EU Lawmaker Seeks to Kill Telecoms Unbundling Plan

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Will functional separation of telecom operations in the EU take place?

BRUSSELS, May 6 (Reuters) - A European Commission proposal to boost competition by forcing telecom companies to run their networks and commercial arms separately should be scrapped, a top European Union lawmaker said on Tuesday.

EU Telecoms Commissioner Viviane Reding has proposed "functional separation" when all other means of increasing competition have failed, but some EU states such as Germany remain uneasy.

"I feel we do not need functional separation," said Angelika Niebler, the German centre-right lawmaker who chairs the European Parliament's industry committee.

The assembly and EU governments have joint say on Reding's proposal, part of a package to update the bloc's telecom rules.

Niebler said she would submit amendments to delete functional separation from Reding's draft package.

Functional separation has already been introduced in Britain, where former state-owned monopoly BT (BT.L: Quote, Profile, Research) runs its network and services as separate units.

Big operators elsewhere, such as Germany's Deutsche Telekom (DTEGn.DE: Quote, Profile, Research), France Telecom (FTE.PA: Quote, Profile, Research) and Spain's Telefonica (TEF.MC: Quote, Profile, Research), say functional separation would inhibit investment by creating legal uncertainty if its application was disputed.

British telecoms regulator Ofcom has described this argument as a myth, saying BT was investing 10 billion pounds ($19.6 billion) in new networks.

Catherine Trautmann, a French socialist steering the measure through parliament, said functional separation should remain an option for national regulators to use as a last resort but only after thorough analysis.

"I agree it should be optional. It will be applied in some countries. In some countries perhaps it should be applied," Trautmann said.

Any application should be justified to ensure it promoted investment and any disputes resolved within two months to avoid legal uncertainties, Trautmann added.

Several members from across the political divide backed this approach, and only Niebler spoke in favour of scrapping the proposal.

"We should introduce it but only when absolutely necessary. We need very clear criteria when this is needed," said Romana Jordan Cizelj, a Slovenian centre-right lawmaker.

Herbert Reul, a centre-right lawmaker from Germany, said Reding's proposal may need adjusting to ensure more legal certainty for companies and make investments more secure.

"We have said we need clear criteria when it comes to functional unbundling," added Silvia Adriana Ticau, a Romanian socialist.

Fabio Colosanti, Reding's most senior civil servant, welcomed Trautmann's approach to functional separation. (Editing by Dale Hudson)

This article was originally published on 2008-05-06
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