Europe's anachronistic state-owned telephone monopolies are under siege. Rivals are using new technologies and exploiting regulatory loopholes to offer lower prices and new services. What's more, the European Community will deregulate all aspects of telecommunications by 1998. So unlike America's Baby Bells, which retain their monopolies in local calling areas, European operators will have nowhere to hide.
Good. But regulators and other policymakers shouldn't shy away from the most critical task of all: allowing telephone-company competitors to build their own infrastructures. Without competing networks from cable television or independent telephone operators, competition is academic, since monopoly operators can hold rivals hostage with high prices for leased lines and other tactics.
Bolstering competition won't be easy. While some European telecom operators are moving smartly into the new era, others are simply circling the wagons. On Dec. 7, France Telecom and Deutsche Bundespost Telekom announced plans to form a cross-border alliance that could effectively stymie competition within their territories. The advocates of this partnership claim that their venture should be viewed merely as Europe's entry against other equally formidable forces in the global market. Perhaps so, but regulators should make sure that consumers and corporations don't suffer in the process.
The goal is not competition for its own sake. Rather, it's the only way to ensure that Europe doesn't end up in the slow lane of the Information Superhighway. That metaphor, for the melding of telecommunications, computing, and information, will be critical for competitiveness in the 21st century--and the U.S. is already pulling ahead. There's no turning back on the road to an open market. Europe's best response now would be to go full steam ahead.