Telecom watchdog urges parliament to go last mile

Is this the sort of competition parliament is looking for? Keystone Archive

Parliament has been debating a major revision to the federal law on telecommunications.

Fulvio Caccia, president of the Communications Commission (ComCom), told swissinfo that the revision was crucial if consumers were to benefit fully from market liberalisation.

On Wednesday, the House of Representatives started discussing a revision to the 1997 Swiss telecommunications law, which laid the legal basis for liberalisation.

It includes a provision that would allow rivals to Switzerland’s largest telecommunications operator, Swisscom, direct access to households – otherwise known as “unbundling the local loop” or the “last mile”.

Customers today can choose another provider, but still have to pay a monthly fee to Swisscom for use of the telephone cables connecting their household to the nearest sub-station.

swissinfo: What is really at stake in this parliamentary debate?

Fulvio Caccia: The 1997 law was intended as a framework, which the government and ComCom would be able to interpret in the light of new developments. However, a subsequent ruling by the Federal Court removed practically all possibility of such interpretation. That is why the government now proposes a revision.

The revised law would also improve areas such as consumer protection, but it is the issue of access to Swisscom infrastructure that has given rise to considerable political divisions.

swissinfo: If the revision is approved, when will unbundling actually happen?

F.C.: The law could enter into force next year, but it is unlikely that it would be implemented before the end of next year. Also, if there are legal objections to the Federal Competition Commission’s evaluation of what constitutes market dominance, opening could be further delayed, until well into 2006.

swissinfo: To what extent do you think consumers will benefit directly?

F.C.: Unbundling will allow other fixed-line operators to offer new services, which they simply cannot do today. In particular, new service “packets” could include both telephony and internet access, but also television and the chance to choose films. If we look at European countries that have already gone down this path, we see that consumers also benefit considerably from a cost point of view.

swissinfo: Swisscom says unbundling will allow its competitors to benefit from investments it has made over the years. How do you react to that argument?

F.C.: The rules are clear – if new operators use part of the Swisscom service, they will pay prices based on international rules, which also foresee remuneration of the capital invested by Swisscom. So in my opinion what we often hear, that Swisscom will have to offer the services at cost price, is a lie. However, I do believe that Swisscom needs to be offered a certain profit margin, to encourage it to invest further and maintain network quality.

swissinfo: Swisscom recently proposed that only the “conventional” copper cable connections should be unbundled, leaving other providers to pay for their own – i.e. broadband – infrastructure. What do you think of that idea?

F.C.: The proposal comes rather late, and it is insufficient. The whole thrust of liberalisation law is to put in place instruments to lower entry barriers. Today, we have a very promising new market – broadband – that requires different infrastructure.

What Swisscom is effectively doing… [is insisting that rival operators build their own broadband infrastructure from scratch]. That is why all other national regulators have opted for a technical solution, fast bitstream access, that allows new broadband operators to acquire customers with lower initial investments.

swissinfo: If unbundling were not to take place, do you see a risk of Swisscom pushing its competitors into bankruptcy?

F.C.: In the broadband domain, there is already a well-established second player, Cablecom. However, if unbundling does not take place, the limited margin between the prices charged to its rivals by Swisscom and the prices they can pass on to their own customers for effectively re-selling Swisscom services risks placing other operators in a very difficult position.

swissinfo: Alternatively, do you see the risk of a Swisscom-Cablecom duopoly?

F.C.: Very much so. If it is only Swisscom and Cablecom fighting it out on the market, the day will probably come when they decide to cooperate and then the free market will be finished.

swissinfo: How does Switzerland compare with its neighbours in terms of progress made in liberalising the telecom sector?

F.C.: In fixed-line voice telephony we have made rapid progress, prices have dropped considerably and new operators have successfully entered the market. The situation in mobile telephony is different because, when the new operators began, Swisscom Mobile already had an almost unassailable position.

The new market for broadband services is very sensitive, precisely because other operators can currently do no more than re-sell Swisscom services. In other European countries, this is not the case.

swissinfo: How much power do you have as a regulator?

F.C.: The Federal Court decision means that neither ComCom nor the government now has the necessary margin of manoeuvre to interpret the law. In addition, the Swiss regulatory system, which prioritises negotiations between the operators, is not best adapted to the realities of rapid technological development. That is why the European Union has introduced the “ex ante” system, which allows national regulators to intervene directly in the market. I hope Switzerland will follow suit.

swissinfo-interview: Chris Lewis

Key facts

The 1997 telecommunications law laid the legal basis for liberalisation.
But six years after liberalisation began, Swisscom remains the dominant operator for both fixed-line and mobile telephony.
It is competing with Cablecom for dominance in the new broadband sector.

In brief

The revised law would allow Swisscom’s rivals direct access to households.

ComCom president Fulvio Caccia says the move is essential to ensure that the opening of the market offers real benefits to customers.

Caccia spoke to swissinfo after the government said that Mark Furrer, head of the Federal Communications Office, would succeed him next year.