EU seeking power to split phone carriers

The European Union today proposed new laws that will grant its member states the right to break up telecoms firms, potentially changing the landscape permanently for such services on the continent. Known collectively as "functional separation," the rules would give each country the discretion to break up large phone carriers, Internet providers, and related firms if it becomes evident a company is abusing its monopoly status and the breakup would not significantly damage the network infrastructure. Companies would not have the privilege of selling off the new company to try and regain their former status, the EU says.

The plan is intended to increase the competitiveness of Europe's telecoms business, encouraging more innovation and helping Europeans "get the most out of modern communication systems," according to the EU's Telecoms Commissioner, Viviane Reding. Most national regulatory agencies in Europe reportedly back the idea in principle but warn that the EU should be careful not to grant itself too much control over decisions to split firms.

Major providers in the region such as Deutsche Telekom, France Telecom, and Spain's Telefonica are already expressing staunch opposition to the deal and claim that approval of the rules by EU nations would discourage them from investing in fiber optics or other networks knowing that the anti-monopoly rule could lead to the company competing against its former investment. The German government is also advising "reticence" in adopting the laws.

Such changes may directly affect deals for exclusive phones and similar contracts, which may substantially restrict the reach of hardware and services in the event of a breakup. Apple in particular has signed agreements with all three companies voicing opposition to the deal and offers the iPhone solely through Deutsche Telekom's T-Mobile, France Telecom-owned Orange, and Telefonica's O2 in the UK. Companies with more international presences, such as Vodafone, are less likely to be directly hurt by forced splits within each country.