Monday, November 10, 2008

IHT: Regulators in Europe fight for independence

Sunday, November 9, 2008

BERLIN: Being one of the national telecommunications regulators in Europe is not an easy job, largely because the governments they work for still own significant stakes in powerful former state phone monopolies. That can make it easy to get caught up in politics.

Consider Dan Cristian Georgescu, the former telecommunications regulator for Romania, who was fired by the Romanian prime minister, Calin Popescu-Tariceanu, in August.

At the time, the prime minister cited unspecified improprieties involving staffing in Georgescu's agency to justify his removal. Georgescu said the charges were fabricated and on Sept. 18, an appeals court in Bucharest agreed and ordered Georgescu back to work.

With court order in hand, Georgescu left the courthouse and walked straight to his old office. But hours later, he was shown the door again. The prime minister had signed an executive order abolishing the agency, replacing it with a near identical one with a slightly different name. Popescu-Tariceanu had done the same thing to relieve the previous regulator of his job.

"I don't know the real reason for my dismissal," said Georgescu, 59, in an interview, the first he has given since his removal. "But Romania's telecom regulator is no longer as independent as it was. We used to be truly independent."

Nobody claimed to believe that Georgescu had been removed because he had angered the former Romanian monopoly, the Romtelecom, and high-profile dismissals like this are rare. But his firing illustrates the fragile position many national regulators have in EU countries, where they are often caught between EU demands to maintain a fair and open market and the financial interests of government employers.

The European Parliament will soon be considering a measure proposed by the EU's telecommunications commissioner, Viviane Reding, to create a European telecommunications regulator. The proposal would also give new power to the bloc's national regulators.

In measures she has ushered through Parliament and that are before Parliament now, Reding has championed regulation as necessary to increasing competition and bringing down prices for consumers.

In eight of 27 EU countries, national governments own an outright majority in former phone monopolies, which gives them a veto over major decisions, according to the European Competitive Telecommunications Association, a group in Brussels that represents competitors to the former monopolies. In 10 other countries, including Germany, France, Austria, Sweden and Romania, the government holds a minority stake but remains the largest shareholder.

"The independence of regulators needs to be clearly defined by law," said Levi Nietvelt, an economist at The European Consumers' Organization, an advocacy group based in Brussels. "That we don't always have."

Consider Belgium, which owns 53.5 percent of Belgacom, the former fixed-line phone monopoly. Belgacom paid €300 million, or almost $400 million, in 2007 in dividends to the government. Reding asked the Belgian regulator, the Belgian Institute for Postal Services and Telecommunications, to reduce the retail prices on Belgacom's network. So far, Belgium has not done so.

Catherine Rutten, a member of the four-member council that runs the Belgian regulator, said her agency was shielded from political influence even though the government owned a majority in Belgacom. Rutten said her agency would make a recommendation soon on how to bring down Belgacom prices. So far, the agency has favored fining Belgacom, rather than imposing price ceilings, which it has never done.

"Just because the government owns a stake in Belgacom doesn't mean we are not independent," Rutten said.

A similar conflict is being challenged in Germany, where national lawmakers and the telecom regulator are letting Deutsche Telekom - still 31.7 percent owned by the German government - bar competitors from leasing space on its €3 billion high-speed fiber optic VDSL network, which it is using to sell video services.

Barring access is against EU law. The European Commission has sued Germany over what it called a "regulatory holiday" for the former national carrier but the issue will not be settled by the court for another two years. During that period, the company can take advantage of its exclusive, faster technology, gaining a market advantage over competitors and higher prices for consumers.

"The German government's stake in Deutsche Telekom creates a constant conflict of interest," said Jürgen Grützner, executive director of VATM, a group in Bonn representing 90 companies that compete with Deutsche Telekom. "The end result is a desire on the part of the government to protect Deutsche Telekom and its jobs."

Daniel Pataki, the Hungarian telecom regulator and chairman of the European Regulators Group, an advisory panel of 27 national chiefs, said regulators viewed independence as critical.

"This is, however, a national matter for each country," Pataki said. "The question is not whether a particular state holds a stake in a telecom operator. What is important is that national regulators are equipped to be able to exercise their functions independently of their respective political bodies embedded in the national legal systems."

A bill before European lawmakers in Brussels attempts to shield regulators from political influence by giving them broader authority to impose fines. The legislation would also bar regulators from leaving their jobs to work for phone companies they had just regulated. The bill would require regulators to work "independently, impartially and transparently," forcing prime ministers, for example, to state the reasons why they dismiss regulators.

Such a change would be welcome in Romania, said Varujan Pamuccian, chairman of the information, technology and communications committee in Romania's lower house, the Chamber of Deputies. "What happened to Mr. Georgescu is because the agency is directly under the government," said Pamuccian. "No one really knows why he was fired."

The conflict has a certain quality of déjà vu. In 2005, Popescu-Tariceanu removed Georgescu's predecessor, Ion Smeeianu, in similar fashion. After Smeeianu won his job back in Romanian court in 2006, the prime minister abolished the agency, reorganizing and renaming it to block Smeeianu's return.

A member of the Romanian Parliament and a phone company executive in Romania, both of whom did not want to be named for fear of political retribution, said they believed Popescu-Tariceanu had removed Georgescu to give his post to a member of the opposition party, whose support he may need in elections later this month.

Reding has sent Popescu-Tariceanu two letters asking him to explain the firing of Georgescu. So far, she said, she has not received a clear answer. Whether European lawmakers will change the rules to combat such situations remains unclear. Members of European upper house, the Council of Ministers, removed the word "independently" last month in their version of the bill from the phrase requiring regulators to work "independently, impartially and transparently." They are scheduled to vote on the bill Nov. 25.

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