Glocalnet to apply for UMTS license: Oligopoly must be broken

Glocalnet to apply for UMTS license: 'Oligopoly must be broken' Stockholm, Sweden-April 3, 2000 - Hopes for tougher competition and lower prices in the mobile telephone market are in danger of being dashed. Instead, there is a major risk that the oligopoly will be allowed to continue undisturbed. This dark outlook is offered by Stefan Krook, president of the Glocalnet telecommunications operating company, who in his continuing efforts to promote competition is also giving notice of intention to apply for a UMTS (Universal Mobile Telephony System) license. "It is with great disappointment that we note that Mona Sahlin does not seem to be promoting competition to the degree that she had announced," Stefan Krook says. "On critical points, urgent recommendations for improvement made by the PTT have been watered down before they were submitted (to the Riksdag) as bills. The consequences for the Swedish telecommunications market are serious and long-term, since they affect the entire period of licensing for UMTS, the third-generation mobile telephony. "It is natural to believe that the proposals were affected by the fact that the IT and Telia bills were presented at about the same time. Apart from the heavy workload in the Department, conflicts of interests are likely to have been involved. A large part of the estimated price for Telia consists of Telia Mobile, whose value would hardly be increased by effective measures to promote competition. Perhaps the Industry Department is simply afraid to saw off the limb on which it is sitting. In the end, consumers are being hurt. "But we do not intend to give up. Until the final vote takes place, we will do our utmost to point out the weaknesses of the bills to the politicians. The most serious deficiency unquestionably is the lack of opportunity to obtain a rapid resolution of disputes between telecom operators through PTS. In the bills, it is proposed that disputes be settled in a court rather than by letting PTS assume full responsibility for supervision, as is done in the case of disputes involving shared- traffic agreements. This will not only result in a lower degree of specialized knowledge on the part of those doing the judging but will also prolong the processes. As always, this will favor the large established operators at the expense of small newcomers. The Sense company, which was declared bankrupt before disputes were solved, is an unfortunate example that we risk repeating. "Another important weakness in principle in the bill -- dealing with the obligation to make network capacity available -- is that the network operators can hide behind (a claim of) lack of capacity, and thereby keep the service providers out. It would be much more reasonable if the network operators could only temporarily refuse to allow other players into a network, thereby gaining a certain amount of time to increase capacity. The costs of expansion, plus a reasonable return, would be assured because access to network capacity would be on market terms. Not forcing the network owners to increase their capacity, as is the case in the pending proposal, means that the owners are being allowed to 'block' a natural resource of national interest in order to keep competitors away. "Limiting the right to require national roaming to seven years is another weakness. The operators who will be able to qualify for licenses along with the three established players will face enormous barriers to becoming established. The troika companies have nationwide networks, fully developed organizations, strong brand names and large customer bases that generate very strong cash flows. Forcing a newcomer who lacks all these advantages to build both GSM and UMTS networks in parallel is a serious error in thinking. The right to national roaming must be unlimited timewise. "If the Government is serious in its stated ambition to facilitate the establishment of new companies, it is also high time to see to it that the lessons learned from the studies of the Swedish mobile telecommunications market by PTS, the Swedish Competition Authority and the National Board for Consumer Policies result in concrete measures. "Number-transferability must be introduced as soon as possible and the complicated products being offered consumers must be controlled. The choice of a (mobile telephone) subscription must be separated from the choice of a telephone, since the latter today controls the former. In plain language, this means that the subsidization of telephones must cease, as well as the related fixed subscription periods of 12 to 24 months. Because of the fixed-subscription periods, many mobile telephone subscribers cannot be attracted to new operators until the periods have expired, which has a very serious negative impact on start-up calculations. "We intend to continue to fight to strengthen competition in the Swedish mobile-telephone market in all ways. One part of this fight involves applying for a UMTS license, alone or with one or more other players." Supplementary information The bills pending in the Riksdag deal with the obligation of mobile telephone operators to conclude agreements covering national roaming, and to make network capacity available to other companies. The latter bill was submitted in the Riksdag on January 27, while the bill pertaining to national roaming has just been sent to the Law Council for review. Both bills will be voted on during the next few weeks. National roaming means, in brief, that subscribers can use another operator's network if their own network is not available. Technically, the situation is the same as when a subscriber uses a Swedish mobile telephone outside the country, but roaming in this case applies within the country. Obligation to make network capacity available means that a network owner can be forced sell capacity to service providers who do not have their own networks. The service operator is thereby enabled to compete on equal terms and acquire its own subscribers. Glocalnet develops and produces communication services sold direct to end- customers or alongside marketing partners. Glocalnet intends to become Sweden's third largest fixed private telephony player this year. The company's vision is to become a leading northern European operator within Internet-based services. Glocalnet has strategic collaborations with players such as Cisco Systems, Portal Software and Bredbandsbolaget. Glocalnet is headquartered in Stockholm, Sweden; the Glocalnet share is quoted on OM Stockholm Exchange's Nya Marknaden alternative market. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/04/03/20000403BIT00160/bit0001.doc http://www.bit.se/bitonline/2000/04/03/20000403BIT00160/bit0002.pdf