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Commission examines a third strategic alliance in the telecommunications sector

The European Commission is presently examining a third strategic alliance in the telecommunications sector. In July 1994, the Commission cleared the joint venture between British Telecommunications and the US long-distance carrier MCI. A second proposed alliance, between Deuts...
The European Commission is presently examining a third strategic alliance in the telecommunications sector. In July 1994, the Commission cleared the joint venture between British Telecommunications and the US long-distance carrier MCI. A second proposed alliance, between Deutsche Telekom and France Telecom, is also presently being examined by the Commission.

The third alliance involves the telecommunications operators of the Netherlands, Sweden, Switzerland, and Spain. They have set up a company named Unisource, which has also entered into several forms of cooperation with the US long-distance carrier and equipment manufacturer AT&T. Given the importance of these parties on the telecommunications market, the Commission has launched an examination of the arrangements regarding Unisource as well as its links with AT&T. A formal request for information has been sent to the companies concerned.

In recent years, the telecommunications market in the EU has been characterized by two parallel developments, namely an accelerating liberalization process and at the same time the emergence of what is commonly referred to as "strategic alliances" involving the public telecommunications operators which previously enjoyed monopoly rights in their domestic markets.

These strategic alliances generally aim at providing highly advanced, end-to-end, seamless telecommunications services over a wide geographical area, often the whole world. The rapid development of the new technologies involved in these services and the pressure to go global felt by service providers from the companies which represent the main target customers, namely powerful multinational firms, have led to the perceived need by telecommunications operators to cooperate together to offer such services, rather than enter this new market alone.

From the point of view of competition policy, it is not possible to say beforehand whether such alliances are good or bad. As a general rule, however, given the strong position and technical skills of the telecommunications operators involved, a careful examination under the EU competition rules will be required with respect to each alliance, to ensure that the liberalization which is painstakingly being achieved in this area is not thwarted by anti-competitive cartel-like arrangements.

Until now, the Commission has issued one formal exemption decision in this area, with respect to the "Concert" joint venture established by the UK operator British Telecommunications and the US long-distance carrier MCI. A favourable position was possible, among other reasons, because of the genuinely global nature of the services offered through "Concert" and the fact that the telecommunications markets of both parent companies are open to competition.
DE
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