The liberal line on deregulation

Restructuring Telecommunications
May 22, 1998

On New Year's Day 1998 the European Union's telecommunications markets were supposed to be fully liberalised. But the remorseless accumulation of directives opening telecommunication markets has not yet succeeded in fully opening or harmonising markets across the EU. The frustration in the European Commission is clear from an exchange witnessed by the reviewer when Karel van Miert, the European commissioner for competition, told Italy's minister of communications that if Italy met the liberalisation deadlines he, van Miert, would advise the Pope that a miracle had occurred.

Despite imperfect and incomplete implementation of the "full competition" directive, the ratchet of liberalisation has been turning since 1988. Successive directives furthered the gradual realisation of the vision set out in the European Commission's 1987 green paper. The green paper sought to bring telecoms in line with the European Treaty's provisions on competition (pro), state aid (anti), market integration (pro) and so on. It emphasised three principles: liberalisation of areas under monopoly; harmonisation of the European market; application of competition rules.

Peter Curwen's book tells this story and places it within a bigger, global story of liberalisation dating from the early 1980s when, more or less simultaneously, what was then the world's biggest company, AT&T, was broken up to foster competition in telecommunications in the United States, and the United Kingdom's biggest company, BT, was privatised. Not only do big things happen in this domain, they happen fast - in 1982 the UK had two telecommunications operators, now it has more than 1,000 - and that is the trouble for this sort of book. Once published, the empirical detail on which analysis and argument rest has usually been overtaken by events, but these specifics tend to bury a general, theorised analysis under a mass of detail. Mediating between books such as Robin Mansell's The New Telecommunications or Ingo Vogelsang and Bridger Mitchell's Telecommunications Competition: The Last Ten Miles and the European Commission's Information Society website (www.ispo.cec.be) is a challenging task.

Curwen identifies two target readerships; business people who want a survey without technical detail and academics seeking case-study material. As he acknowledges, the empirical substance of such a book has a very short shelf-life. In consequence there can be few business people who will find Restructuring Telecommunications the useful survey Curwen intended. Too much has changed and too much has to be unlearned by the neophyte reader for the book to be useful. It is like an outdated Ordnance Survey series map - interesting to see how things were but not a reliable guide to route finding in the here and now. That said, the glossary and bibliography are helpful to those seeking orientation in a confusing and complicated landscape.

Academics may find Curwen's study a useful case study - although perhaps a kind rather different to that intended by the author. For Restructuring Telecommunications well exemplifies the liberal orthodoxy that informs EU policy and Curwen's own perspective. There is much to support this viewpoint - not least the metamorphosis of BT from a sclerotic monopoly to a world-class company. But sceptics would be more likely to be convinced had the author considered cases that do not fit neatly into the dominant liberal orthodoxy. A hint of the great heresy, that efficient public monopoly is not always a contradiction in terms, surfaces in a curious place - in Curwen's third of a page on Norway, where he acknowledges that TeleNor is "sufficiently efficient to prove difficult to underprice". Curious, because Norway is less obvious prime territory for heretics than is France, which Curwen considers more extensively - but not for the challenge to the liberal paradigm posed by France Telecom.

In consequence, the slow and uneven implementation of the EU's liberalisation policies appears, from Curwen's account, to be explicable only in terms of the desperate rearguard actions of incompetent monopolies and their political sponsors. No one could deny that this is a big part of the truth, but this explanation does not acknowledge the strength of counter-arguments. For the author to choose three case studies (the UK, the US and Germany) that clearly support the liberal perspective rather tips the scales. Taking France Telecom would have made Curwen's arguments more complex - and more convincing. So too could Curwen's rehearsal of arguments for a withering away of regulation in favour of general competition law, which have been made more persuasively.

Here, surprisingly I think, Curwen undersells the liberal case. Oftel's insertion of a "fair trading" clause into BT's licence suggests that the fate Curwen defines for it (being sucked into "a quagmire of detailed regulation") is by no means inevitable. That being so, there may be considerable force to what we might call the "liberal witherer" position; that general competition law may do well what detailed regulation can do only badly. More discussion of the EU Competition Directorate's policies and practices (or the importance of similar US bodies) would have strengthened Curwen's liberal withering.

Finally, neither author nor reader are well served by the publisher's inelegant running of text boxes (presumably used instead of footnotes because less forbiddingly academic) across successive pages.

Richard Collins is senior lecturer in media and communications, London School of Economics.

Restructuring Telecommunications: A Study of Europe in a Global Context

Author - Peter Curwen
ISBN - 0 333 72229 9
Publisher - Macmillan
Price - £40.00
Pages - 220

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