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Cart Europe's Cartels Away (Int'l Edition)


International -- Editorials

CART EUROPE'S CARTELS AWAY (int'l edition)

It's an argument German authorities have made for years: Too much tooth-and-claw competition is a bad thing. What consumers really want, the Germans say, is high-quality (if costly) goods in an orderly market, not the rough-and-tumble rowdiness of Anglo-Saxon capitalism.

The response of German consumers to telecommunications deregulation on Jan. 1, however, is giving the lie to that argument. Germany's telecom market is now arguably the most open anywhere in Europe south of Scandinavia. And, despite conventional wisdom, German consumers are responding to freedom of choice and competition like--well, Anglo-Saxons. Spurred on by how-to reports on TV and in popular magazines such as Focus, Germans by the tens of thousands are switching to the new phone services, whose main selling point is price breaks of anywhere from 5% to 50% vs. Deutsche Telekom, the nation's telecom giant (page 14).

The rest of Continental Europe needs to take note of Germany's bold move. In telecom, regulators in slower-to-open markets such as Italy, Spain, and Portugal should push ahead with reforms until they have opened their markets as wide as Germany's. The benefits to consumers are clear: Studies in Britain show that telecommunications prices have dropped 40% since deregulation began in 1981. And most of the drop has been since 1991, when the British government allowed expanded competition with British Telecommunications PLC and more than 150 rivals flooded the market.

Broadscale deregulation should be accelerated everywhere on the Continent. The European Commission is already pushing for more competition in air travel and electrical generation and distribution. But businesses such as natural gas distribution are still virtually untouched by the changes. And pricing cartels are still all too prevalent in Continental markets such as publishing. EC competition chief Karel van Miert is to be commended for pushing reforms from on high. But more Continental governments need to take his directives to heart by dismantling cartels and opening up monopoly markets to true competition. Germany has shown that consumers, even German ones, will be happier if they do.


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