ECONOMY

OTE inhibits Internet use

The telecommunications sector has changed drastically over the past 20 years. The combination of technological developments and deregulation has created new prospects and ways of communicating that were initially hard to envisage. These developments may be global but only their echo reaches Greece. Indeed, our country is the EU laggard in the use of computers: according to Eurostat, there were only nine PCs per 100 inhabitants in Greece in 2001, whereas the EU average was 31 per 100 and the respective figures in the US and Japan were 62 and 35 per 100. Despite widespread unemployment and the low competitiveness of Greek companies, we persistently ignore EU’s injunction that «the widespread use of the Internet is the key to modern education and the creation of new jobs.» In this article, we will see how we ended up at this predicament and what can we do to make up for lost time. Until the end of the 1980s, Greece, like most European countries, retained the state monopoly in telecommunications. In the rest of Europe, the telecoms sector was deregulated in the early 1990s. Greece, by securing successive postponements from the EU, waited until 1999 to privatize OTE and to allow competition in telecoms Lost chance In these 10 years, OTE squandered the chance to become a dynamic company that could withstand pressure from competitors. On the contrary, by following the «tried and true» way of Olympic Airways, OTE became a parasitical organization that demands money from its clients/victims without offering corresponding services. During this lost decade, OTE undertook a series of actions to prevent the development of competition. It knew that when it replaced its old switching centers with new, digital ones, which are much smaller, the space freed in its installations throughout the country could be used by its future competitors (the so-called co-location). OTE used the «grace period» granted by the EU to upgrade its switching centers and get rid of the extra space. Then, when telecoms were deregulated, that space had been sold, rented or simply transferred so that OTE’s competitors could not use it. And where did OTE find the money for its upgrade program? From us, its clients, of course, through the adoption of the per-minute charge, a practice that proved a severe blow to the development of Greece’s Internet, then in its infancy. For example, the price of an hour’s connection shot up from 10 drachmas (2.9 eurocents) to 220 (65.6 cents). Even now, despite the misleading announcements by OTE and the National Telecommunications and Posts Commission (EETT), the prices keep rising. OTE’s argument that charging by the minute was imposed for financial and technical reasons is not valid: US telecoms companies are far more profitable despite the fact that per minute (or per second) charges were never imposed in local calls. Mistrust for the ‘Net Even now, OTE views the Internet with suspicion and tries to curtail its development. The reason is simple: the Network offers equal access to all telecommunications services providers. Thus, OTE loses the advantage of ownership of the fixed-line network. OTE’s hostile position is obvious in the cast of fast ADSL Internet access. ADSL connections are faster (seven to 18 times faster than dial-up PSTN connections and 3 to 16 times faster than ISDN connections) and are open 24 hours a day with no charge. For this reason, they can also be used for phone calls through the Internet, the so-called Voice-over-Internet Provider (VoIP) service. Already, British Telecom has announced that it will provide VoIP services free of charge to ADSL subscribers. To OTE, which bases its hopes for profitability on telephone call charges (since it faces strong competition in other telecoms services), such a prospect is nightmarish. So, it tries to delay the spread of ADSL. First, it tried to impose exorbitant charges (80 euros per month just for the service itself, while there was an extra charge for the Internet connection) and now through so-called «upgrades» to the network. Undermining competitors As in the case of the switching-center upgrades, these network upgrades aim at getting rid of competition for access to the cable that connects the users to the network. The main achievement of deregulation has been that other providers can ask OTE to rent the cable in order to offer their services (e.g. telephony, Internet access etc.). Under these circumstances, OTE is paid only for renting out the cable and loses access to the client. So, it has begun an upgrade program aiming at substituting optical fibers for the old copper wires. When a competitor firm asks to have the use of the local cable (local node), OTE can reply that there is no local node, since copper wires extent only from users’ terminals to the local switch and that the onward connection to the local switch center is now by optical fiber. In its haste to deactivate the copper wires, OTE has «forgotten» to install equipment to support ADSL users; as a result they are left waiting for months for the service to be installed in the upgraded network. In the contract that ADSL subscribers sign, OTE mentions that, in case of a network upgrade, ADSL service may be suspended. According to the contract’s terms, OTE is not obliged to refund the client/victim for the purchase of the ADSL equipment (modem, splitter etc.). In the face of all this, EETT (whose aims include «safeguarding users’ rights») is silent. OTE does very well to try and maximize profit, but EETT must ensure competition works. The telecoms sector is too important in order to be monopolized by an organization such as OTE. The lost chance to acquire broadband services at low cost burden the operating costs of Greek firms and have a negative impact on their competitiveness. Funds provided to Greek universities and research centers are squandered in order to pay OTE’s exorbitant online connection fees. EETT must estimate OTE’s real costs in order to arrive at a realistic pricing policy and combat the price gouging. OTE must also be encouraged to adopt new technologies. For example, if EETT freezes fixed charges and abolishes time-based local charges, OTE will be forced to develop ASDL at a faster pace and encourage VoIP. Too big Such action is rendered necessary by the fact that OTE is too big for the small Greek market and thus hinders competition. Since OTE has been adept in sidestepping EETT regulations, its breakup should be seriously considered. The breakup could create a network managing and a telecoms services firm that would lease the network from the manager, just like OTE’s competitors do now. Alternatively, OTE could be forced to auction off a number of switching centers to competitors. Both proposals are compatible with international practice. OTE may be pining for the good old monopoly days that allowed it to set prices as it wished. However, technological developments have drastically cut the cost of telecom services globally. If we want to remain competitive, we must enforce competition, even at OTE’s expense. We must not repeat the Olympic Airways mistakes. (1) Assistant Professor, Department of Computer Science, Drexel University, Philadelphia, USA.