German Telecom: Open It All The Way

The German government's decision to speed up telecommunications deregulation is good news indeed. Recently, Posts & Telecommunications Minister Wolfgang Butsch opened the corporate side of Germany's huge $66 billion market, Europe's biggest. Companies can go to private telecoms for their data-service and mobile-phone needs. Now they won't have to lease costly lines from Deutsche Telekom to reach customers, and they can use their own fiber-optic networks to underbid the state phone monopoly.

Unfortunately, Germany's huge consumer sector remains closed and controlled, and Butsch risks looking like a 19th century Church of England archbishop trying to refute Darwin's On the Origin of Species by making concessions to its arguments while condemning its conclusions. Whether sacred or profane, powerful new ideas whose time has come are best handled by fundamental reconsideration and rethinking. The prevailing wisdom about erstwhile government-controlled monopoly utilities is that private and deregulated is a lot more efficient way to go. German telecom policy has yet to take that idea on board in full.

Significantly, a growing number of German--not just foreign--companies are joining the chorus for faster and wider access to telecom markets. They have grasped what still seems to elude the German government: Cheap and efficient telecoms are increasingly a factor of production in advanced economies. Companies such as Veba, Thyssen, and Viag are ready to lease their thousands of miles of fiber-optic networks for up to half of Telekom's leased-line rates. That's why Butsch bowed to corporate demand for deregulation.

Butsch was also prompted to act by pressure from the U.S. Federal Communications Commission, which threatened to block a $4.2 billion cross-investment among Deutsche Telekom, France Telecom, and Sprint unless deregulation was accelerated in Germany. (The European Union is scheduled to begin deregulation in 1998.) At the end of January, FCC Chairman Reed E. Hundt was in Bonn, and at a lunch, a U.S. official point-blank asked Gerhard O. Pfeffermann, state secretary at Posts & Telecommunications, if Germany was planning to allow competition in telecommunications before 1998. Pfeffermann said "yes," putting the government on record in favor of early deregulation.

What's really at stake here is Germany's long-run competitiveness, not protecting the rump of a monopoly. German companies fear falling behind the U.S. and Japan in Information Age technologies and efficiencies of production and delivery. They are aware that by the turn of the century, telecom will overtake autos as Europe's largest industry.

We hope that the opening of Germany's corporate telecom sector has a twofold impact. Within Europe, the move should prompt other European countries to accelerate the pace of liberalizing their own telecom monopolies. At home, it should put pressure on the government to open up the consumer market to real competition. Global markets won't wait for German bureaucrats much longer.

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