival Internet connections only on unbundled lines.
Still, the European Union is unlikely to consider a call to break up the former monopolies, according to a person close to the commission's thinking. "There is no doubt that the new entrants are having it tough right now," this person said, "but is it realistic to ask for the incumbents to be broken up? Such action would be disproportionate."
Michael Bartholomew, a director of the former monopoly companies' trade association, said that today's complaint letter "sounds like a cry of desperation by the new entrants." Mr. Bartholomew said that the former monopolies had spent 330 million euros ($326 million) making the local telephone exchanges capable of accommodating competitors. His group's members have not been obstructing fair competition, he said; rather, public expectations for local loop unbundling were simply too high. "It is not the magic wand that will create broadband Internet access in Europe," he said. "There are alternative, less costly ways of providing fast Internet, such as cable TV lines and fiber optic lines. The reason why so few local telecommunications lines have been unbundled is that there is no market demand from competitors for local loop products."
New entrants to the telecommunications market said the commission's attempts to regulate the local loop had failed, and one said such efforts were in vain anyway.
Renato Soru, the chief executive of Tiscali, an Italian Internet service provider, said that companies like his would do better to gain access to the former monopolies' network at a central location, not at individual exchanges scattered across the landscape. They would then pay the local phone company to link them to customers instead of duplicating those links themselves.
"The reconsolidation of incumbents in their respective national markets is only too apparent," Mr. Soru said. "The road that should be taken is not that of unbundling the local loop, as this is not an efficient answer to the problem from an economic point of view. The real solution is free access to infrastructures, following the interconnection model, which has already led to the liberalization of the telephony and dial-up Internet sectors."
