Gustave Barth, of St. Germain-en-Laye, France, responding to the article of Aug. 31 "Telefonica: Opportunity To Re-Direct EU Telecom Regulation", (a copy of which is reproduced at the end), writes:

The complaint that the European telecommunications industry would lose EUR40 billion in significant part because of the roaming caps established by the European Union isn't acceptable as such.

1. Before the roaming caps were implemented, the roaming charges were exorbitant. They are still quite high today compared to the costs incurred by the operators.

2. But as a result of introducing reasonable roaming rates, the roaming traffic should logically have increased and should continue to increase. It is clear that many travelers don't use their mobiles when they are abroad (and many use them only marginally) because they fear very high charges. Few know about the regulatory caps and more are confused by the multiplicity and the complexity of the roaming schemes offered by the operators. The latter bears the responsibility for this situation.

3. It is true, on the other hand, that the data as published by the European Regulators Group don't reflect a significant increase, over the last three years, in the roaming traffic within Europe. This could be due in part to the way the data are collected and the findings interpreted. Further analysis is required.

I want to stress, furthermore, that the impact of the economic environment doesn't appear to be significant in this respect. A report released this summer by the Organization for Economic Cooperation and Development, which surveyed 30 countries, concludes that the industry's revenue in the mobile sector is on the rise, despite the global recession.

I think that to be credible, Mr. Linares should be more precise on how the E.U.'s regulation - particularly concerning roaming - could affect revenue and investments to the huge extent he claims.

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Follows the republished article:

SANTANDER (Dow Jones)--Telefonica SA's (TEF) chief operating officer, Julio Linares, said Monday the European Commission has a unique opportunity to change its regulatory policies.

"The European Commission is renewing the mandate of its telecommunications directorate... it's an opportunity to reorient (the regulatory model) in favor of different objectives," Linares said in a telecommunications conference.

Linares said the telecoms industry in Europe would lose out on EUR40 billion in revenue between 2007 and 2012 because of caps the European Commission has put on roaming charges and mobile termination rates, or the tariffs telecom operators apply to each other to connect calls.

He added companies affected by regulation would invest EUR6 billion less in the period due to the changes in the regulatory framework.

Telefonica is Europe's largest telecommunications company by market capitalization.