Germany Warned Again Over Regulatory Holidays For Deutsche Telekom

by Ulrika Lomas, for LawAndTax-News.com, Brussels

27 February 2007

The European Commission on Monday sent Germany a letter of formal notice after repeated warnings not to adopt legislation that could grant Deutsche Telekom a 'regulatory holiday' in spite of its dominant position on the German broadband market.

The case is being fast-tracked, and Germany will only have 15 days to reply to this letter. The Commission intends to refer the case to the European Court of Justice as soon as possible.

“I regret that Germany has chosen to ignore the Commission’s concerns about this new telecom law despite several clear warnings from the Commission,” announced EU Telecom Commissioner Viviane Reding. She continued:

"The granting of regulatory holidays to incumbent operators is an attempt to stifle competition in a crucial sector of the economy, and in violation of the EU telecom rules in place since 2002.”

The new infringement procedure launched on Monday concerns amendments to the German telecom law that have recently entered into force.

These amendments, which were proposed by the German government in spring 2006, would effectively exempt Deutsche Telekom AG’s fast internet access network (VDSL) from competition, as had been requested by the German incumbent operator, which is still partly owned by the German State.

Such ‘regulatory holidays’ would be granted without consulting the Commission and regulatory authorities in other Member States, as is mandatory under EU telecom rules to ensure transparency and a better functioning internal market.

In October 2006, EU Telecom Commissioner Reding and EU Competition Commissioner Neelie Kroes sent a letter to German Minister of the Economy Michael Glos, in which they expressed their serious concerns about the draft law, and threatened infringement proceedings if the law was not brought in line with European legislation.

According to the EC:

"In the Commission's view, the German law, as now adopted, jeopardises the competitive position of Deutsche Telekom's existing competitors and makes it much harder for new competitors to enter German markets. It also attempts to influence the German regulatory authority in charge of electronic communications (the 'Bundesnetzagentur') on whether or not to grant competitors access to the new VDSL-network currently being built by Deutsche Telekom."

"The new law therefore interferes with the authority's discretion in defining and analysing markets under EU rules. It is a legislative response to Bundesnetzagentur's decision in September 2006 to address Deutsche Telekom’s significant market power in the German wholesale broadband market. The remedy proposed by Bundesnetzagentur on 21 July 2006, and endorsed by the Commission on 21 August 2006, requires Deutsche Telekom to open its broadband networks (including those using VDSL technology) to competitors."

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