Commission tries to ring the changes in Europe

THE FIRST step towards cutting the cost of international telephone calls in Europe is likely to be taken at the European Commission this morning.

The Commission's 16 members are due today to approve without discussion a paper which recommends breaking the stranglehold that national phone companies have over international calls inside the EC.

The paper is likely to prove a prototype for Commission policies that directly benefit Europe's 340 million consumers. But at the same time it may anger critics who believe telecommunications policies should be set in national capitals rather than Brussels.

With the paper approved, the Community will have begun a move towards the kind of competitive phone market that has resulted in cuts of more than 50 per cent in the price of phone calls in the United States and Japan.

The document, which was prepared in May by officials working for Sir Leon Brittan, the member of the Commission in charge of competition policy, does not recommend any measures to open up markets for either domestic calls or international calls to countries outside the EC.

The paper has raised a storm of opposition from phone monopolies in France, Germany and elsewhere, from their governments and members of the Commission itself. Its discussion by the Commission been delayed several times by internal politicking.

The price of international phone calls is at present set in secret negotiations between national phone companies. Analysts estimate that their profit margins on international calls are up to three times higher than their margins on domestic calls.

Pressure on the Commission to do something about the issue has increased as European businesses and consumers have noticed that it can cost twice as much to phone from one EC country to another as to make the same call in the opposite direction. Also, an international call can cost up to seven times as much as a domestic call of the same distance. Critics say such distortions make a mockery of the EC's much-vaunted single market, which is due to come into effect on 1 January next year.

Underlying these problems, however, is the more important point that even in Britain, which has among the cheapest pricing in the Community, consumers still pay significantly more for their calls than those in the United States.

At least two American phone companies have recently set up calling-card services that allow European consumers to save money on calls inside the EC by routing them across the Atlantic and back. But the services have been only discreetly advertised and have been carefully priced slightly below existing European prices so as to avoid offending European phone monopolies.

One of Sir Leon's advisers said yesterday that it was 'drip torture' that had persuaded the paper's opponents finally to agree to its publication. Other Commission sources, however, suggested that there had been a delicate compromise between Sir Leon and Jacques Delors, the Commission President, in which Mr Delors has let the paper through in return for an undertaking from the competition commissioner not to use more drastic measures to break up telephone monopolies.

Research done for the Commission suggests that cheaper call pricing will benefit, rather than harm, the industry; in 20 years' time, according to one scenario, European telephone revenues will be four times as high as now if prices are liberalised but only double if they are not.

Some prices will certainly have to rise. In Greece, local calls can still cost 20 drachma (6p) untimed. With a time limit imposed, however, Greek consumers are likely to make their conversations shorter - and may as a result get a dialling tone more often.