Commission sets recommended prices for telecoms services
The European Commission has adopted a Recommendation setting out the prices which telecommunications operators may charge each other for delivery of calls in the liberalized European telecoms market (after 1 January 1998). The aim of the Recommendation is to bring down the costs of interconnection charges which constitute one of the biggest barriers to new entrants. Commissioner Martin Bangemann, responsible for telecommunications policy, stated that, "The price of interconnection will be a critical factor affecting the speed with which competition and choice develop in the EU". The Commission, he said, "is sending a strong signal to the market that we expect interconnection prices in Europe to be very competitive". The Commission is recommending a move to forward-looking long-run average incremental costs as the basis for interconnection charges. The existing monopoly operators have, thus far, based their charges on the historic costs of their original investments. In the competitive market, however, firms will have to look forward to survive. The charges outlined in the Recommendation are based on current practice, taking the three Member States with the lowest prices. These recommended prices will last until such time as interconnection prices can be properly calculated on the basis of forward-looking, long-run average incremental costs. The recommended prices (in ECU cents) set by the Commission, which cover the cost of terminating a call on established, fixed networks at peak time are as follows: - Local level interconnection (providing access to several thousand customers connected to a local exchange): between ECU/100 0.6 and 1.0 per minute; - Single transit interconnection (providing access to 500,000 to 1 million customers in a metropolitan area): between ECU/100 0.9 and 1.8 per minute; - Double transit interconnection (providing access to customers on a national network): between ECU/100 1.5 and 2.6 per minute.